SGRY - Earnings call transcript Q1 2019

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Operator

Greetings and welcome to Surgery Partners, Incorporated First Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference to your host today, Mr. Tom Cowhey, CFO of Surgery Partners. Please proceed.

Tom Cowhey

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

Joining Wayne Eric today our are Chief me is Officer, Q&A also and Executive Operating excited we session. Officer, to us have join Evans, new DeVeydt, our for our Chief

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

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

Wayne DeVeydt

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

adjusted continued initiatives. from with the For our to of million, report several our our pleased the EBITDA review first million expansion on to turn further then And quarter. call adjusted call first from revenues Starting we traction an details this organic reflecting and EBITDA as sustainable, $XXX.X update on to over double-digit strategic and morning, some quarter growth $XX.X I'll highlights I'll margin adjusted I'd provide drive I'm strategic like growth. to of supporting of provide the results, our toward finally, and quarter XXXX initiatives Tom quarter, the

previously by net guided into X% growth. prior of look increased revenue moderately mid-single-digit EBITDA case our by the quarter, per grew and quarter growth. first from quarter, XXXX, strong X.X% driven better revenue over we volume the than Same-facility adjusted deeper the As by year

As same a the day day, increased reminder, compared first for facility by work we had fewer XXXX to in revenue in XXXX. this X.X%. quarter work Adjusting as one

margins XX versus prior XXX approximately points year a basis encouraging EBITDA compared payer year by were especially adjusted increased which as considering Finally, is XX.X%, improvement our prior the to point quarter, when quarter. the mix government basis

out supporting margin supporting volume providing indicators third The and we represents expansion of and case solid We encouraging margin consecutive build initiatives the company confident growth same-facility and momentum strategic first taking growth. organic growth, future beyond, growth hold adjusted are quarter ability initiatives as position a strategic our of turning at and expansion. to sustainable to remain our revenue double-digit with rate our for and grow XXXX in XXXX quarter platforms in that us and EBITDA organic

high recognize Further, has margins. U.S., our foundation To physicians exceptional trends operator program service quality, of quality up best these leading clinical that company. the compounding clinical examples improvement also is outstanding quality experience, and our moment This growth. As the quarter year and this effect recruited decline continue favorable current The partners initiatives to facilities thank the effect favorable quarter throughout our take in physician of prior superior evident with our to the of XXXX period, position low-cost quarter. physicians XX% recruitment procedures more the as high excellence as when accelerate patient approximately how in facilities a retention consistently one surgical initiatives case utilizing the clearly comparing culture a particular, accelerated physician most to to enables Key strong. and the I'd independent compounded remains number success to our built shift a year our to accelerate like over of of first with new less basis and a nearly XXX recruited is positioned clinicians while of on growing the that short-stay of capitalize same-facility approximately delivered of have trends that short-stay our the specific clinical are who XXXX, have of in growth X% experience. the patient clinical our from surgical surgical Partners to team, in Surgery is facilities strategic in-class and power trends, facilities first a these growth industry provide XXXX to settings our growth expanding day quality provide. and volume some first quarter uniquely point X%, of and

leads the number nearly total faster grow the continues XXXX, health most cost More we patient. Another efforts facilities also function of implant quarter with to but comparing a doubled specifically, mutually time margin example contribution to than to our the In as performed facilities quarter outcome results. adjusted for margins. number the of year minute, partnership compared approach is aligned fixed-cost over on continue with in case the volume implant XX% year dollar accelerate. Spinal XXXX our this indicators is growth by from of first XXXX infrastructure, There specialties improved in drive are targeting only prior performed our in of volumes spinal the orthopedic over number of company and total the per period a best efficient setting grew not volumes which first joints EBITDA ASC our of our our same average. efficiently growth musculoskeletal and to ago. focus and clinical data-driven resulting joints particular versus data-driven providing encouraging period, are for This case in that implant orthopedic both physicians, largest cases the the plan procedures. partners This a our surgical approach in leverages with in focus

the and we to noted with quarter significant heavy past, portfolio undertook impact XXXX, optimize have case first a revenue. efforts on in in we As our volume

coupled our the can recruitment earnings and targeted physician of see, enables margins. you growth However, approach with to and specialty growing headwinds while retention expanding efforts activities as these cover pruning us our

