Surgery Partners, Inc. · NASDAQ:SGRY
Surgery Partners — 40th Annual J.P. Morgan Healthcare Conference (January 2022)
42 slides from Surgery Partners's conference presentation, January 2022
Slide 1: 40th Annual J.P. Morgan HealthCare Conference
40th 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 forward-looking statements by terms such as
Slide 3: Surgery Partners Introduction
Surgery Partners Introduction © 2022 Surgery Partners – Confidential & Proprietary Information
Slide 4: Surgery Partners is the Leading Independent Surgery Center Operator
Surgery Partners is the Leading Independent Surgery Center Operator… ~$2.2 billion ~$316 million 31 States Q3 2021 TTM Revenues(1) Q3 2021 TTM AEBITDA(2) 115 Ambulatory Surgery Centers 18 Short-Stay Surgical Hospitals 4,600+ Affiliated Physicians 600,000+ Annual Patients (1) September 30, 2021 trail
Slide 5: The Only Opportunity to Invest Directly in a Pure-Play of National Size
…And is the Only Opportunity to Invest Directly in a 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, $2.2B 97% Surgery Center 133 Ophthalmology & GI Operato
Slide 6: Diversified Mix Focused on High Value-Add Specialties
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 16% ✓ Leading musculoskeletal platform 36% GI 22% ✓ Expansive network of surgical capabilities 26% ✓ Leading
Slide 7: Well-Positioned to Pursue the $150B+ Total Addressable Market
…And are Well-Positioned to Pursue the $150B+ Total Addressable Market (TAM) $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 + + Ta
Slide 8: Surgery Partners Investment Highlights
Surgery Partners Investment Highlights © 2022 Surgery Partners – Confidential & Proprietary Information
Slide 9: Surgery Partners Investment Highlights
Surgery Partners Investment Highlights Large Market Opportunity Supported by Multiple Macro Growth Drivers and 1 Aligned with the Mega Trend: High-Quality, Low-Cost Care in Specialized Settings 2 Industry Leader Focused on Higher Growth, Higher Acuity Specialties Exceptional Clinical Quality Coupled
Slide 10: Over $150B Total Addressable Market (TAM)
1 Over $150B Total Addressable Market (TAM) Same-Facility volume Physician recruitment in De Novos growth targeted specialties Organic Expansion programs Case shift in core specialties like Investment in innovative Orthopedics, Spine & Cardiology technologies for service line expansion Deployment Mi
Slide 11: TAM: Over $90B Outpatient Surgical Market and ~$60B Migrating
TAM: Over $90B Outpatient Surgical Market and ~$60B of 1 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 Outpatient Setting HOPD $35B+ surgery 6% ASC $550B+ Of
Slide 12: Increasing Number of Procedures Projected to Migrate to Lower Cost Settings
Increasing Number of Procedures Projected to Migrate to 1 Lower Cost Settings Migration of Orthopedic, Spine and Cardio procedures will fuel rapid ASC growth Percentage of procedures performed in ASCs 80% 68% 70% 66% 61% 60% 58% 52% 50% 44% 40% 33% 30% 30% 20% 10% 10% 10% 7% 4% 0% Cardiology Spine O
Slide 13: Leading Musculoskeletal & Cardio Platform Positioned to Capture Opportunity
Our Leading Musculoskeletal & Cardio Platform is Well 2 Positioned to Capture this Opportunity $3 billion 15% Musculoskeletal Annual savings by shifting Surgery Partners’ historic 50% of joint cases to ASCs(1) orthopedic case growth 14 80%+ Robots added in 2020 and Surgery Partners’ facilities 2021,
Slide 14: Differentiated Approach to Growing Orthopedics & Cardiology
Differentiated and Highly Capital Efficient Approach to 2 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. Add orthopedics and Tra
Slide 15: Driving Strong Case and Revenue Growth
