SGRY - Earnings call transcript Q4 2019

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Operator

Greetings and welcome to Surgery Partners Fourth Quarter and Year End 2019 Earnings Call. At this time, all participants are in listen-only mode, a question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Mr. Tom Cowhey, Chief Financial Officer for Surgery Partners. begin. may you you, Thank

Thomas Cowhey

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

Joining Executive Surgery Surgery Wayne Chief me Eric Partners' and Evans, Partners' Officer. Executive today are Chairman DeVeydt,

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

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

that, call turn to Wayne. I'll With over Wayne? the

Wayne DeVeydt

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

fourth a cover morning have quarter expectations. this We XXXX results regarding to our our and lot

strategic for and Before journey initiatives. Partners a and developed assembled This as sustainable journey like and XXXX term. double a growth team we term begin adjusted the have to in near on long Surgery I digit both two-year we've term when company we new been key would highlight the longer positioned and for began how our we goals EBITDA

finally establishing with our included specialties to targeted directing integrating and a non-core decision-making pipeline to assets, economies accountability data-driven a corporate and of based and execution legacy eliminate settling the specialties the the In the matter scale, foundation XXXX, a high-growth of geographies, opportunities our building eliminating strongest sheet focused on return with we de-risking distractions capital, for acquisition and portfolio and results. to on growth of building aligned growth achieve balance for highest operations which investments initially realigning on culture

to revenue properly ensuring our attract in for ability healthcare centers finally doctors cycle and system. for services to more highest and believe core foundation key to to quality our centers. XXXX partner facilities. believe ensuring four best the paid the and perform critical and are value what facilities our part becoming areas partners physician the we we provide XXXX we possible are of In foundational investing stay that leveraged established will partner our included XXXX essentially actions operation recruiting us the these items initiatives into areas to our and care; the was facilities we the choice as the surgical management; are value increased and our that accurately focus more owed For in the procurement; delivering the we investments drove provide. short collecting choice. early differentiate of that of the surgeries our rapidly These physician with we Managed of for and our

same By we while differentiate could growth. focusing our adjusted on areas stewards prudent EBITDA as the and operator achieving these of of capital we ourselves also key remaining above-market double-digit believed growth choice, and facility

goals these and this adjusted EBITDA revenue same results XXXX published double-digit year morning that facility with year-over-year nearly full growth X% confirm Our we achieve growth.

for EBITDA long-term. success that continue immediate XXXX similar double-digit grow believe and can the rates expect both by we and in We to adjusted

physicians, Our execution for intentional past years opportunities two the Partners with payers. providers focus has over and Surgery expanded afforded and partnerships

term time a year strategy on Chairman, and I be Surgery and our development I aware, as Partners you new of are will my earlier long Executive role many this business stepped focusing As into execution efforts. at of

While are benefits attractive we for of an particularly the pipeline driven growth scaled partner. tuck-in choice because partner of primarily of performance, XXXX a acquisitions monitor looking minded organic often the physicians to by continue for we is entrepreneurial, independent

increased delevering. As at for are which XXXX attractive see we acquisitions both strategic opportunity multiples we enter and

I'm continuing leader these like the team to the this opportunities. we've have Eric team, drive released talented results continue confident very in this morning. excited am I about my as focused the efforts partner right I leadership we on with to to and expanded ones that right

me let the Eric to that about turn over Eric? talk to With the company's operations. call

Eric Evans

will provide everyone. then Thank most results on recent contributed the good sustainable opening we Tom, morning remarks that drive XXXX with our results close will our I'd take and strategic long-term XXXX an and of highlights continue review initiatives these before you, morning update Wayne our EBITDA as results on detail growth. well that This then double-digit outlook greater to and like as to to financial adjusted questions.

earnings a initiatives in adjusted on and pleased reporting performance in representing to started of bear have XX.X%. on report been am full-year over basis. a fruit this achieved we've XX basis points on growth I to X.X% million adjusted targeted facility $XXX.X of driven reported this double-digit margins expanding focusing X.X% grew which XX.X% EBITDA XXXX. year same our basis This to revenue EBITDA The our adjusted was strategic full-year growth strong year, growth by we