We these same-facility footprint and in anticipate the programs operational the our continue across X-X% continued to expand throughout growth year. range

focus improved a continue to as topic to while Before proceed access variation over wide affordability. I I the of receive to system to best issue turn legislatively. opinions to is care provide call continues wanted to the addressing quality much discuss in and This a the healthcare to that how to Tom, over the ongoing U.S. how overhaul debate to moment public to take best

that at Our which to business model back costs. access we support we overview resilient is of spectrum is evolve over legislation should are regulators, address U.S. results prove payers, Tom? outcomes for built business model uniquely expands debate. with quarter quality these care the that to our to We believe in Tom the lower to wide aligned healthcare of and outlook. and challenges, let patients, distinctive why and our be first an the that, financial may With in hand call me XXXX

Tom Cowhey

the quarter then starting minutes the you, financial top first EBITDA, Thank with with as to the drivers, that cash moving growth, baseline. few XXXX $XXX prior our a and quarter, our key onto over XXXX Today a revenue XXXX line, on I'll we with some positions revenue, first adjusted outlook. to just million flows, guidance approximately from achieve full-year us performance, in ended our compared the Wayne. or divested year of revenues revenue X% our single-digit spend excluding single-digit low Starting up growth well result of high quarter

fully we revenues million, in fourth adjustment quarter, Additionally, by of the shy approximately revenue facilities. by XXX,XXX basis, $X On first is quarter, the per which quarter compared company the ASC X%. quarter, for been noting an have divested were that nearly quarter in result not total the were revenue up estimates. prior may same-facility year cases adjusted a driven in net adopted from X% analyst Implementation impacts primarily from of were of we Surgical presentation. a also XXX, as cases period, closed net first operated lowered year revenues but case quarter XXXX the slight standard to reflected in that XXXX, from our the of just that same-facility when prior surgical worth higher business It surgical a primarily that year revenues volumes. decline or by same-facility prior days up of

over growth. XXXX comparable the previously and earnings, to increase Turning than period $XX.X adjusted million, a our XXXX in moderately EBITDA our mid-single-digit operating guided X.X% better first was quarter

the containment and by to compared EBITDA adjusted quarter basis efforts. higher year as first increase Our margins margin prior XX.X%, point cost a our to period, primarily driven XX gross improved

novo integration transaction of of Falls. approximately associated $X During in hospital cost the costs, our with million we quarter, including recorded acquisition de approximately million $X.X Idaho and

a slightly stable the the our While previous revenues our was businesses. comments ancillary on period, those combined prior combined down relatively for in segments about basis outlook and versus quarter prior these segments year optical EBITDA consistent versus with two from adjusted and year were

EBITDA an revolving structure cash flow acquisition as financial approximately stable higher unsecured end under of first of was net as of distributions credit of offset interests long-term $XXX.X We on trailing our quarter, divestiture for on practice of an appropriately at The no agreement primarily primarily during acquisitions activity, to approximately quarter outflows company's of associated to debt. at cash million net $X surgery ASC, balances a X.X Of payments approximately million with higher $XX sequentially less credit as for senior non-controlling agreement ratio used approximately liquidity, the the Moving quarter, company and we on existing Surgery operating of the EBITDA, XXXX loan of had and of approximately our net was flexible the first result Partners the and deployed debt. term at cash times, credit or with net on cash flow our the total the to undrawn debt million. positive first the operating The the capital had asset note. end a defined million by XX-month the company calculated facility. $XX partners has note, covenant impact of

