Surgery Partners reports 37% of cases are orthopedics, to focus there in 2020

Since its founding in 2004, Surgery Partners has had a growth strategy dependent on acquisitions and organic growth that has led to revenue growth over the years.

The company now has 112 ASCs and 15 short stay surgical hospitals across 31 states, according to the presentation given by Surgery Partners CEO Wayne DeVeydt at the 38th Annual J.P. Morgan Healthcare Conference on Jan. 13. It is partnered with more than 4,000 physicians, including 1,500 physician owners, and its facilities serve more than 600,000 patients annually. In the past year, the company reported five surgical facility expansions and 433 new physicians recruited through September 2019.

In 2019, the company anticipates reporting low single-digit revenue growth as well as double-digit adjusted EBITDA growth. Its portfolio is diversified, with around 37 percent of the case mix being orthopedics; another 25 percent is ophthalmology and 21 percent is GI procedures. The company works with many payers across the country and are an in-network provider.

"We represent a value proposition in the industry that is a lower cost," he said. He pointed out that the same procedure performed in the outpatient setting is reimbursed at a lower rate than the inpatient hospital for Medicare.

The company's orthopedics case volume has grown around four times over the past seven years, hitting 195,118 cases in 2019. Surgery Partners also reported net revenue growth from $260 million in 2012 to an estimated $1.8 billion in 2019.

The company's strategy has been to position itself in high growth specialties, such as orthopedics, and remain independent. So far, the company has focused on acquiring ASCs to bring into its platform and drive efficiencies to increase value.

"Hips and knees are growing at a faster rate than any other surgical procedure in the country, and you're seeing more and more movement from the inpatient setting to the outpatient setting," said Mr. DeVeydt. "We've had growth in every major segment and grown 4x in musculoskeletal. We doubled our MSK in our ASCs from last year. It's all about positioning for future growth."

In the future, Surgery Partners anticipates focusing on orthopedics, spine and ophthalmology, which have growth potential. The total market surgical cases for orthopedics and ophthalmology are expected to grow at a compound annual growth rate of 2 percent from 2017 to 2025; spine is expected to grow at a CAGR of 1.8 percent over the same time period.

At the same time, there is a projected two-times increase in the projected hip procedures through 2026 and expanded patient base for orthopedics and total joint replacements as Medicare began reimbursing for total knee replacements in ASCs this year. The estimated number of knee and hip procedures is expected to grow to 1.9 million by 2026, and more than 25 percent of Surgery Partners ASCs performed total joint replacements in the past year.

"Technology advances are happening quickly. Commercial payers have been doing total joints in our facilities already," he said. "You have the fastest growing segments with the largest acuity payments out there with a demographic that is aging in."

Finally, Surgery Partners has a focus on patient satisfaction and experience. The company reports a lower average deficiency per Accreditation Association for Ambulatory Health Care survey than the national average — 10 versus 13.8. It also has a patient net promoter score of 91 and physician NPS of 89.

In 2020 to 2024, the company expects to see top line growth of 4 percent to 6 percent, a 3 percent to 5 percent margin expansion and capital investment returns.

"We are only in the early innings of leveraging our scale," he said. "We are now at a point where we can really leverage what a scalable asset looks like."

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