EBITDA revenues million. adjusted to million grew an grew fourth to $XXX.X In adjusted and XXXX, XX.X% quarter impressive the $XX.X X.X%

facility look quarterly revenue prior X.X% As net year now volume strong same facility of growth. deeper by revenue This quarter increased per from case quarters. the adjusted growth we six days revenue the and continued the by driven consecutive quarter same at into trend

and our quality exceptional patient we focus facilities as initiatives by XXXX, initiatives These meaningful previously dynamics will surgical managing the on the continued key underlying strategic along our that opening growth. foundational corporate experience. Wayne of remarks about with well areas to as continue his focus growth provide enthusiastic a remain and on include in overhead begin we a mentioned As providing

key enhance efforts, to arming manifest we've in a in strong recruiting As in for time margin and our our we of discussed quarter did of to and continues our driving leadership physician contribution from facility data markets. and physicians we similar recruited in physicians facility relevant same strong number revenue to help third with added success XXXX highly as The of retain and newly call, XXXX in some partners programs our evidenced growth our growth year our resources recruit been We corporate another numbers. these numbers. by as working physicians

of in focus our which surgery performed almost to procedures centers ambulatory joint joint total data-driven specialties XXXX approximately is targeted the mid grow we our meaningful acuity Currently, In our double performed approximately XXXX. by total our high has to cases. XX% total centers. percentage specialty capabilities into of perform expanding the yielded joint our total ambulatory end Our the the procedures in XXXX, that higher programs improvements range and we X,XXX of in XX% in including increase to as continue multi were surgery invest and centers to expect

continue can team's in As patients. choice be facilities you we and making of both our with these Surgery by effort pleased to for physicians see results, surgical a Partners’ destination

the are momentum with pleased equally we payers. are with building We positive

members. off surgical per them In markets benefits facility plan growth. to to their provide partners contributed in rate rate growth vibrant revenue completed short commercial these understand and Partners operator we a increases Surgery our achieved negotiations that the value and that stay health quarter Recently double-digit Our cycle markets independent and increasingly can multiple this to net adjusted are fourth momentum. case a testament EBITDA like

many across As dialog this the country. we are with shared previously payers actively engaged in

to continue on we build constructed can confident eight We last are strong the over the quarters. foundation

on yielding believe same We grow that and revenue can Our X% facility to at X% rate remains to of our to model growth. on for volume X% base long-term consistent. X% sustainable a growth business X% X% rate,

reiterate As with the we we bias higher range. end a this the look towards to XXXX of guidance

bringing are doing bring our we Our the focus proof at procedures targeted if on we we payment in results value appropriate on least to of the for doctors system, in can level that growth. the to and to date achieve facilities, specialties right this our getting focus

our expect G&A procurement, additional and we to leverage. of EBITDA value. On These for of by cycle adjusted X% of focusing X% double-digit on areas include top of an our growth team goals in growth baseline this revenue support areas growth, key

plant of bear in to are and confident fruit they and areas in continue further will we these We seeds each XXXX beyond.

We XX and these past have continue the scale to months functions portfolio. these initiatives leadership over in built new teams they our broad across

our and in Recent optimizing collections other are discounts cycle the impact improved we purchases. medical of efforts procurement implants on greater In to rebates These base payment that opportunities GPO our supply making our stages reduce early are we aggregated and double-digit have distinct denials. on and is information give revenue top and initiatives in improvements our achieving progress of of address such confidence front-end helping the us on trajectory. identify during our in process growth billing denials can

look facilities have and briefly Operating to Since Wayne the much amazing using building outstanding led support on achievements. promotion physician he support and providing operational Partners colleagues and now surgical Chief in impressed work This meeting our administrative I and has our the Officer group CEO, surgeons of touring spent teams. some the first about committed tenure recent by early facilities over developed. our in partners have It's early transformation forward Finally, been our I to perform last exceptional leaders success. to of team and job I'd on highest provide my quality to continued to exceptional like the as to my their the leadership I patients. of these years of build here as group support outcomes as for company has CEO. joining this talk two to enable XXXX clinical this Surgery the

I operating with the will as team of further on objectives we leadership mature challenging calls, future our In some our system. detail

With will Tom? color turn provide I financial additional Tom, to our will that, call who on results. over the