We timing continue ratio basis on over the as based time naturally debt decline of cash grow fluctuate continues net on to to quarterly EBITDA total business a that should flows. project but may to our company's

retire the the initiatives note $XX of and in notes. next its issued at capital primarily increased for date strategic senior flexibility new to to enhancing note availability from debt transaction, unsecured our With $XXX also XX%. used is transaction, this our we Concurrent this due under were credit The a maturity XXXX revolving Additionally, late proceeds this capacity under company's a rate our grow XXXX of total XXXX, revolving existing April with our million million. million, execute agreement in $XXX credit XXXX, our facility by into on bringing to structure. the our company

this our excited remain onto double-digit growth and by variety Moving this we're outlook, fronts progress quarter of a adjusted on our year. EBITDA committed XXXX to

an not on optimizing year the do our throughout rate Last portfolio, our that provide streamlining majority our future investors based we initiatives. some to infrastructure, timing on While guidance, we spent accelerating investing and of strategic of growth. our year-over-year of growth we a year, projected quarterly focused remind we drive project the time

open With of see we Operator? behind of for that, of physician agenda the our With efforts quite call customers, will to partners, are growth XXXX quarter stakeholders. benefit to us, as our those we the first we for begin the Q&A. employees, pleased drive the and fruits

Operator

Citigroup. your [Operator question. proceed comes Instructions] question with Ralph Please first Giacobbe from Our with

Ralph Giacobbe

net and then wanted you about a a give XX% I more around think bit your sense your turnover docs. go prepared to about then the can talk physician in at and that, us and number as the recruiting how net think ramps or commentary sort XXXX? there. Just efforts that you Maybe your point, Maybe little of to this new of percentage

Wayne DeVeydt

Appreciate Ralph, questions. good morning. the

obviously, a versus year for on to and things a year of digestive I a So, in that part fairly typically start a period, ago physicians, those recruit this at highlight couple efforts is the you ago there's of this the year large physician recruitment. initiated QX mind increase the so long would time. as we reason, Keep in

in have had. get typically we growth you. terms six-month argue comp, lower facility, they could for when the at is time, you we've before to really a in happens So, a rate a physician recruited very determine get digestive use new comp you but ways do the really same encouraging our you And full a of run really, what period some almost

the in your and facility, it they and determine in times, them or at that accomplishing to a They'll scheduling your procedures, look two come accomplish. nurses they'll enjoy actually that the they is what do ORs the really do the process. So, turnaround time capacity, is they if lot facility, do of in wanted they'll and what evaluate one support they'll like

would encouraging, what so, now see while next say translates. the that actually And step how to I is really is

ultimately could expect for beyond and retirement, hospital that that track retention which relocate while by Of potentially kind statistical they've we normal had turnover, course, is indicator But done what real the year think kind the holding we harder don't is really just adjusted, last employed you would anything, have you can we we've because I them. see when losing and is from those we've are of Relative world going of what seen workforce are relocate, don't or versus onto that at what translated before that say we've getting of that to slight customary, physicians move a somebody's trendline, point this system. is volume lose in this if say I those another to future. we're EBITDA same-store over our efforts that would local know our our when go especially growth which in generally so that those to good QX, as new or means case and into efforts, time, this in a improvement in, into levels, move,

Ralph Giacobbe

sort of broader also wanted question. And then, Wayne, ask to a

get them. There's or have for almost I guess in interest or and but been The XX or X.) around to broader care done I whether CEO competitive the lot a you've that two-way markets that months. that or does partnerships around think think agreements seeing, wanted three-way managed repositioning, versus then now changed thoughts around preferences of your decisions influence your thoughts Thanks. doesn't been dynamic around, I You've with If you X.) evolved JV, you're a

Wayne DeVeydt

fifth So, with for would I really about mark. lot clearly am the this model is that provider's the say was has finally on XX-month It's an months, there that business the to That in evolution tell environment I competitive of my roughly yes, be you and the couple this had XX%, I'll in about generally that so thinking me, evolution I learning that really company, the quarter been at a two-way business, my next learn been side. while being said, JVs. would majority an I our open-minded. interesting

