USPI has 30 de novo ASCs in pipeline, sees 'consistently positive' M&A environment

Dallas-based United Surgical Partners International, part of Tenet Healthcare, had a successful third quarter with continued service line and revenue growth.

Same-facility revenues were up nearly 8% and case volumes grew right around 4% year over year. Saum Sutaria, MD, CEO of Tenet Healthcare, said he is proud of USPI's continued strength and financial performance as Tenet aims to grow in the coming year.

"We remain focused on attracting high-quality physicians who choose to practice in our low-cost, high patient satisfaction setting of care," said Dr. Sutaria during the third quarter earnings call Oct. 30, as transcribed by Seeking Alpha. "This, coupled with tailwinds from increased patient demand for ambulatory surgery care, will support continued organic growth."

USPI added six new ASCs to its portfolio in the third quarter, most of which focused on orthopedic surgery. The new centers are in Nevada, Maryland, Texas and Florida in partnership with regional musculoskeletal specialists. Dr. Sutaria said the company has a pipeline of more than 30 de novo ASCs at various stages of maturity.

"Notably, de novo centers have effective EBITDA multiples in the low single-digits, making them a very attractive use of the capital that further advances the site of service value-based care, which USPI uniquely delivers," said Mr. Sutaria.

USPI's growth rates are above the long-term projections for the business at 2% to 3% organic growth. The company aims to add more high acuity procedures to the case mix to improve the average net revenue per case at its ASCs. USPI has added 103 new service lines to its centers so far and aims to keep growing over the next three months.

"The Q4 ramp for USPI is real and it's something that we're really interested in seeing and we're well-prepared for as the first post-pandemic Q4 to see how that goes," he said.

Dr. Sutaria also said the merger and acquisition environment for ASCs is "consistently positive" and he hasn't seen higher multiples as ASCs recover from the pandemic. He sees a lot of opportunities in acquiring new centers, but also noted high interest rates forced USPI to raise the bar on its assessment process for financial returns and the ability to drive post-synergy multiples down.

"We work to maintain our USPI margins based upon longer term business decisions we make around service lines that we choose to be in, what we think the mix will be with the physicians that we work with, et cetera," said Dr. Sutaria. "But make no mistake about it; there are many things we could do to grow the business within that range that may move the margins up or sometimes down a bit, but they're still highly accretive to the business, given the types of post-synergy multiples that we deliver."

USPI's full year margin is around 40%, based on business performance.

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