Thomas Cowhey

EBITDA, Surgical quarter approximately approximately the Thanks drivers minutes with at of we XXXX with performance moving on adjusted XXXX I'll end Eric. cases our to and XXX,XXX our revenue the and year and increased key starting few in cases. XXX,XXX a some outlook. our year fourth ended cash Today then flows top-line. the Starting to on financial spend quarter

this and higher net Importantly, as earnings. cases growth higher noted which acuity revenue Eric included drive

divested growth the adjusted nearly divested closed growth growth $X.XX also $XXX reported benefited fourth of the case of facilities. year-over-year or of Full-year impact of rate revenues, than approximately year revenues period revenue Our billion closed In X.X%. would care higher the X.X% last revenue $XX of X% overcoming to revenue Removing the been the prior managed nearly year. we million growth. improvements of quarter representing XXXX adjusted yielding million rose from adjusted from have same targeted facilities strong or loss

in the the Higher reimbursement growth. for the and balance basis X.X% revenue facility and year quarter coming rates quarter year. same a case growth improved X.X% fourth On to full contributed X.X% total from the cases fourth X.X% with grew and this in the for acuity

Turning to operating earnings.

million $XX.X strong worth insurance period from Our just benefits fourth of health it the two EBITDA XX.X% performance XXXX that previously. a operating the growth. in that strategic in XXXX actions year and result was two our The from $XXX.X over came quarter full-year our EBITDA a is driver bringing of period adjusted was quarter increase at of over hospitals our quarter end consolidation. noting chose to losses discussed from guidance the prior full-year that double-digit XXXX comparable growth of primary we exit the absence have surgical plan of tail The to over we achieving adjusted our million, the but XXXX increase operational

Our on basis EBITDA a also period XX.X% fourth-quarter full-year EBITDA from improved adjusted XX.X% prior margin to our margin and increased XX adjusted basis points XX.X%. year the in by to

Idaho opened our $XX.X $XX.X year-to-date we transaction, $XX.X associated cost million of quarter de XXXX in XXXX. integration recorded November costs million. acquisition fourth-quarter total the transaction, bringing which with hospital integration included novo in and approximately of and our Of During to costs note, million acquisition Falls

noted I've results from before expect As throughout report facility we to separately XXXX. this

these were businesses. this ancillary consistent excludes guidance stated in the Our and our down adjusted our XXXX optical and of also in segments expectations hospital in revenues new with slightly impact EBITDA for XXXX. Net

year Turning on revolving borrowings a with of million with metrics. ended We no approximately $XX liquidity cash to the facility. balance credit our

X.X During XXXX, capital times EBITDA. of million multiple of our we highly portfolio $XX trailing at enhancing deployed adjusted over a attractive

acute November Idaho XXXX the facilities to addition, December made construction was our investments care worked XXXX a in hospital The substantial tirelessly Falls initial projections. and Idaho of new important operate we to opening a culmination make ahead this This we successful licensure that teams opened existing market. which in its would existing and multi-year very significant markets hospital the Community the thank received surgical of we the in of In in where possible. Hospital was The of most Falls. our complements this and new hospital doors like and investment in capabilities expands our

to in investments years broadly community growth. expect our to this and able across brand facility We to sustainable we effort to contributor with are material excited adjusted to be EBITDA our a better our achieve be this long-term to strategic a Falls demonstrates serve to Idaho make come. More portfolio our willingness new

We're Partners be building positioned near-term, long-term predictably goals. Surgery to day medium-term and to every and consistently achieve growth

interests $XXX.X operating the by For year million non-controlling $X.X cash million. of distributions flows exceeded to

for from ratio total times facility higher added XXXX. as For represents inclusion third to have This agreement exceeded XX, this $X.X resulting of EBITDA, from ended debt Specific by operating primarily we as Idaho agreement ratio $XXX trailing approximately Falls between distributions quarter adjustment the million. basis our $XXX the our new XXXX EBITDA $XX financing brings XX-month under company's point XXXX new in period of a a to decrease debt million. of added to equipment flows XXXX Idaho calculated the December credit performance million fourth of reflecting adjusted obligations with in This approximately ended credit Falls and and X.X EBITDA facility of cash EBITDA. projected financing have our well credit the We of XX as lease million agreement. the quarter net to the

financial before, covenant term the capital with noted or the senior loan our on flexible unsecured As structure notes. has we no appropriately an have company