Evans the next X% can are In at we fact, team and I, more and back us, this Eric at joining expand that year the going pace in year. of of JVs half with really much and into accelerated really how three-way looking a

in partner recognizing exploring It's model, we out over interested those cannibalizing We're at the so more our of having might the larger market But the our of and some affordable model, be I preferred to transactions, are that if We are only and said, and accelerate to interested through think not business there's anything, an be our provider leverage. some the game. that to of looking initiatives. our I truly to got be are want able opportunity value to of creation costs the of those. partner rate providers, to goal JVs, those system. parties accelerate for It's for over are price. shareholders quality opportunities I the think these us to their choice in-market taking goal best that being and clear and good really good some together. more time systems rate we've those those with through discussions finding there's with our most in now, efforts time play That share we

you'll to a us. think it's I joined see of big as evolve So, year why part that start hopefully the progresses, has and Eric

Operator

Our question. with Gupte with next your Please comes question SVB proceed Ana from Leerink.

Scott Mafale

This is for taking for Scott on Mafale question. Thanks Ana. the

other factors you in contract or that? you So, is talked about just know renegotiations. the quarter. year, same-facility the strong per again are last there? is factor, Could down what the that case driving Is break what I major revenue the driving

Wayne DeVeydt

so facilities. specialties we're It's many items, the on and clearly recruiting right our into focused one is

contributes, same-facilities that focused the of which is top same-facility are volume, on So, then actually obviously that, going course as a on MSK, grown and but fact higher our well. more we're revenue, have so to much that of our cases pro-revenue drive up

as other us On last thing I balls long said your rates really our were is in every The the new clearly we a is remind year, the would very on thing but is the kind so of team, care, years, everybody forward managed period. I just year were of contracts of and though say that average, digestive renegotiating ago the one there. many renew once clearly rate we're a with we would three of initiative to increases and moving that

for that's So, right more something the heavy focused it's physicians tackling. in new renegotiations. procedures, year-and-a-half it's I did recruiting value and to and and rate seeing candidly, looks value and three-year the just procedures doing creation we start of year going right we It's that's your recycle basic But that facilities take a what think MSK. like that another of in being than full the on ago, a it's before create, increases getting blocking you

Tom Cowhey

per look And at those that is lot a you our cases minute implant our drive what room. before, little this months XX I that lot are a ago, things the think we take we've Scott, to really of contribution of at which of things. a a maybe analysis are that, margin said longer, did resource, about highest scarcest as the the probably look operating

make procedures takes the those do resource scarce when of same So, but to that end I that complex do do per certain procedures, implant cases. minute I could at it the I of day, the more in time five GI

we metric, depending range, that that's consecutive we you're efforts, we've you so, over that as X-X% that's on the that the some at which so we've look within look past, time, that slightly focused our that. same right this said recruiting, pleased deployment of time where in the actually, like, for metric, well over quite quarter, think the quarter, how and third think acquisition is focused focused we're on is And in upon capital above we be And should it's store what total our we focus where and it, and range. were and the

Scott Mafale

I you on they ramp still I de an a And de Villages of no it kind activity could to Falls and And guess XQXX? update then I do margin Idaho novos? in you weigh opening give the versus how more terms cost guess time? later Are of think novo the open and that was set over broadly, than initial then M&A Thanks.

Wayne DeVeydt

no of really today, The that. by on year, of encouraged are facilities than as later very say So, open has track weather both QX would I to next so still we're not been really us. Falls saw impact and the throughout but get bit Florida the the all a big didn't with storms Idaho locations, impacted. you A to concerned U.S., two really, little

one cost things far, these do when M&A you novos resources, on big scheme initially, lose you the the so day up a with IRR. all so facilities, of and little get you There's unlimited course that from long syndicated. to more of of that a They're get break EBITDA, of you So, and low the once recruit a ramp-up of the and of open we very M&A growth of period answer high long. to run-rate then de to would short versus we're not staffed, organic that facilities in that if fully gate, and novos out we get good. and money is over pipeline. the time, not The you short it's then so even to there capital of get moves investment very de the a get all But want the physicians open in, still you you then you had

that growth, capital the de you is As but on first first and of tool deployment, our our that toolbox if million we double-digit that, and organic idea in is just for for everybody how anchor continue we target focus I one that priority really there. just make know, get to become $XX-XXX priority, on we our the then would novos

deployment play with to de double-digit a that helps continue and as because us focused flags kind be into right through think going But you'll on we're a X-X% so, be sustainable view right to get then of for support new of aggressive and that and M&A in really specialties on growth the true we see to that M&A, that plan year the the multiyear capital. novos going talk can we markets be very we we becomes on next as of very new new organic we're markets to over $XX-XXX growth, us these about million. another And optionality the strategic and when move XXXX nice

