Surgery Partners, Inc. (NASDAQ:SGRY) Q1 2023 Earnings Call Transcript

Wayne DeVeydt: Hey, Whit, it is all consolidated today. When we initially modeled, we assumed a midyear convention in terms of when we would sell these, very similar to how we assume on acquisitions. So it does create a headwind for us. The full headwind is not the $100 million, think about it being about half of that is the actual headwind versus our original guide. But based on the strength in the quarter, we’re more than .

Whit Mayo: Okay. But $100 million annual, but $50 million as you think about a mid-year convention relative to the guidance. And then one — sorry, one last one. Just as you look at the development pipeline and the acquisitions that you will close, should we expect any of those to be consolidated?

Dave Doherty: Hey, Whit, yes, absolutely. I mean, we’ll continue to look at any and all models, right? We said this, we’re pretty agnostic to the structure as long as it — we have to manage it. We have to feel good about the growth prospects and what we can bring to it. But yes, we will continue certainly to buy consolidated positions. What I would say is with the health system partnerships, you’re more likely to have nonconsolidated positions, certainly with those going forward. Typically, with de novos, you’ll often start in a nonconsolidated position, but we’ll buy up over time. And so I think it’s going to be a healthy mix with and we’ll continue to get really good guidance to you guys. You guys can think about the revenue impacts. As we’ve said before, we’re agnostic to structure. Our job is to grow EBITDA, grow market share, grow cases and whatever structure makes the most sense for us to expedite that we’re going to take.

Operator: Our next question is from Bill Sutherland with The Benchmark Company.

Bill Sutherland: Can you go back and just in the quarter, you said 4 de novos, I think, and 10 value health consolidation. Was that —

Wayne DeVeydt: We recently completed four de novos, and we’ve got 10 that are underway that are fully syndicated. We have a lot more than that in the pipeline. I’m glad you asked about this. I will say this is another additive opportunity for our — to our growth algorithm. When you think about how we think about the business, there is no reason we shouldn’t be double-digit syndicated new de novos annually moving forward, a really strong pipeline, and we’re excited about those partnerships, in particular because they’re really heavy ortho.

Bill Sutherland: Yes. And could you update us on the Value Health relationship kind of where you stand with facilities and development plans?

Wayne DeVeydt: So Value Health, we’ve had a number of facilities. I don’t have the full numbers in front of me, but Bill, we’ll follow up with that. We’ve acquired a fair amount of facilities that were existing facilities that have been added into our portfolio, some of which we’ve actually bought up to a consolidated position already. We continue to work with them on new de novos. Many of those 10, we just talked about are value health partnerships that we’ve worked on together. So certainly, that’s been a really impressive part of our partnership. And they continue to work on their bundled health model and their value-based care pricing for hyper specialties in orthopedics and cardiology bariatrics. We are pursuing opportunities in those — in multiple areas, and we’re going to continue to push forward on that.

As you can imagine, that’s part of the value-based world that is pretty nascent, but there’s real opportunities we’re seeing it in certain of our centers already, and we hope to see that grow in the future.

Bill Sutherland: And then you got a lot in your plate, but are you potentially in discussion or are you in discussions with potentially other health system relationships?