2 …Driving Strong Case and Revenue Growth… ~3.7x case growth over 9 years Case Volume by Specialty 195,472 ✓ Net Revenue CAGR of 140,867 ~27% from 117,777 2012 to TTM 3Q 2021 84,713 78,136 52,838 ✓ Case mix aligned with 15,051 14,090 higher acuity Other(1) GI Ophthalmology MSK 2012 Sept. '21 TTM © 2
Slide 16: 15% Orthopedic Service Line Volume Growth
2 …And 15% Orthopedic Service Line Volume Growth 96 Locations (1) 67,269 90k+ Orthopedic Procedures Annually 39,065 670+ Orthopedic Physicians 108%+ Joint Case Growth at ASCs (2) YTD Sept 2017 YTD Sept 2021 Orthopedic Case Volume (1) Facilities that performed orthopedic cases between 2019 and YTD Se
Slide 17: Considerable Growth Ahead for Joint Replacements
2 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 2028P Inpatient Outpati
Slide 18: We Focus on What Matters Most: Clinical Quality and Patient Experience
We Focus on What Matters Most: Clinical Quality and 3 Patient Experience OUR MISSION ENHANCING PATIENT QUALITY OF LIFE THROUGH PARTNERSHIP © 2022 Surgery Partners – Confidential & Proprietary Information 18
Slide 19: We Hold Ourselves to the Highest Standards
3 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 ASCs Surgical Hospita
Slide 20: Regularly Report and Benchmark Performance to Emphasize Culture of Safety
…And Regularly Report and Benchmark Our Performance 3 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 ✓ Hospital admissions ✓ Norm
Slide 21: A Proven Record of Exceptional Clinical Care
3 …With A Proven Record of Exceptional Clinical Care… © 2022 Surgery Partners – Confidential & Proprietary Information 21
Slide 22: Clinical Efficacy Resulting in a Better Patient Experience
…And Clinical Efficacy that Results in a Better Patient 3 Experience Nationwide Hospitals Surgery Partners(1) Four Star 29% Five Star 71% Best-in-Class Patient Experience (1) Includes hospitals that have been owned / operated by Surgery Partners for TTM Sept. 2021. © 2022 Surgery Partners – Confiden
Slide 23: We Focus on Patient Experience
3 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 Personal People Patient exp
Slide 24: Best-in-Class Patient Net Promoter Score
…Which has Resulted in a Best-in-Class Patient Net 3 Promoter Score Patient Net Promoter Score 94 89 79 62 62 © 2022 Surgery Partners – Confidential & Proprietary Information Note: Survey conducted from Dec ‘19 – May ‘20 24
Slide 25: We Align Ourselves with our Physician Partners
3 We Align Ourselves with our Physician Partners… 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 © 2022 Surgery Partners – Confidential & Proprietary Information 25
Slide 26: Highly Satisfied Physicians
3 …Which Results in Highly Satisfied Physicians… Physician Net Promoter Score 89 Exceptional Provider Experience 81 Aligned equity ownership model 79 62 High NPS 62 © 2022 Surgery Partners – Confidential & Proprietary Information Note: Survey conducted in 2015; 366 respondents. 26
Slide 27: Strong Physician Engagement and Retention
3 …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 have what they need to
Slide 28: We Operate in a Highly Fragmented Market
4 We Operate in a Highly 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%) Single facility providers multiple sites
Slide 29: Integrated Pure-Play Platform
…That Can Uniquely Benefit From an Integrated Pure-Play 4 Platform… 94% of surgical facilities/ clinical Patient practices migrated to end-state Accounting platforms, representing 94% of Platform revenue 95% of surgical facilities/clinical practices migrated to common claims clearinghouse Consolidat
Slide 30: Proven Track Record of Delivering Organic Synergies