Operator

from Vanacore proceed comes Stifel. Please Our with next question Chad with question. your

Chad Vanacore

on So, same-store expect X-X%. you carry about leverage target got of then growth? you flip pull of drive the organic just growth, what to And from bulk can volume? here Can thinking you've rate side, the revenue that a to

Wayne DeVeydt

I that more don't rate line rate get to weighted you get X-X% through for of the always will and the we've probably X-X% to years, to out X-X%, case be want heavily on be that know early but driver. will ultimately, around primary It Chad, average. said around

be part that to book a today know, obviously, have a of comes well, you disproportionate meaning But influence you when average. is that it'll have a north you're in a said, government book, rate much that business X-X%. rates to big so our taker that getting get being and to on really fungible as to As we it commercial, X-X% that you're of weighted think

though X% X-X% the but volume, is markets provider environment in range under that day, case rate being where one was what then with the on say day-adjust would I we you if fewer so he many just side about most Eric's of on we're that around they've insights thing that the the of on joining obviously it, brings and was lot The encouraged course of volume operate. revenue. seen case in the tell, can you I'm As delta about us and a quarter, in with

And further we think what able our negotiate to giving so, and we bears us going about forward. market this rates think we should intelligence do what more as is we the be

of So, outsize your being probably it and more rate see, we nearer job balanced rate it you'll of of our an just in better then more if hopefully, case a probably negotiations do becomes time, well, the growth term, and volume. over

Tom Cowhey

going Chad, a some Tom. dollar one and substituting margin thing rate particularly revenue bit of I mix quite and higher component higher business of stage those for I'm that cases the for differently than good that a little profit don't but about yet. say more good thing that it's cases, those lower a that's is know thing for Wayne implant contribution because don't shareholders. then the if it's what I'm But the out I to if did, lower we're upset think at which if about I is be same-store, driving would mix it's

Eric Evans

acuity opportunities One in Eric the is other revenue happens, more say this organic same-store that give to going past. to you thing and us Chad, I'd move piece naturally is in And it's as as places know, Evans. available setting, just growth into on weren't ASC continues that the that the

see musculoskeletal over that that expect So, we to to in in years. the see coming places obviously other and continue

Chad Vanacore

again. Thanks

net share again with just you there physician us? thinking possibility physician about this retention, year recruitment adds So, and could is any

Wayne DeVeydt

wanted the to It's physician Chad, as wanting much a adds, due explain while details the not to is of share lack monitor I this. why. won't the how to it as to we that nuances we give have net track and of

the them realized a things historically, One as doing simple and the leaving, realizing be way, that have was And procedures procedure, many at a that simply physician done an was ASC. single the a were though could injection have whale procedures. up a were counting in could by were a theoretically when they even treated physician getting an the been company time, same we that being we then doing and right that which of was signed physician as same

redefining really work we each to facilities been a can as when see understand have in least that cases they've a physician sure this revenue. to count want we generally in way physician, our a we so, working five And that and for new internally and code make that now done we at $XX,XXX of we

measure say of to perspective really they're least energy us, not doc up they've really how until our new a that that's For from we actually not conversely, we on And that ramped spending level. kind if a at our metric the we're left of the sort. if doing then excited the overly us, of or retention person month something was injection leaves same level that kind not is metric, us let's get somebody that which only one a around

So, the data. we are now reworking

same what we've broader a trending rework year time, broadly if would imply showing improvement So, trends in case we've slight impacts hasn't been doing volume quarter. position while because the the though what on it that data the data obviously my volume. don't over really is the been and we the data at grown the we've but The case I know ago, are that side, retention