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

to Moving outlook, growth to variety on growth EBITDA a we of committed by digit revenue XXXX and high baseline. adjusted and to are as remain fronts single quarter our excited this the on XXXX double-digit our compared progress

adjusted the line We exclusion. expect the impacts in bottom and excluding hospital new Falls to guidance both our metrics at that from XXXX report our our and top Idaho reflects

materially from revenue XXXX appears of and approximately growth. growth headline in year, repositioning removed annualized portfolio top-line investors the $XXX the last higher While baseline million that than depressed we remind XXXX revenues

strong We revenue continued mentioned growth same expect XXXX growth previously the negotiations. revenue facility rate to our of reflect impact including

particularly strong Adjusted revenue in EBITDA is acuity growth procedures volume growth. and expected per higher continued to case from growth net benefit

and to expected revenue continue pay Our G&A dividends. cycle efforts also in procurement, containment are to

XXXX In continue results summary, believe our demonstrate to achieve ability our to we our target.

continued to pleased are hold. expansion take strategic same strong We see facility revenue as with margin growth initiatives our

We procedures continue invest reap facilities we as begin to enter to benefits of will and our of existing new markets in the new that facilities. growth organic the Medicare some expand to support

open call we the will for that Operator? Q&A. With

Operator

proceed of Instructions] question Thank and Please your with comes you. we'll conducting Citigroup. At time a [Operator question this session. the question. answer Our from line be Giacobbe first with Ralph

Ralph Giacobbe

Can fourth in procedures? about – -- sense how Good etc. potentially just folks you've impact any give on Thanks. in seen obviously virus quarter you lot think impacts start you and headlines. impact if the I morning. framing I'll potential a Corona guess, of behavioral any deferring us

Eric Evans

morning, this good Eric. Ralph, is

an very not it’s seriously. take our surprised our are I'd question. everyone's it's and something for We start we is physician we on our seen just the priority that of saying and impact. colleagues, not this so Obviously, obviously date safety getting partners our have patients with first mind. To

our to that all sure So haven't from screen started standpoint making store a scheduling over clearly make steps and the standpoint from same policies that as appropriately we our the ASCs hospitals but we we patients. off impact sure are seen a in are triage taking year we

access probably places. there's most less and points in dependent ER less is business Our

strong our have like as it an not impact, is us say to So I far prognosticate manage clearly we can something to of pretty this seen any in general ability feel don't date we is that the to but I wouldn't would want I impact. know overall but that as predict

Ralph Giacobbe

weakness just CapEx Okay. sort I quarter. as number if to expectations a maybe you flow bit little and help spend flow well. cash was for light call and guess the XXXX why the on question, out us the sort can the cash of And Thanks. operating on expected of in there follow-up just Anything

Thomas Cowhey

Sure. Ralph, Hey Tom. it's

on cash obviously the you So year, done. go just compared startup the receivable combined agreement for quarter are year and and associated and and the about year as one up the that which with offset because well, some primary up about we've went of receivable three IFCH the higher about earnings the as losses tax period. the with in cash higher help also the your We your higher agreement operating level payments those to you've think make of flows again as you but fourth-quarter prior we flow and the to Falls Idaho just year over and Community costs you they'll period expense the earnings payments tax that have XX% we took the grew are as of the and Hospital there some in this by think think obviously just interest is the in got opening year that so translate last next drivers transactions year interest and partial

you of think have about the same will you next year As some dynamics.

double-digit, annualization losses year of because have income You’ll will in higher much and expect a we you the this then as XXXX notes fourth the have Falls. you'll a grow with additional quarter interest at Idaho of bit little did we rate but associated to have

them excluded in every the the full-year teens I we've this of EBITDA that in which expect EBITDA terms we've and low hospital probably at would As taken at the will cash that our look quarter. that impact similar a that year, you Xx from but to losses impact little outlook. that bit that probably in more and be drain anticipating will be flow perhaps that we're fully would than better we fund number reported XXXX

Ralph Giacobbe

you. Thank Okay.

