Surgery Partners, Inc. · NASDAQ:SGRY

Surgery Partners — 38th Annual J.P. Morgan Healthcare Conference (January 2020)

31 slides from Surgery Partners's conference presentation, Jan 13, 2020

  1. Slide 1: 38th Annual J.P. Morgan Healthcare Conference

    38th Annual J.P. Morgan Healthcare Conference January 13, 2020 © 2020 Surgery Partners – Confidential & Proprietary Information

  2. 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 forward-looking statements by terms such as

  3. Slide 3: Agenda

    Agenda 1 Who We Are 2 What Makes Us Unique 3 How We Drive Shareholder Value © 2020 Surgery Partners – Confidential & Proprietary Information 3

  4. Slide 4: Who We Are

    Who We Are Section 1 © 2020 Surgery Partners – Confidential & Proprietary Information

  5. Slide 5: Our Core Values are Foundational to Who We Are

    1 Who We Are Our Core Values are Foundational to Who We Are  Act with integrity and transparency  Be accountable  Drive clinical and service excellence  Demonstrate compassion and kindness  Set and exceed expectations Each quadrant represents a Surgery Partners stakeholder Enhancing patient qua

  6. 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 2004 Formation of Surgery 2011 2014 2015 2017 2018 Partners 1996 Formation of Symbion Healthcare © 2020 Surgery Partners – Confidential & Proprietary Information 6

  7. Slide 7: Resulting in the Leading Independent Surgical Facility Operator

    1 Who We Are …Resulting in the Leading Independent Surgical Facility Operator 2019 Guidance Reaffirmed 31 States Low single-digit Double-digit Adjusted revenue growth EBITDA growth 112 Ambulatory Surgery Centers 15 Short-Stay Surgical Hospitals 4,000 Affiliated Physicians & ~1,500 Physician Owners 6

  8. Slide 8: 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 17%  Leading musculoskeletal platform 37% GI 21%  Expansive network of surgical capabilities 25

  9. Slide 9: A Strong, Vertically Integrated Management Team

    1 Who We Are And a Strong, Vertically Integrated Management Team Wayne DeVeydt Eric Evans Tom Cowhey Chief Executive Officer EVP & Chief Operating Officer EVP & Chief Financial Officer 26 Years Healthcare Experience 15 Years Healthcare Experience 18 Years Healthcare Experience 02 Years with Surgery

  10. Slide 10: What Makes Us Unique

    What Makes Us Unique Section 2 © 2020 Surgery Partners – Confidential & Proprietary Information

  11. Slide 11: What Makes Us Unique

    2 What Makes Us Unique What Makes Us Unique Uniquely positioned as a result of our focus on high growth specialties Supported by our superior clinical quality, customer satisfaction and physician engagement outcomes Only independent surgical facility operator of national size and scale Focused on co

  12. Slide 12: We Have an Increasing Opportunity With the Highest Acuities

    2 What Makes Us Unique We Have an Increasing Opportunity With the Highest Acuities… ~4x case growth over Case Volume by Specialty (2) 7 years 195,118  Net Revenue CAGR of 129,228 +31% since 109,751 2012 88,774 78,136 52,838  Case mix aligned with 15,051 14,090 higher acuity Other(1) GI Ophthalmolo

  13. Slide 13: Portfolio Focused on Specialties Projected to Grow Faster

    2 What Makes Us Unique … Resulting in a Portfolio Focused on Specialties Projected to Grow at a Disproportionately Higher Rate Total Market Surgical Cases by Specialty (’17-’25 CAGR) Key Surgery Partners specialties in above market average growth areas 2.1% 2.0% 2.0% 1.8% Market Average 1.2% Growth

  14. Slide 14: Leading Musculoskeletal Platform is Key to Future Growth

    2 What Makes Us Unique Leading Musculoskeletal Platform is Key to Future Growth 2x $7 billion 100 million Increase in hip revision Annual Medicare spend Adults in the U.S. with (1) (2) procedures projected by 2026 on total joint procedures chronic pain  Leading national musculoskeletal surgical fac

  15. Slide 15: Attractive Growth in Joint Replacement Procedures

    2 What Makes Us Unique As an Example, for Musculoskeletal, Attractive Growth in Joint Replacement Procedures Number of Procedures in the U.S. (000s) Knee Replacement Hip Replacement 1,053 733 1,003 696 956 662 911 630 871 601 834 575 2015A 2016E 2017E 2018E 2019E 2020E 2015A 2016E 2017E 2018E 2019E