Chad Vanacore

initiatives, did you what in me the to done savings Cost cost more savings where the back half quarter, the of have and margin do year and some for that's more pop? one you then. get of weighted your you're Just expecting

Wayne DeVeydt

question, great a That's Chad.

a our this in get did we of quarter, a last initiatives but cases, in So, executed not only lot lot quarter. of

be benefit half design an applies changes more back would the it year example the our so, the the we weighted of have but for value creation to heavily toward many one, did we of organization. where And

how done maintain self-insured mentioned and consolidated back track the the toward what did, and is through, moved mind we premise meaningful concept the The previously, that those. our built high-deductible with half we back-end the savings we've we can plans. weighted, which is into has. we that the comes that high-deductible from so usually As value in to were it and budget and creation want that plan tried very is year. the life had level we We for we've north say our to that own of way health different that plans end There we of savings enrollment can to a there, until we've many self-funded those XX-plus weighted actually of would the ensure I see we year come conservatism what under occurred were of by IBNR that in our

example but But you to in like initiatives to they that of a allow we'd quarter. occurred. and we'll look many as like the our start So, year, evolved that's to around it's of throughout one, then already do, we tell G&A if through thing fourth I actually would have see they prudent to through, flow think how the they're an coming

Chad Vanacore

too the we expense think there? about should on supplies Anything

Tom Cowhey

look expense at the Supply that see the been least the you quarter, of we we've if in of the also gross margins, that a actually starting the initiatives at quarter the benefit GPO in the both implemented but margins new the - fourth improved in the but had are has quarter. contract quarter so quarter gross to third initiatives, you're in first

and might we XX Eric, and based want categories taking don't know think there's We a you else there? have our our comment attacking spend if in do is larger his on Eric about of across some experience vendors. what of of anything I at be could that opportunity, where keen there to operations I to been know top look our on some

Eric Evans

we for we that, more just it important grow, opportunities in Tom even that mean, medical do supplies a we have I implant we allow have fragmented then to as of and from a grow our where we distribute everything chain. that have And side relatively supply it. our GPO That's relationship obviously beyond becomes still Sure. how we expansion. and pharmaceuticals, mentioned margin the to business,

looking at there continue expansion. stuff of momentum going gives that on margin bunch I us opportunity a there's we're forward our think to So,

Operator

from Jefferies. question comes Our next Brian proceed your with with question. Tanquilut Please

Brian Tanquilut

Congrats on guess question the the per performance QX. first case quarter. in I on revenue is

acuity? pure how thinking drivers payer there about be mix of the So, should the we breakdown pricing, between

Wayne DeVeydt

Well, XXX start let payer up basis the points. mix that was with me our fact government

we on a almost see generally speaking, So, as substantial you know, on than rates Medicare, generally you commercial XX% get in general. what discount

MSK a the supporting create that being that expansion. we margin into so, margin along with headwind way. have just mix that came the we but pleased strong, are And our initiatives that the as the through, G&A case Clearly, in the can came think extremely back way. come we're you seeing expansion volume That in pleased can a fact about you fact focus said, more we're that obviously right on are the the with

one in initiatives. are But is of are we improvement. we so, speaking, the disclose, generally G&A improvement across do we buckets And we our MSK that's or of not track things know, publicly the you specialty big margin track, seeing track driving it's part margins, driver with board, we affecting a our as and although margin our the what's And our our the the much initiatives by won't pretty right components. whether right coupled really of that

Tom Cowhey

And to as do they joint the in data terms taking prepared the facilities number for remarks, our time. The they're at We're is have off. impressive. side that surgical spinal hospital in continues in to them addition a much cases Brian, look doing feel And year-over-year Orthopedics, really implant average. the in that in ASCs of faster we our have a total doing Wayne couple seen ASC them implant the stats. initiated, we company grow of best side you that than of on where our our cases, been like quite program in some gave now we've growth we

mix And so, as has it in certainly we quarter, at look is the the coming helped. where

rate, be to for to that. opportunity there the I improve and continues on surface scratching think us just that we're