Operator

Thank you.

line comes Fischbeck question the Kevin Please of proceed from of with America. next Our with your question. Bank

Kevin Fischbeck

is Great. your that that guess we role to include your deals, Wayne does for said Thanks. I of kind Should guidance deals, focus about ask expect you of year year just I just I beyond know -- equation. through more actually confirm guess, should this an of within but kind really the wanted we you’re bigger not the way side I not beginning next up it's to deals in should positioning until that, we that on or way? flow the bigger and us beyond of that to on to that expect a show initiative and deals see this in a to

Wayne DeVeydt

Hey in the Kevin, good morning. appreciate question

put things. a me Let in few perspective

Let me all think being that. first guidance, as available just to when annual start our about levers we with, we view

we finish not got of now outright ASCs will last being not this and half there said so actual our right have we late have The but year. a have we last the in early baked obviously these first now we we're -- over under that Now we core many are that last very to now at year that started some the line assets you and throughout but M&A core in robust being hopefully process with to some and still be a M&A LOI re-shifting pipeline assets started ASCs get where the place that replenished we late few year LOI year planning a and next of also can of right would transactions year. tell in are have to I prune kind

as these the doing we I it that two scale kind through establishing asset this play into one the ‘XX number that number a built get smaller focus proving infrastructure and a initiatives, and of back into was actually foundational redeploying seeing been and with a started of made say we the pruning capital highlight and our we've that And the plug number but and acquisitions to then in a number course goal though on core and has because our could of proof effective year goal a returns growth doing that entities. point. we of proposals last was that

the wood your robust, to I into of at So is announce the last expect finish of be line. that And items we do they'll would EBITDA then to we've LOI the or question at over our earnings for looking year these our that are the long though some divested the will is additive the than growth short are these just be is QX we pipeline Kevin year did under this which whether an knock as some I whether transactions and early expect double-digit how really those and either replenish of or year. think us we'll well into position. be more on I they'll a several QX -- got the announcing end short-term divesting play a reflection lot would additive to EBITDA. we in of

Kevin Fischbeck

then guess quarters this year And recently to the this of and up Can assumes last physicians as couple Okay. relative the Great. about you're volumes up of that of time far Thanks. recruited color this give years how couple what I you ramp seeing then the last of of ramp lot any the your about you talking year docs? guidance is a you've spend recruited. as

Eric Evans

what better the really focused years We've chief a been Eric. are year on This significantly both talked this docs some recruitment do past big the and difference additions on number there's our number, that in know with couple growth slightly we say that. we're our on. year the with impact This were in opened as The of at that those full additional year's can year. be pleased data specialties bigger and advantage and results. so a ASCs goal we we seeing than taking probably are couple revenue of expect A We had CMS of pleased a and the us to added the with approach financials this a that. officer opportunities expect resources is could we our a this to have last we focused lot doctors with we earnings that about were you Sure. we're and things year that the keying and up we the done numbers and lot is we've for particular acuity over physicians growth recruiting pleased

as actually this we've as huge invested will we grow and number recruited that physicians to year far that definitely continue So expect a in to focus. be continue area it to

I Tom, you to know, And don’t that. if to want anything add

Thomas Cowhey

No. folks I and and get think mean, lot smarter accelerated with confident we gotten that I'm very that every I added focus that and we've this it going into we additional in as really is in think, area how XXXX. we of XXXX about result take the year ROI a we're in have to invest we want how to terms our good a

Kevin Fischbeck

last virus. squeeze earlier to I clarification to question in Thanks. need related about Great. Corona Ralph's one

so you're you're said [guidance]? not it, it guidance not is Does your of be you're seeing impact assume seeing You an not adjusting now. will impact that or kind there an

Eric Evans

actually make we haven't very I ours Corona plans what's of think infrastructure. have is and we have to to kind business. not same no business again had say Most acute very one. obviously a minute, date ERs but the is there has nothing been seen facilities our prediction to the like feel a virus. We an and type we elective our very There's impact of don't No. few and impact guidance as or our of in procrastinate don't in so would to anyone's far to position with going a I happen related look

and but new every this. a we So again day target information it's on moving get

sure think think we're I safe positioned biggest our we physicians to colleagues to here and well to and is that. our do keep we make do focus our part then patients,

Kevin Fischbeck

Thanks. Great.

