Surgery Partners, Inc. · NASDAQ:SGRY
Surgery Partners — 39th Annual J.P. Morgan Healthcare Conference (January 2021)
50 slides from Surgery Partners's conference presentation, January 2021
Slide 1: 39th Annual J.P. Morgan Healthcare Conference
39th Annual J.P. Morgan Healthcare Conference
Slide 2: Legal Disclaimer
Legal Disclaimer Forward-Looking Statements Statements contained in this presentation, including the question and answer portion of the presentation, other than statements of historical fact, are forward-looking statements. In some cases, you can identify forw ard-looking statements by terms such as
Slide 3: Agenda
Agenda 1 Who We Are 2 What Makes Us Unique 3 How We Drive Shareholder Value © 2021 Surgery Partners – Confidential & Proprietary Information 3
Slide 4: Who We Are
Who We Are Section 1 © 2021 Surgery Partners – Confidential & Proprietary Information
Slide 5: Our Core Values are Foundational to Who We Are
1 Who We Are Our Core Values are Foundational to Who We Are PATIENTS PROVIDERS PROVIDERS ✓ Act with integrity and transparency ✓ Be accountable ✓ Drive clinical and service excellence ✓ Promote a culture of diversity and inclusion EMPLOYEES PAYORS ✓ Demonstrate compassion and kindness Each quadrant
Slide 6: We are a Business Built Over the Course of 20+ Years
1 Who We Are We are a Business Built Over the Course of 20+ Years… Initial Public Offering Transformational Journey 2004 Formation of Surgery 2011 2014 2015 2017 2018 2020 Partners 1996 Formation of Symbion Healthcare © 2021 Surgery Partners – Confidential & Proprietary Information 6
Slide 7: Resulting in the Leading Independent Surgical Facility Operator
1 Who We Are … Resulting in the Leading Independent Surgical Facility Operator ~$1.9 Billion 10%+ Adjusted EBITDA 30 States Adjusted Revenues(1) Growth Target (2) 116 Ambulatory Surgery Centers 17 Short-Stay Surgical Hospitals 4,000 Affiliated Physicians 600,000+ Annual Patients (1) 2019 FY adjusted
Slide 8: We Have a Diversified Mix, Focused on High Value-Add Specialties
1 Who We Are We Have a Diversified Mix, Focused on High Value-Add Specialties, Supported by an Aging Population Surgery Partners’ Case Mix Other(2) Musculoskeletal(1) ✓ Strength with high acuity patients 18% ✓ Leading musculoskeletal platform 38% GI 19% ✓ Expansive network of surgical capabilities 2
Slide 9: And a Strong, Vertically Integrated Management Team
1 Who We Are And a Strong, Vertically Integrated Management Team Wayne DeVeydt Eric Evans Tom Cowhey Execut ive Chairman of the Board Chief Execut ive Officer EVP & Chief Financial Officer 27 Years Healthcare Experience 15 Years Healthcare Experience 18 Years Healthcare Experience 03 Years with Surg
Slide 10: That has Built a Solid Foundation to Capture Growth
1 Who We Are That has Built a Solid Foundation to Capture Growth… Where We Were Where We Are Solid, but un-pruned assets Streamlined, surgical facility assets Great platform, but fragmented Holistic infrastructure Lack of strategic clarity Focused management and vision FROM: A collection of great as
Slide 11: Of the Over $150B Total Addressable Market (TAM)
1 Who We Are … Of the Over $150B Total Addressable Market (TAM) Same-store volume growth Physician recruitment in Idaho Falls Community targeted specialties Hospital Expansion programs Case shift in core specialties like Investment in innovative Orthopedics, Spine & Cardiology technologies for servi
Slide 12: What Makes Us Unique
What Makes Us Unique Section 2 © 2021 Surgery Partners – Confidential & Proprietary Information
Slide 13: What Makes Us Unique
2 What Makes Us Unique What Makes Us Unique Uniquely positioned due to our focus on high growth specialties Supported by our superior clinical quality and customer experience Only independent surgical facility operator of national size and scale Focused on consolidating an under-valued and fragmente
Slide 14: What Makes Us Unique
2 What Makes Us Unique What Makes Us Unique Uniquely positioned due to our focus on high growth specialties Supported by our superior clinical quality and customer experience Only independent surgical facility operator of national size and scale Focused on consolidating an under-valued and fragmente
