20 things to know about 4 large ASC companies: SCA, USPI, Regent & Surgery Partners

This past year was big for the ASC industry, with many large companies growing and striking key partnerships that set the stage for 2020.

Here are 20 things to know about United Surgical Partners, Surgical Care Affiliates, Regent Surgical Health and Surgery Partners as they head into a new decade.

United Surgical Partners International

1. In February, Tenet CEO Ron Rittenmeyer reported a 7.5 percent net operating revenue for USPI in 2018, and said the company could exceed $175 million in acquisitions for the right deals in the future. USPI CEO Brett Brodnax also discussed the company's view on private equity in healthcare during the fourth quarter and full year 2018 earnings call in February.

"Some people would view that as competition," he said. "Quite honestly, we see that as an opportunity. If we can work with some of these PE firms to help leverage our infrastructure as opposed to them having to replicate the infrastructure, we think there is an opportunity to partner with the PE firms to help grow their footprint and scale out of their business at a much more expeditious pace."

2. USPI continues to gain market share as a profitable business line for Tenet. At the Morgan Stanley Global Healthcare Conference in September, Mr. Rittenmeyer said the company has around 6 percent of ASCs and plans to continue investing in USPI's growth. "[The ASC market] is a very fragmented area, and we own about 6 percent of facilities out there. So, when you think about it, we have a tremendous opportunity still for consolidation as well as de novos," he said.

3. In the last year, USPI also has entered into several key partnerships. The company reported entering into a joint venture with Hackensack (N.J.) Meridian Health and Vanguard Surgical Center as well as Dignity Health and the West Coast Joint and Spine Surgery Center in El Dorado Hills, Calif.

4. In November, Tenet agreed to settle claims USPI and one of its surgical hospitals were involved in false claims, anti-kickback and Stark Law violations. The company paid $66 million to settle allegations that USPI and Oklahoma Center for Orthopedic & Multispecialty Surgery billed for services by a physician who had an improper relationship with the hospital. Tenet had already established a reserve for the payment.

5. USPI reported 6.9 percent revenue growth in the third quarter and a 5.1 percent increase in case volume. Revenue per case was up 1.7 percent for the quarter. For the nine-month end, the ambulatory segment reported $1.5 billion in revenue, flat from the same period the previous year. Same-facility revenue was up 5.5 percent, and revenue per case jumped 2.3 percent.

Surgical Care Affiliates

1. Over the past year, Surgical Care Affiliates focused on adding ASCs to its portfolio. In May, then CFO Caitlin Zulla told CFO magazine that the company aimed to add 20 centers during the calendar year with around 60 percent having at least one value-based contract. She also said SCA was focused on negotiating those value-based contracts with private insurers and Medicare instead of large self-funded companies.

2. On Dec. 13, Surgical Care Affiliates named Ms. Zulla CEO of the company. She replaced Tony Kilgore, previously served as CEO. She joined SCA as chief administrative officer and CFO in 2015.

3. In 2020, Optum expects its revenue to jump 14 percent with OptumHealth being a big part of that. OptumHealth, which includes SCA, is predicted to have a double-digit percentage revenue growth in the next several years.

4. In October, Optum reported SCA's cardiovascular operations were up 13 percent and spine procedures grew 14 percent year over year. Total joint replacements also jumped 39 percent in the third quarter.

5. In 2019, Optum added 10,000 physicians to its 46,000-physician network and aims to continue growing in the years to come. Surgical Care Affiliates now reports having more than 230 surgical facilities and 8,000-plus physicians who perform more than 1 million procedures per year at SCA facilities.

Regent Surgical Health

1. Regent Surgical Health now has 28 ASC partners, including 21 joint ventures with hospitals and physicians. Three of those centers are involved in bundled payments. Regent reported 7.7 percent case volume growth in 2019, which was nearly double the industry rate.

2. Fourteen of Regent's centers include total joint replacement. The company plans to approach 100 percent growth on volume for joint replacements over the coming year, both by growing patient volume at existing centers and designing new facilities for total joints.

3. Four leaders joined Regent in the past year:
• Alexandra Reyes became operations vice president for the Northeast region.
• Beth Johnson became senior vice president of operations.
• Scott Bergman joined Regent's business development team on the East Coast.
• Justin Neerhof joined Regent's business development team on the West Coast.

The company also promoted Erin Petrie to vice president of revenue cycle management and Gina Tolberg became revenue cycle manager.

4. Regent entered into multiple partnerships over the past year, including one with Universal Health Services, Bone & Joint Institute of Tennessee in Nashville and ASC North in Anchorage, Alaska.

5. In July, Regent partnered with Conformis, a customized total joint replacement implant company. The partners aim to reduce costs and improve outcomes for total joints in ASCs.

Surgery Partners

1. Third quarter revenue increased 4.5 percent to $452 million for Surgery Partners, although the company also reported $24.8 million net loss attributable to common stockholders on Nov. 5. The company reiterated its double-digit adjusted EBITDA growth projections for the full year.

2. For the first three quarters of 2019, Surgery Partners reported same-facility revenues were up 7.6 percent. Year-to-date revenue overall was also up 2.6 percent to $1.3 billion.

3. Surgery Partners has reported 10 percent same-facility growth over the past five years. It is affiliated with 4,000 physicians who serve more than 600,000 patients annually. It has 180 locations nationwide.

4. The company changed its physician recruitment strategy, and its efforts are paying off. Its physicians are contributing a 20 percent higher case volume in 2019 than they did in 2017, CEO Wayne DeVeydt reported in the second quarter earnings call in August. He also said the physicians are conducting higher net revenue per case surgeries.

5. Surgery Partners set out to spend $80 million to $100 million on mergers and acquisitions in 2019. It has experienced success with small one-off deals that are non-competitive and have low single-digit multiples. However, it has also broker-led deals at 7 to 8 multiple.

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