  16. Slide 16: Sizing the Medicare Opportunity with Joint Replacement

    2 What Makes Us Unique Sizing the Medicare Opportunity with Joint Replacement November 2019: CMS released final 2020 Medicare Hospital Outpatient Prospective Payment System and ASC Payment System Final Rule Final Rule Takeaways Total Knee Opportunity 2.6% aggregate rate increase (50 bps higher 1.9 m

  17. Slide 17: We Differentiate Ourselves by Focusing on What Matters Most

    2 What Makes Us Unique We Differentiate Ourselves by Focusing on What Matters Most… Clinical Quality Patient Experience Physician Engagement Trusted Partner © 2020 Surgery Partners – Confidential & Proprietary Information 17

  18. Slide 18: 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) 30.0 15.00 30.00 13.8 10.0 10.00 20.00 17.0 5.00 10.00 0.00 0.00 Surgery Partners All Other Surgery Partners All Other ASCs Surgical Hospitals © 2020 Surgery Par

  19. Slide 19: While Focusing on Patient Satisfaction

    2 What Makes Us Unique … While Focusing on Patient Satisfaction… Cleanliness and comfort 96 Facility Communication on insurance and financial responsibility 92 88 Process 93 Financial Administrative and Overall clinical staff Patient Satisfaction Kept informed and procedure explanations 94 96 Person

  20. Slide 20: 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 91 79 77 68 62 Note: Costco - https://customer.guru/net-promoter-score/costco; Others – 2019 “What Do Companies with High Net Promoter Score Have In Common?” © 2020 Surgery Partners –

  21. Slide 21: Physician Net Promoter Score

    2 What Makes Us Unique We Engage with Our Physicians and Hold Ourselves Accountable for Industry-Leading Performance Physician Net Promoter Score 89 79 77 68 62 Note: Costco - https://customer.guru/net-promoter-score/costco; Others – 2019 “What Do Companies with High Net Promoter Score Have In Commo

  22. Slide 22: How We Drive Shareholder Value

    How We Drive Shareholder Value Section 3 © 2020 Surgery Partners – Confidential & Proprietary Information

  23. Slide 23: Recognizing the Benefits of Our Transformational Journey

    3 How We Drive Shareholder Value Recognizing the Benefits of Our Transformational Journey 2018 2019 2020 – 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 Growth Acc

  24. Slide 24: 2018 Key Accomplishments

    3 How We Drive Shareholder Value Foundation of our Transformational Journey: 2018 Key Accomplishments Pruned Asset Base Recharged Organic Growth $100M+ Pruned Annualized Net Revenue 500+ new physicians recruited 2 Surgical Hospitals 4% improvement in same-facility case growth 2H ‘18 vs. 1H ‘18 5 ASC

  25. Slide 25: Creating a Platform

    3 How We Drive Shareholder Value Foundation of our Transformational Journey: Creating a Platform 89% of surgical facilities/ clinical practices migrated to end-state platforms 95% of surgical facilities/clinical practices migrated to common claims clearinghouse 95% of surgical facilities integrated

  26. Slide 26: YTD 2019 Key Accomplishments

    3 How We Drive Shareholder Value Executing on our Strategy: YTD 2019 Key Accomplishments Invested in Our Surgical Facilities Accelerated Organic Growth 2 ASC relocations/expansions completed YTD 7%+ same store net revenue growth YTD Sep’19 5 additional expansions by YE2019 433 new physicians recruit

  27. Slide 27: Long-Term Growth Model

    3 How We Drive Shareholder Value Reaping the Benefits: Long-Term 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% +3-5% +3-5% Sustainable long-term double-digit AEBIT

  28. Slide 28: 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+ ~ $235 2018A 2019E 2020P 2021P 2022P 2023P 2024P Near-term Mid-term Long-term  Return to growth  High-end 4-6% same-  Medicare and Managed store revenues Care opportunity 

  29. Slide 29: Summary

    3 How We Drive Shareholder Value Summary We Have 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

  30. Slide 30: Appendix

    Appendix © 2020 Surgery Partners – Confidential & Proprietary Information

  31. Slide 31: Reconciliation to Adjusted EBITDA

    Reconciliation to Adjusted EBITDA The following table reconciles Adjusted EBITDA to Loss before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited): EBITDA Adjustments 2018 Loss before income taxes $ (69) Plus (minus): Net income attributable to non-controll

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