Operator

you. Thank

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

Chad Vanacore

I to want actually on questions. follow up missed just Thanks. and did Ralph's Kevin I

XXXX? what about losses did expected Falls say in Idaho startup for you

Thomas Cowhey

Sure.

year licensure. So something we've pieces that expect would are for losses fixed of of EBITDA all excluding an this the excluded year I be in this similar. kind costs. of add low did lot We've teens We EBITDA impact got if up and receive terms you we'll the a that

will So we revenue are start we expecting have offset that that. to to

will there So but over concentrated in saw you won't -- be we not as that bad, think quarter. the as full the losses year be as the fourth what

in then hope cash think year. flow XXXX. fund of we that it better guidance as impact our you think loss then and that start And about we fully we cash what in of which the appropriate building this quarter accelerate number of other really capital of our got as contemplated think impact way concentrated to set that the at terms a that the in we we've in fourth versus about finance what flow so for the that looking because Xx and really slightly very is we've liquidity to in look XXXX in that, terms turn we growth going was a and availability things is at is kind XXXX ensure And and that and to impact of aside the to but you're in XXXX

Eric Evans

opened value reputation, those while our this thing we the We're add hospital we know years. hospital and this our this start-up, and feel hospitals is about hospitals market there with where would is losses one fast positioned of one incur in seen well. as I on coming as will I've the well having and turn really really, as relationships any be going a Yes hospitals positive where all This We're will a from positioned standpoint. a over years. the a context just is number of market it physician well for

Chad Vanacore

And M&A right. the just question. All then on

acquisition. guided the You somewhere said flat you thinking external assets via some really prune robust. to that to between on growth past revenues us plan is X% is we In XXXX? be to you've in but the pipeline growth X% Should

Wayne DeVeydt

Not necessarily.

is a is, things the have those timing so got so clear going deal will the we've we're anticipating Chad sometimes to would the timing done you as an thing you that that we and done always one those and are clearly we're on think entity about not of I as core assets don't deal I do have become it's and of pruning XQ. know, one highlight until we couple closing in that what probably a is the

meaning We early pipeline robust this terms acquisitions QX get are a lose to other then is this the of these again. the positive actually other LOIs and the be replenish enough looking at on EBITDA done couple growing hopeful to some we we we actually a if positive, through year few we and in can come net that that we're M&A EBITDA start could

that a divest. toward So positive right bias I now neutralizing would from after we growth those M&A even

Chad Vanacore

just other that thing, quarter we was then a it think And and knee tough initial one in this third right. replacement started quantify quarter impact. the about asked up you All thought I to fourth you picking mentioned had that

So got quarter going replacements these Where you do see your now to? belt. knee under a you've

Eric Evans

Yes.

big doing while now ASCs and talked in I hospitals increasing that that not the of acute stuff big past, with shift direct of guidance ASCs I standpoint. appropriate out to in can give So I a level the will knees Medicare, going of care going and moving seeing regions the country advantage knees until fast how the comfort out care about different, for do far we've a as setting. hospitals. from as a on this it's exactly this one am stocks commercial the of an our is needs say we been we're will say to in also health's scheduling we've many among

think schedules. up of mean example next that continue think for split I I've always seen as seeing five stuff tough, about grow, there that's it's that unreasonable total predictions the joints the year we don't to to and the that. timing this added an done there's that we could have We're don't to be out half ASCs. years up cardiology. been in advantage that to but I within that Physicians expect is

So if you and to guys ASC this list know year. the was stenting added PCI's the

it's which It's think in hospitals they they was on have in it PCI's be about also relative ago moment theory based that should maybe that were to allowing years on but been you in first started terms backup, takes the If comfort without This based physician ACSs. when more stuff done time. allowed in just XX regulatory level. open-heart

are are So parts country, this feel where results. used and states beginning physicians we other still is comfortable In all their concept. have and across the are the joints to just extremely bringing great physicians country it having of getting and some

across levels would say different maturation quite So the are I country. the

but that to to continue a nice for positive the expect trajectory timing. be us predict We really to exact kind movement it's of hard

Wayne DeVeydt

I Chad, want clarify. to just one thing other Hey

commercial. quarter those So not the Medicare starting are the talked eligible that fourth we any quarter print include really TKA procedures in so the because first does numbers all about earlier and are

the our we ability total and in so probably a today in had our and continue of quarter we've knees to able to years Medicare population able joints anticipation to hopefully have footprint. those potentially across start couple our about facilities couple year to in expand service last in to list add to years do XX and joint facilities ASCs ASCs be total of going the to being our hips do as about of arming and same really to a capability that for we're this that doing focus So populations over of a commercial

Chad Vanacore

a right. All lot. Thanks

Operator

Thank you.