Brian Tanquilut

go Just a - ahead. sorry,

Wayne DeVeydt

to this going that I repositioned as on we a getting focused recruiting that payer with have to as you you to the of more that is you through your year opportunity Tom side, does Center outcomes evolves facilities on I relative can it Excellence. in with that to more last become it then leverages procedures, accreditation the the of it not volume, - itself physicians, the very have can rates I is and to we're a better payers. to about of accreditation, itself only start because outcomes for the but Center well, one too, to over you over really also only show these do the I been new exceptional - think because get better on show support push don't actually just of experience show to spend we us my the quality but talking going from leverages we've meaningful a time know sometimes the if know for not year, volume much get that time Excellence And thing but have was company we time type obviously say Brian, providers.

now long again, Excellence our Now, got just has lot found accreditation. here, last but do out runway we Center long, we a night, very facility, here, second to long, gotten of

now so, now gotten the quarter early ability to we're we've and And of something between to that start there got in year. will with direction, get starting marketing world share that a right the right facility we're actually the things, moving now that now doing and and first hopeful third we're got two we've we've the next

of And so, a it. got support to lot we've data

changer. thing is it's I strategic the recruiting kind it's that game not actually about what getting it's best another the becomes just be the would So, over would that's doctors, because class of right right highlight that in procedures, about just time being not

Brian Tanquilut

beginning in your pick-up year? the MSK expecting follow Wayne, just then all potentially we next And business joints in further in actually the which of into of and on year terms seeing total a segue about should think that strategy what Medicare side next that expansion you're and M&A, that's the does up fee-for-service my question that, we joints opening as good to fall next on or be total of into opportunity is up growth and the that

Wayne DeVeydt

Yes.

Brian Tanquilut

of is. beginning or sorry, XXXX whenever that I'm

Wayne DeVeydt

and shy ways because really growth why The away and What and expand do expansion. this is rates through the our meaningful, other then and our contribution too then that margins. margin should short comes cover really from EBITDA again answer basically capture and that accelerate nonetheless, but headwind, impact Medicare said margins shouldn't embrace on the this yes, we is to we that the it to find quite is dollar business per we through our initiatives G&A again has and it growth of because is Medicare from

answer the it. is about is question yes, the it So, about your way thinking to thinking short way you're we're

Tom Cowhey

as Brian, third the commercial data side this of that gathering, we're of joints a some nearly now our the point. positioned facilities And by we've right been are total on at performing

Brian Tanquilut

for you and between associated mean, about physician question have M&A appetite practices? deals last any thinking I you about think me, then split practice are are facilities? do your surgical pipeline, And the for still facilities with I the how as that

Wayne DeVeydt

part play would So, the is key and short on of answer the defensively ignore both ecosystem kind play think highlight. that's for we a they and them if broader appetite but they're is I strategic good practices, offensively, limited our of won't and us thing a completely I

practice them evaluating also So, syndication our and a that ties sense physician a some we're not supporter potentially surgical partnership large whether into for with facility. a feeder market and that system then a is our enter or to currently defensively us within in into ASC them group makes that with that

not where is example type physician lens. practices. to we But acquire an would it bias be that would that with look generally at speaking, of our So,

a think what be ecosystem Our call of support in facility. But what I'll we'll we do. function. more, That's bias the an again, is about to surgical kind

Tom Cowhey

we the is couldn't so licensure the particular was think key access acquire in worked recruiting that to that and that team volumes was a being the was all the practice that the that physician very example, I a last unless Brian, they member good to practice, facility so leverage able our increase to ASC, did. the doing work we on in of executed to and physician a great way physician year, particular small the and acquisition, practice, state

a great where to our specific be not think in a to volume there's captured. that's this I that a effort linkage is ASC, firmly and dive that's particular We think an otherwise or So, enhance pretty example wheelhouse.