Slide 15: Well Positioned to Capture $90B+ Existing Outpatient Surgical Market
2 What Makes Us Unique Well Positioned to Capture $90B+ Existing Outpatient Surgical Market and ~$60B of Cases Migrating to Outpatient Annual Revenue (US) Annual Volume Growth $500B+ $230B surgery -2% Inpatient ~$60B Incremental Shift of $470B+ Inpatient Surgical Cases $55B+ surgery 2% to the Outpat
Slide 16: Musculoskeletal and Cardio Procedures Make Up 60%+ of Inpatient to Outpatient Opportunity
2 What Makes Us Unique Musculoskeletal and Cardio Procedures Make Up 60%+ of Inpatient to Outpatient Opportunity Inpatient Surgical Procedures with Potential to Shift to Outpatient Setting Surgery Partners’ Clinical and Operations platform well-positioned to accommodate shift Source: Bain & Co © 202
Slide 17: We Have an Increasing Opportunity With the Highest Acuity Specialties
2 What Makes Us Unique We Have an Increasing Opportunity With the Highest Acuity Specialties… +3x case growth over 8 years Case Volume by Specialty 172,902 ✓ Net Revenue CAGR of 115,671 +30% from 88,761 2012 to 2019 80,712 78,136 ✓ Case mix 52,838 aligned with higher acuity 15,051 14,090 Other (1) G
Slide 18: Which Are Projected to Grow at a Disproportionately Higher Rate
2 What Makes Us Unique … Which Are Projected to Grow at a Disproportionately Higher Rate Migration of Orthopedic, Spine and Cardio procedures will fuel rapid ASC growth Percentage of procedures performed in ASCs 80 % 68% 66% 70 % 61% 60 % 58% 52% 50 % 44% 40 % 33% 30% 30 % 20 % 10% 10% 10 % 7% 4% 0%
Slide 19: Leading Musculoskeletal & Cardio Platform
2 What Makes Us Unique Leading Musculoskeletal & Cardio Platform $3 billion 9%+ Musculoskeletal Annual savings by shifting Surgery Partners’ historic 50% of joint cases to ASCs (1) orthopedic case growth 11 80%+ Robots added in 2020, Surgery Partners’ facilities bringing total to 30 perform MSK proc
Slide 20: Considerable Growth Ahead for Joint Replacements
2 What Makes Us Unique Considerable Growth Ahead for Joint Replacements… Inpatient and Outpatient Hip & Knee Replacement Forecast Volume (millions) CAGR ’18 – ’28P 2.0 57% 48% Outpatient = 20% 1.5 40% 15% 31% 15% 23% 1.0 85% 77% 69% 60% 52% 43% Inpatient = -0.7% 0.5 - 2018A 2020P 2022P 2024P 2026P 2
Slide 21: And Medicare Continues to Advantage Outpatient Surgical Facilities
2 What Makes Us Unique … And Medicare Continues to Advantage Outpatient Surgical Facilities Approved Total Joint Replacements • 2020 - Total Knee Arthroplasty 20% cost savings for hip approved for ASCs replacements(1) • 2021 – Total Hip Arthroplasty approved for ASCs Recent CMS Changes 17% cost savi
Slide 22: Differentiated and Highly Capital Efficient Approach to Growing Orthopedics & Cardiology
2 What Makes Us Unique Differentiated and Highly Capital Efficient Approach to Growing and Enhancing Orthopedics & Cardiology… 1. Demographic and site of service 7. Supply chain initiatives trends leading to future growth 6. Payer strategies 2. Physician Recruitment 5. In-Market and New Market 3. Ad
Slide 23: Leading to 9%+ Orthopedic Service Line Volume Growth
2 What Makes Us Unique …. Leading to 9%+ Orthopedic Service Line Volume Growth 90 Locations 109k Orthopedic Procedures 650+ Orthopedic Physicians 97%+ Joint Case Growth at ASCs (1) Orthopedic Case Volume (1) Nov ember YTD ’20 compared to Nov ember YTD ’19 © 2021 Surgery Partners – Confidential & Pro
Slide 24: Musculoskeletal has Proven Most Resilient Through COVID Disruption
2 What Makes Us Unique Musculoskeletal has Proven Most Resilient Through COVID Disruption Year-over-year surgical cases by key service lines (1) (1) Represents March and April 2020 © 2021 Surgery Partners – Confidential & Proprietary Information Note: Not days adjusted 24
Slide 25: What Makes Us Unique
2 What Makes Us Unique What Makes Us Unique Uniquely positioned due to our focus on high growth specialties Supported by our superior clinical quality and customer experience Only independent surgical facility operator of national size and scale Focused on consolidating an under-valued and fragmente
