Eric Evans: Hey, Brian, thanks for the question. And look, there’s not a ton of information out there, right? We have done our research on the best we can, based on what we think the uptake could be, what the potential impact could be, there are puts and takes. As you can imagine, there are patients that are ineligible for surgery today because of weight, that will become eligible. There are patients who are overweight who might lose weight and become more active. And when you look at the types of procedures we do, which tend to lead towards things that are less affected by co-morbidities, if you look at the overall patients we have, for us, we see definitely impacts of people that will become eligible. We understand there might be some people who are healthier longer, but they also become more active.
We have a lot of stuff that is based on activity and wear and tear. We think about things like GI doesn’t affected by this in particular, as far as [risk goes] (ph) from what we can tell. Ophthalmology, obviously, a lot of that is — some of that can be dye-related. A lot of it is not. We look at the pros and cons. We looked at the relative size of the market. And the reality for us is we don’t see this as material, to our business. And so maybe there’ll be data that comes out in the future that changes that opinion. But at this point, Brian, like if anything, it allows more patients who have fewer co-morbidities to be taken care of in our sites of service. We think that’s a net benefit. But we still see the relative impact on an overall population of procedures as being relatively small.
So that’s as much as we can tell you right now. And I think that’s — if anybody is telling you more than that, they have data that I’ve not seen. So I think that’s kind of where we all sit.
Brian Tanquilut: I appreciate that. And then maybe, Dave, as I think about your swaps, just I know you said fixed rate and your debt, just any color you can share on your swaps? And then maybe also, how we should be thinking about funding the $200 million of deals in the pipeline?
Dave Doherty: Yeah. I appreciate you asking this question because we obviously do look at this and we’re aware of how this is kind of viewed from the outside. So let me start with free cash flow generation. I mentioned it earlier in my prepared remarks. But hopefully, the results that we printed this morning demonstrate the confidence that we have been having all year in our ability to generate free cash flow this year, of north of $140 million. And I can assure you, our modeling still shows us kind of progressing nicely up to $200 million plus of free cash flow in 2025. So from a cash flow generation, you get to that year and you can see that the business is generating sufficient free cash flow to support its operations. So what we’re really talking about here from an exposure area is the gap year of 2024 where you’re going to be generating between the $140 million and the $200 million of free cash flow again.
We’re not going to give that guidance just yet. We’ll give it in upcoming calls. And that’s when you look at our balance sheet. And our balance sheet right now sits with $236 million of cash and an untapped revolver of nearly $550 million. So when management says and when I say that we have confidence we’ll be able to support the growth that we’ve committed to of at least $200 million of capital deployment, that’s why we have that confidence. Now we do — to your point, we do have a debt stack that we look at that, there’s no material debt coming due until 2026. To your point, we have interest rate swaps and caps in place, mostly swaps at this point, that fix our current term loan variable rate to just under 6%. I think we’re at 5.9% effective interest rate.
We’ll have that all the way through March of 2025. And then at that point in time, obviously, I hope that we have done a refinancing opportunity, we’ll be close to that at that point in time. So that we’ll time the market in the most favorable environment that we can see and then we’ll go after the market. And of course, reestablish our hedging strategy and what’s going to make sense to us. I think what we have valued and I think our investors have valued is the predictability of our free cash flow. So hedging strategy will always be important to us. In today’s environment, that means we have to look at the forward interest rate curve and see what kind of makes sense for us. But as we sit here today, fully hedged in a position of strength because of that predictability that we have over the next several years.
Brian Tanquilut: Appreciate that. Hey, Wayne, maybe one more question, if I may. I know there — we’ve been asked a lot about site neutrality. How are you thinking about the proposals that are out there, whether it’s from [indiscernible] or whatever is going around in DC right now? Thank you.
Wayne DeVeydt: Hey, Brian, thanks for the question. I’m going to let Eric actually expand on this since he just provided the Board an update along with some of our long-term outlook views. The short answer is, we actually think this is a net positive to us. But Eric, maybe expand on kind of what we disclosed to the Board and…
Eric Evans: Yeah. Bian, let me start with the whole thesis of our business is the savings we create in the system by driving patient care to the right side of care, right? That is — that is absolutely why this company, I think, exists. It’s why we create a lot of value. It’s why we are part of the answer in healthcare. So for us, any legislation that actually encourages patients to get their care done in the right place is something we fully support. So let me set it up there. Let me secondly say, we don’t own and operate traditional acute care hospitals. Right? We have six surgical — we have surgical hospitals that do take care of extended stay scheduled patients. Many of them don’t have ERs, right? So you think about a given market and how we think about the world, we’d like the opportunity in a given specialty, whether that’s orthopedics or cardiology, to provide the whole spectrum of care to our physician partners.
So if you think about our surgical facilities where there may be something would move to an ASC, we’re already doing that. You look at our surgical hospitals, we have ASC strategies, many of them have ASCs, and many of them multiple ASCs. So the idea is we think it’s a unique opportunity in our short-stay surgical facilities, again, very different than traditional acute care. They are purpose built for higher acuity scheduled procedures. As we think about that world, we love that opportunity with our partners to cover the entire gamut of acuity in a value-based way that allows the patient to go to the right side of care. So that’s addressing any risk we might have. The bigger issue is — our bigger catchment is on the ASC side. We have 130 plus today.
We’re adding a bunch of de novos. As you know, we see that number growing out its way to 200 over the next few years. All of those sites benefit from anybody leaving the HOPD hospital site. So we feel like we’re very well positioned and been proactive on moving it to the right side of care in markets where we have the higher acuity capabilities. And in the other cases, we see that as a net positive. So it’s, again, core to our business, we believe in it. We’re excited about it. We think it’s the right answer for the health system. And so net-net, we think definitely not a risk, and we really think there’s some opportunity there. And Dave, maybe you want to add something?
Dave Doherty: Yeah. So of course, you can expect that we’re tracking what’s going on up in DC and kind of following the conversation. As Eric mentioned, this is the company Steve says, so logically makes sense for us. As we looked at the closest proposal that we’ve kind of seen with some degree of specificity, there are — there’s this concept that stuff might move out of our larger acuity centers into our ASC environments. If you take just a bearish case and assume that those types of cases in the environment that they’ve kind of set up. So again, very worst-case scenario in 2026 and beyond. What we’re talking about in our calculations is less than 1% of our business. And I’d say when you look at just the bearish case, that’s purely the bearish case, right, assuming that there is no further improvement opportunities inside our ASCs. And no replacement of those cases outside of our larger facilities, which is unrealistic.
This company, as you know, is very strategically focused. And if you have an effective date of 2026 or beyond, overcoming a 1% headwind is not something that intimidates us in any way.
Brian Tanquilut: Thank you.