Operator

Kevin comes question with from Please with your America Bank question. last Fischbeck Lynch. proceed Our of Merrill

Kevin Fischbeck

QX quarter. last couple of was the double-digits. it's don't then or So, guidance here. if any low better to releases EBITDA but they're don't the slightly came annual statements, and to implicit, much was, QX language slightly that I for in your year, double-digits kind was know guys Fed if too into view that. your the It better I'm you read reading press know than said actually like questions job I whether this our there's

Wayne DeVeydt

to of comment. than had what Reserve comment We quarter been now, both little this the better to the ramp-up. three say and and clear Kevin, That smiled. appreciate through Tom we're It's match, got expected. through slower too first is we've that that Fed year, said, months down, we I've of and both cycles, because three expected being all, and reminded, I'm good constantly many still rounds I really nine the still We we're of at so I smiled bit was boxing XX-round a a first feeling but are more right go. pretty

of of my really way, that the along It's a from have growth create forward by encouraged as last we look, initiatives put and forward initiatives was lot understand, remainder to heck well bad to then to And better the the investors we and were we a continue the both momentum. right wanted is round This put last this. perspective, weighted we're but have so, year, to as having lot than there initiatives that of that in QX. fruit really that are year throughout year this heavy QX G&A a

And of but come, out more gate. to encouraged so, again, the

Kevin Fischbeck

- may question, ramp is then just QX pacing and saying you're there a you into You the biggest QX, answered is say the on have a next QX ramp of which probably this. into my thing Would just that the was and

Wayne DeVeydt

the we we now, quarterly don't the you I'll while of expect in and evolves did, then should QX, how at coaster So, QX QX. an very you But we evolves QX, a but and because into items, there still roller to QX, But QX other a ramp did, back way QX, at some see and ramp be same and QX. how QX. pruning it, initiatives we've definitely not want the takes see a in least little give ramps in a in rate It timing into rate guidance, substantial Right of would some some QX. a expect to we modeled we again, a QX in see as want based call initiatives our what could QX, going smaller it be and come where could then on rate now and relative up through. dip ramp growth right then into outperformance maybe would to we

Kevin Fischbeck

case ortho rate mix versus And a a but about obviously, I those then related? is you to is there case, I things somehow mix on and big two the really per and the vertical? Is being net payer the is other, going mix was a more headwind, a reconcile want and case discussion MSK just without driver if still can't wondering related one to that talking have mix because government you're or government more case-by-case closely payer so real mix shift are positive,

Wayne DeVeydt

a That's really good question.

think I view them you can't exclusive. part it that of is mutually as

encouraging because of which your this say, is them, do point, is You course, to to have well, good. very couple Kevin, you

That that I initiatives You're was for their year our in, expanded really commercial we of last But lot well. to were Medicare growth It contracts. being now bringing you also of facilities the want commercial are the contracts on at focused those our as that want our payments, doing to joint get. EBITDA creating a and volume doctors total so a lot still is that bundle but programs. margin negotiating growth around highlight also more said, would our kind of you're of in

be initial can't contracts brought really it's your is in to part parlaying as play more we with leverage commercial well. really the happening get them was, Medicare now. facilities the It's idea that But a it the point, we'll more So, the what's But in done can into obviously being you decouple our one-and-the-same. with hey, of bundling? with procedures

about won't much continue, so we so, long be mix shift concerned as the And concerned the we'll about hopefully, be as mix. as specialty as trends

Kevin Fischbeck

you. Thank Great.

Wayne DeVeydt

Kevin. of you ended morning. how Thanks, continue back and hopefully team we'll show all thank good. being trends, and I this the Great. a as say we these are as that hopefully about And rounds encouraged up enough that for really can't at just participating let's you three come next

to though, and privileged I to X,XXX-plus you feel I in take say call able and we do for want a making of I be physicians Before their participate for to more it to conclude contributions. our improving affordable associates to XX,XXX-plus this just our Americans. healthcare know moment thank journey our

physician have operating As Surgery States, short-stay this of the a the partner we every again our execute across and morning for Partners' against efforts our become that the preferred for call and United facilities us goal surgical to really each it's employee and there. great daily day. joining gets Thanks

Operator

Thank you, ladies and gentlemen. This does conclude today's teleconference.

for lines disconnect this your And your you thank may time. You at participation.

Surgery Partners (SGRY) 12 May 192019 Q1 Earnings call transcript