Slide 26: We Hold Ourselves to the Highest Standards
2 What Makes Us Unique We Hold Ourselves to the Highest Standards… Average Deficiencies per Survey(1) Average Deficiencies per Survey(2) 25% Fewer 48% Fewer 10.00 Deficiencies 40.00 Deficiencies 8.4 33.7 30.00 6.3 5.00 20.00 17.6 10.00 0.00 0.00 Surgery Partners All Other Surgery Partners All Other
Slide 27: Regularly Report and Benchmark Our Performance to Emphasize our Culture of Safety
2 What Makes Us Unique … And Regularly Report and Benchmark Our Performance to Emphasize our Culture of Safety… Sample Metrics Sample Reporting ✓ Patient burns ✓ Patient falls ✓ Wrong site ✓ Hospital transfers procedures ✓ Surgical site ✓ ER visits within 24 infections rate hours of discharge ✓ Hosp
Slide 28: With A Proven Record of Exceptional Clinical Care
2 What Makes Us Unique … With A Proven Record of Exceptional Clinical Care… © 2021 Surgery Partners – Confidential & Proprietary Information 28
Slide 29: Clinical Efficacy that Results in a Better Patient Experience
2 What Makes Us Unique … And Clinical Efficacy that Results in a Better Patient Experience Nationwide Hospitals Surgery Partners(1) Best in Class Patient Experience (1) Includes hospitals that were owned / operated by Surgery Partners FY2019 © 2021 Surgery Partners – Confidential & Proprietary Infor
Slide 30: We Focus on Patient Experience
2 What Makes Us Unique We Focus on Patient Experience… Cleanliness and comfort 96 Facility Communication on insurance and financial responsibility 93 88 Process Financial 94 Overall Exceptional administrative Patient and clinical staff Experience Kept informed and procedure explanations 94 95 Person
Slide 31: Best-in-Class Patient Net Promoter Score
2 What Makes Us Unique … Which has Resulted in a Best-in-Class Patient Net Promoter Score Patient Net Promoter Score 94 89 79 62 62 © 2021 Surgery Partners – Confidential & Proprietary Information Note: Surv ey conducted from Dec ‘19 – May ‘20 31
Slide 32: What Makes Us Unique
2 What Makes Us Unique What Makes Us Unique Uniquely positioned due to our focus on high growth specialties Supported by our superior clinical quality and customer experience Only independent surgical facility operator of national size and scale Focused on consolidating an under-valued and fragmente
Slide 33: Surgery Partners is the Only Pure-Play of National Size and Scale
2 What Makes Us Unique Surgery Partners is the Only Pure-Play of National Size and Scale Surgical Facility Revenue(1) Number of Parent Surgical Specialty Focus Company Facilities(2) Revenue % of Total Public Only Pure-Play ▪ MSK, Cardiovascular, $1.9B 95%+ Surgery Center 133 & Ophthalmology Operator
Slide 34: What Makes Us Unique
2 What Makes Us Unique What Makes Us Unique Uniquely positioned due to our focus on high growth specialties Supported by our superior clinical quality and customer experience Only independent surgical facility operator of national size and scale Focused on consolidating an under-valued and fragmente
Slide 35: Well Positioned to Capture Share in a Fragmented Market
2 What Makes Us Unique Well Positioned to Capture Share in a Fragmented Market Number of ASCs in the U.S. Number of POHs in U.S. Total = 5,851 ASCs ~ Other Multi-site Operators Independent Single-site ASCs (10%) (36%) National 94% Platforms Hospital Affiliated ASCs (18%) (36%) Chains with (6%) Singl
Slide 36: Invested in Systems and Processes to Build a Platform Capable of Acquisition-led Growth
2 What Makes Us Unique Surgery Partners has Invested in Systems and Processes to Build a Platform Capable of Driving Acquisition-led Growth Managed Care Supply Chain • Invested in key talent • Invested in key talent • Continuing to enhance • Migrated to one our health plan value company-wide GPO pro
Slide 37: Re-Focused on Short-Stay Surgical and Re-Accelerating Capital Deployment
2 What Makes Us Unique We have Re-Focused on Short-Stay Surgical and are Re-Accelerating the Pace of Capital Deployment Closed or Sold Acquisitions Transaction Highlights • Refocused portfolio on growing short-stay surgical assets • 7 transactions to enhance presence and footprint in Idaho • 4 trans