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

Brian Tanquilut

Hey good for Wayne. first I guess is my guys. question morning

about ventures hospitals like outsource think is on outlook just increasing we As JV interest there. M&A it joint seems there the to from and in

focused of you joint way the guess And I Partners are then historically part -- two So front? strategy. seeing in that is that second mostly in Surgery as a the partnership what company

thinking through us walking business? just to the partnering mind what and with economics don't of potentially the you model does that and if on hospitals your So this

Wayne DeVeydt

Brian, the Hey, question. for good thanks morning

really them. important you that the an -- value JVs comes creation M&A, these not is point about just it's through think raised and it's about I

today competitors on previous compare on a of less basis. to X% we've in just of or our were and it's here three-way with of California relationships a got reminder these at UCLA in been of that in what three is JVs, our than look had As as business these and terms JVs if about isolated of that Vanderbilt institutions that way to historically say where some three-way they in academic XX% we some but Tennessee at Southern we total are JVs generally good percentage book you

a couple partner high. we evaluating need but fact with calls, and local regional would of how run the a only our you, national as to value drive of tell optimism can tell is in with operation, and efficient that facilities. and regular to them they we've that would last footprints number so, the can I on creation is our right large box that ASC bring to been I've the said work facilities with to ecosystem And we of very in and got this run understand more the strategy those, mutual you in process hospitals into systems them some partnerships they've ability an ongoing doing And my to for having a these entering coupled with I we what black are that not systems now. volume dialog are

surprised announce well that so, point this year. some the is And way to I be we if under work and that ventures wouldn't opportunities JV

we it. platform. but like for a their in me to And a our do tool of out. just I say double-digit. are do so model laid toolbox can of the approaching eyes to I plus way continue solid think remains we couple in give the to us -- I that think manage And opens just seen, lands growth around another what Where really we've to that we that us, be people's and confidence that's of execution our think up lot years why XX% that And those we're

now. probably but very bullish JVs on right the So, us, in only I this on more bullish this even M&A, the for would say, on not opportunity

Eric Evans

it historic it well, health of Yes, plans. add a also the thing and JVs, Wayne only very position our lot to because I is with not us partner that, up I three-way that to would of for covered of having opportunities think opens

to sense in cases large makes that operator both better that, like-minded a a with one where and where are there the player, system. region. every clearly with of health depending create much region. so, believe health make we clearly on value off We to other are there we that the plans that in a independent partner are we And sides on But and sure of we remain it want we're And times working being our markets.

industry of a -- is is given structure, a value optionality our we for really that big us. piece think the have, I

Brian Tanquilut

below I what that you guess, much what a where renegotiated? percentage or terms your inflation follow-up on to that rates and call, last the juice ability to have those of forward you've to of contracts in point, ratchet to get, doing left with still market been going do you're contracts of or how the Eric. guys player terms you you in is what Being up a increases already bring market, trying marrying value that

Eric Evans

it's number just have industry at where, have still market based say to significant. significant value-playing we the a will on data, in. markets just of I We be the we're market of opportunity a

we prefer to right Clearly, there. way to collaborating a find business how on So also we're we is place move partnership upside the in what still move too. where we see that would do to actually up

several But markets. trade. we volume-value opportunities a have it's of So lots in

player tell same of at got we to increases, negotiations will I we're We collaborating payers time we more a significant we we're under move time paid creating at the the a upside value the still fairly, business because have the also with you, even the of be have while lot while have in in that we us value and our completed, same those -- increases. way. with ability see to capture and significant And negotiations

So sweet their of to I the partner volume because we're where to is that and value do think remain additional move the independent we place right job spot also want where people find create our patients. for

