10-K: Surgery Partners Reports Increased Revenue and Adjusted EBITDA for 2024, Despite Net Loss

Surgery Partners, Inc. reports a 13.5% increase in revenue and a 16.0% increase in Adjusted EBITDA for 2024, but also a net loss attributable to Surgery Partners, Inc. of $168.1 million.

Summary

• Surgery Partners, Inc. reported total revenues of $3.1 billion for 2024, a 13.5% increase compared to $2.7 billion in 2023.
• The increase in revenue was attributed to same-facility revenue growth and acquisitions completed in 2024.
• Days adjusted same-facility revenues increased by 8.0%, driven by a 4.0% increase in revenue per case and a 3.9% increase in same-facility cases.
• Adjusted EBITDA increased by 16.0% to $508.2 million in 2024, compared to $438.1 million in 2023, due to revenue growth, cost management, and acquisitions.
• The company experienced a net loss attributable to Surgery Partners, Inc. of $168.1 million in 2024, compared to a net loss of $11.9 million in 2023.
• As of December 31, 2024, Surgery Partners operated 161 surgical facilities across 31 states, including 142 ASCs and 19 surgical hospitals.
• The company acquired a controlling interest in eight surgical facilities and several physician practices for $378.8 million in cash and $1.1 million in non-cash consideration during 2024.
• As of December 31, 2024, the company had cash and cash equivalents of $269.5 million and $501.5 million of borrowing capacity under its revolving credit facility.

Sentiment

Score: 5

Explanation: The document presents mixed signals. While revenue and Adjusted EBITDA increased, the net loss is concerning. The company is growing, but profitability remains a challenge.

Positives

• Revenue increased by 13.5% to $3.1 billion in 2024.
• Adjusted EBITDA increased by 16.0% to $508.2 million in 2024.
• Same-facility revenue growth was 8.0% in 2024.
• The company completed strategic acquisitions to expand its network.
• The company maintains a significant borrowing capacity of $501.5 million.

Negatives

• The company reported a net loss attributable to Surgery Partners, Inc. of $168.1 million in 2024.
• The company has a history of net losses and may not achieve or sustain profitability in the future.
• The company has a significant amount of indebtedness outstanding.

Risks

• Reductions in payments from government health care programs and private insurance payors could adversely affect revenue and profitability.
• Failure to negotiate favorable contracts with private insurance payors could decrease revenue and profitability.
• Competition for physicians and clinical personnel could increase labor costs.
• Cybersecurity attacks or intrusions could adversely impact the business.
• Failure to comply with federal and state laws and regulations could result in significant penalties.

Future Outlook

The company believes favorable industry trends such as an aging population, advancements in medical technology and payor and government encouragement to move high acuity procedures from acute care to lower cost sites of care will further drive growth.

Industry Context

The company operates in a highly competitive healthcare market, competing with hospitals, other surgical facilities, and physician groups to attract physicians and patients. The company believes that the competitive factors that affect our surgical facilities ability to compete for physicians are convenience of location of the surgical facilities, quality of care offered, convenience of scheduling, professionalism and cleanliness of facilities, access to capital and participation in private insurance programs.

Comparison to Industry Standards

• The document mentions several large national companies that own and/or manage surgical facilities, including HCA Healthcare, Inc., AMSURG Corp., Tenet Healthcare Corporation and Optum, Inc.
• These companies represent significant competition for Surgery Partners in the surgical facility market.
• The document does not provide specific financial comparisons to these companies, but it acknowledges that many of them have greater resources than Surgery Partners.

Management Changes

Related Party Transactions

• The company had related party transactions with physician investors and a lessor who are related parties.
• During the years ended December 31, 2024 and 2023, the Company incurred lease costs of $24.8 million and $19.5 million, respectively, under operating lease agreements with physician investors who are related parties.
• During the years ended December 31, 2024 and 2023, the Company paid rent of $25.7 million and $26.4 million, respectively, under finance lease agreements with physician investors and a lessor who are related parties.

Stakeholder Impact

• Shareholders: The net loss may negatively impact shareholder value.
• Employees: The company's focus on cost management may impact employee compensation and benefits.
• Patients: The company's focus on high-quality, cost-effective solutions may benefit patients.
• Physicians: The company's physician engagement strategy may attract and retain physicians.
• Payors: The company's partnership opportunities with payors may make health care more affordable.

Next Steps

• The company will continue to focus on improving same-facility performance.
• The company will selectively acquire established facilities.
• The company will develop new facilities.
• The company will pursue other portfolio management initiatives.

Key Dates

Keywords

surgical facilities, Adjusted EBITDA, revenue, acquisitions, healthcare, ASCs, surgical hospitals, net loss