Slide 38: What Makes Us Unique
2 What Makes Us Unique What Makes Us Unique Uniquely positioned due to our focus on high growth specialties Supported by our superior clinical quality and customer experience Only independent surgical facility operator of national size and scale Focused on consolidating an under-valued and fragmente
Slide 39: We Have a Highly Flexible Model
2 What Makes Us Unique We Have a Highly Flexible Model… Multi-Site Management Three-Way JVs Facility Facility Facilities Two-Way JVs Services Health Payors Systems OR We have a tailored approach to partnership and physician engagement © 2021 Surgery Partners – Confidential & Proprietary Information
Slide 40: Which Results in Highly Satisfied Physician Partners
2 What Makes Us Unique … Which Results in Highly Satisfied Physician Partners… Physician Net Promoter Score 89 81 79 62 62 © 2021 Surgery Partners – Confidential & Proprietary Information Note: Surv ey conducted in 2015; 366 respondents. 40
Slide 41: And Strong Physician Engagement and Retention
2 What Makes Us Unique … And Strong Physician Engagement and Retention BETTER PARTNERS. BETTER CARE. We are focused on physicians. Through decades of experience, we have observed that an outstanding patient experience begins with an outstanding physician relationship. Everyone wins when physicians h
Slide 42: How We Drive Shareholder Value
How We Drive Shareholder Value Section 3 © 2021 Surgery Partners – Confidential & Proprietary Information
Slide 43: Recognizing the Benefits of Our Transformational Journey
3 How We Drive Shareholder Value Recognizing the Benefits of Our Transformational Journey 2018 2019 – 2020 2021 – 2024 Foundation of our Executing on Reaping the Transformational Journey Our Strategy Benefits Pruned Asset Base Invested in Our Surgical Facilities Top-Line Growth Recharged Organic Gro
Slide 44: Business Has Proven Resilient Through COVID-19 Disruption
3 How We Drive Shareholder Value Business Has Proven Resilient Through COVID-19 Disruption Net Revenue Has Experienced Strong Rebound Since April Same Facility Net Revenue vs. Prior Year Same facility net revenue continues to exceed prior year in 4Q 2020 © 2021 Surgery Partners – Confidential & Prop
Slide 45: Reaping the Benefits: Proven Organic Growth Model
3 How We Drive Shareholder Value Reaping the Benefits: Proven Organic Growth Model Top-line Growth Margin Expansion Capital Investment Volume Procurement Acquisitions Rate Revenue Cycle Expansions Org / Workflow Managed Care Efficiencies De Novos +4-6% EBITDA p.a. +3-5% EBITDA p.a. +3-5% EBITDA p.a.
Slide 46: Sustainable Long-term Double-Digit AEBITDA Growth
3 How We Drive Shareholder Value Reaping the Benefits: Sustainable Long-term Double-Digit AEBITDA Growth $ in Millions $420+ ~$315 12.5%+ ~$259 ~ $235 $250 Growth CAGR to $260 2020-2024 2018A 2019A 2020P 2021P 2022P 2023P 2024P Near-term Mid-term Long-term ✓ Return to growth ✓ High-end / exceed 4-6%
Slide 47: The Surgery Partners' Advantage
3 How We Drive Shareholder Value The Surgery Partners’ Advantage $150B+ Total Purpose-built, Veteran Focused on High Addressable Market Management Team Growth Specialties + + Superior Clinical Independent, Trusted Quality and Customer Scalable Platform Partner of Choice Experience + + Equating to Ne
Slide 48: Appendix
Appendix © 2021 Surgery Partners – Confidential & Proprietary Information
Slide 49: Reconciliation to Adjusted EBITDA
Reconciliation to Adjusted EBITDA The following table reconciles Adjusted EBITDA to Income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited): EBITDA Adjustments 2019 Income (loss) before income taxes $ 55 Plus (minus): Net income attributable to non
Slide 50: Reconciliation to Adjusted Revenues
Reconciliation to Adjusted Revenues The following table reconciles Adjusted Revenues (1) to GAAP Revenues, the most directly comparable GAAP financial measure (in millions and unaudited): Revenue Adjustments 2019 Revenues $ 1,831 Plus (minus): Provision for doubtful accounts 25 Adjusted Revenues(1)
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