Wayne DeVeydt

you millions. going It's I tell own even print, would although that to put of is tough want tell don't I you see creation. one numbers and It's about I well I is, our the the It's sustainable one not thing. isn't out This key north simply short-term we've but not a Brian, And wants opportunity what that capturing that. value you last capturing tell Hey, just value to is math. would to millions. done will just XXs everybody us really quantify, creation. of about And

at kind about ask you journey. when where we're in of So this

I paid. between would delta we market is have say what paid getting actually be we the what the we the barely today surface versus scratched on paying versus what should get

actually so to today, is to to Where want paying are you we different think the value versus is that. the even levers be which about. stand three play be And where have versus those really above we where market

around us of the gives double-digit our a So, that's optimism a us company, and term as long for runway growth. lot what over

Brian Tanquilut

helpful. Thanks very Wayne. That's

Operator

you. Thank

Frank Please Morgan with proceed Markets. question a Capital final Our from line comes RBC question. your with

Frank Morgan

how the is to joint, that facilities guess, I that of morning. in doing over XX the the total is the course on that? capability Good it staggered timing capital up mid-to-high from for going what stay to of that have year terms and the XXs, requirements

Eric Evans

a it's Frank. question, Yes, great

that capabilities facilities doing and joints already have number the space the of of identified We have quickly. a

joint lot capability adding that So, centers these adding total multi-specialty centers of we're lot capital. where a we're doesn't that are require of a

new we new examples add [ORs], we rooms, also expand where obviously there to have to have capacity. Now, are

that require of we getting the matter to that mid-XXs a the the It's lot a not But much capital. protocols get Those in ones move more mid-XXs have comfortable, do their simply getting identified expensive. docs from place. us

we so as there some beyond we're we those opportunities quite are but -- as out put to a centers clear joints, And adding have do there path require far more centers capital. the more of total additional that,

Frank Morgan

you. Got

it the of And is year ratably is so spread that impact so, is loaded back-end the that Or is current not those, it kind spread? -- the the meaningful? of of kind in

Eric Evans

first ready-to-go. And curve. this that We so centers of varying would in got relatively their levels new -- had I it's have the program, started done first say, normal they've year joint. far two we've so a doing

be year. across it's -- kind the spread front-loaded. be particularly back-loaded it will to any to going it or So I don't of And not expect be

Frank Morgan

just the question And side. you. one volume Got on

all because called something hurricane-related you may have some think of been deferred XXX out quarter procedures like issues. I last

fourth that Just that? kind Thanks. curious, number, but color it around more maybe could a didn't just of of thought the see in you any impact I -- quarter of

Eric Evans

Yes.

always our surgery. fourth to growth, acuity-wise like positive to guys when hard a with pleased you were we as couple quarter volume comes say, of case growth. procedures I'd all, both percent that a and lost growth it saw on of know in first day It's So

this like mentioned it last day a lost, Wayne yes, time out. think I spreads

would down. You all pin with those that's huge I don't number, in the It's impact. posted. total, a quite assume to get pleased to hope hard I but always And that made some it growth in we that were of back. we think

Frank Morgan

Okay. Thanks.

Eric Evans

Yes.

we people's a and XXX,XXX up to positive collectively our before So Surgery over and join you to XX,XXX patients their thank and that I think trust care that make associates Partner often thousands with what I take partners And seriously call, day and for serves are absolutely last to over our each Partners X,XXX physicians lives. our vulnerable We patients colleagues difference take are our my physician their most place faith in that in moment the patients so system year of who contributions. over in make and call. want conclude many incredibly each say to and was a privileged us that, just Surgery moments.

to to company In system for we all we mission of our of solution through are work and fully of the stakeholders. we clearly of part patient are our our quality healthcare life and enhancing nation's this of lead creating the extremely value of the on deliver as our to efforts, I'm more excited humbled opportunity partnership. many about by proud facing are the challenges

execute for the colleague will there. efforts the our against preferred we become get it the Surgery is As Partner short-stay daily across us physician every facilities of each goal and that and operating partner to surgical U.S.,

day. for to want morning a this them, and joining have thank I So great our definitely thank to you and you call say

Operator

you. This today's concludes Thank teleconference.

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

Surgery Partners (SGRY) 5 Mar 202019 Q4 Earnings call transcript