…With a Proven Track Record of Delivering Organic 4 Synergies While Enhancing Patient Experience Managed Care Supply Chain • Enhanced centralized • Enhanced centralized team with seasoned team with seasoned executives executives • Continuing to enhance • Migrated to one our health plan value company
Slide 31: Re-Accelerating the Pace of Capital Deployment
We Focused on Short-Stay Surgical and are 4 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 • 8 transactions to enhance presence
Slide 32: In 2021, We Closed ~$325 Million of Acquisitions
4 In 2021, We Closed ~$325 Million of Acquisitions 2021 Selected Acquisitions ~ $325M of capital Omaha, NE San Francisco, CA Multi-specialty Surgical deployed in 2021 Ophthalmology Hospital (orthopedics, San Jose, CA Closed 6/21/2021 general surgery, other) Multi-specialty Closed 12/31/2021 (orthope
Slide 33: Uniquely Positioned to Enable Value-Based Surgical Care
5 Uniquely Positioned to Enable Value-Based Surgical Care Partner to Enable Value-Based Care National footprint of outpatient surgical facilities Risk- Health Based Plans Providers Total Joint Replacement Price ~$30K ~$15K Meaningful site of service savings(1) Health Systems 94% Quality outcomes and
Slide 34: A Dynamic Growth Model
6 A Dynamic Growth Model Top-line Growth Margin Expansion Capital Investment Volume Procurement Acquisitions Health System/ Rate Revenue Cycle Health Plan Partnerships Org / Workflow Managed Care De Novos Efficiencies Mid-teens AEBITDA growth target with Capital Deployment © 2022 Surgery Partners –
Slide 35: Surgery Partners Financial Overview
Surgery Partners Financial Overview © 2022 Surgery Partners – Confidential & Proprietary Information
Slide 36: YTD Sept 2021 Financial Highlights
YTD Sept 2021 Financial Highlights Surgical Cases Net Revenue ($m) CAGR = 2.2% CAGR = 10.9% $1,614.9 404,297 387,437 $1,314.2 $1,311.8 324,888 YTD Sept 2019 YTD Sept 2020 YTD Sept 2021 YTD Sept 2019 YTD Sept 2020 YTD Sept 2021 Same-Facility Growth AEBITDA ($m) (1) Volume Rate Revenue 21.7% 29.9% CAG
Slide 37: Business has Remained Resilient Through Covid Impact
Business has Remained Resilient Through Covid Impact Same Facility Net Revenue (% of PY) 145% 117% 117% Average 108% 106% 108% Since 101% 2Q 2020 81% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 © 2022 Surgery Partners – Confidential & Proprietary Information 37
Slide 38: Long-term Financial Targets
Long-term Financial Targets ▪ Same-facility revenue growth of 7.6% in 2019; 2020 pre-COVID Organic same-facility growth of 9.4%(1); YTD 3Q21 same-facility revenue AEBITDA Double growth of 21.7% Growth Digit ▪ Industry tailwinds in MSK & Cardio (16%+ CAGR MSK case volume growth YTD 3Q17 – YTD 3Q21; 1
Slide 39: Surgery Partners Investment Highlights
Surgery Partners Investment Highlights $150B Total Addressable Market Large Market Opportunity Supported by Multiple Macro 1 Growth Drivers and Aligned with the Mega Trend: High $60B of Inpatient Cases Migrating Quality, Low Cost Care in Specialized Settings to Outpatient 7.5%+ Industry-leading Same
Slide 40: Sustainable Long-term Double-Digit AEBITDA Growth
Reaping the Benefits: Sustainable Long-term Double-Digit AEBITDA Growth ~ $570M ~$315 $370M+ $325M - $330M ~$235M 2018A 2019A 2020A 2021P 2022P 2023P 2024P 2025P Goal to achieve $570M of Adjusted EBITDA by 2025 © 2022 Surgery Partners – Confidential & Proprietary Information 40
Slide 41: Appendix
Appendix © 2022 Surgery Partners – Confidential & Proprietary Information
Slide 42: 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 (unaudited): TTM Nine Months Ended September 30, (in millions) Sept 2021 2021 2020 2019 Income (loss) before income taxes $ 68.8 $ 26.5
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