Financial Data and Key Metrics Changes - Surgery Partners reported second quarter net revenue of $826 million, an increase of 8.4% compared to the previous year, and adjusted EBITDA of $129 million, reflecting a 9% growth [6][25][26] - The company achieved a same facility revenue growth of 5.1%, with same facility case growth at 3.4% and rate growth at 1.6% [25][26] - The adjusted EBITDA margin was 15.6%, which is 10 basis points higher than the prior year [26] Business Line Data and Key Metrics Changes - The company performed nearly 173,000 surgical cases in the second quarter, a 3.8% increase from the previous year, with significant growth in gastrointestinal (GI) and musculoskeletal (MSK) procedures [9][25] - Total joint procedures grew by 26% in the second quarter compared to the prior year, indicating strong demand for orthopedic surgeries [10] Market Data and Key Metrics Changes - The total addressable market for Surgery Partners is estimated to grow from $40 billion to over $150 billion in the near to medium term, driven by demographic trends and technological advancements [22] - The company has less than 5% exposure to Medicaid, indicating limited risk from changes in Medicaid reimbursement policies [18] Company Strategy and Development Direction - The company focuses on three growth pillars: organic growth, margin improvement, and capital deployment for mergers and acquisitions (M&A) [5][6] - Surgery Partners plans to deploy $200 million in acquisitions for the year, with a disciplined approach to ensure long-term value creation [15][31] - The company is actively evaluating its asset portfolio to optimize for growth and leverage reduction, including potential partnerships or sales of non-core facilities [22][80] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning within the current regulatory environment, noting minimal exposure to tariff-related price increases and a favorable outlook from CMS regarding outpatient rates [17][18] - The company anticipates continued growth in same facility revenue, expecting to reach the high end of its growth target of 6% for the full year [9][81] Other Important Information - Surgery Partners opened eight de novo facilities in 2024 and has a robust pipeline for future developments, particularly in higher acuity specialties [12][22] - The company recorded a 27% sequential decrease in transaction and integration costs, reflecting a more normalized M&A activity level [17] Q&A Session Summary Question: What is the expected pace of acquisitions for the year? - Management confirmed a strong pipeline and reiterated the target of at least $200 million in acquisitions, emphasizing the importance of timing and quality over rushing to meet targets [34][36] Question: How do de novo facilities impact margins? - Management explained that de novo facilities take time to reach full profitability, typically achieving breakeven within 6-12 months and full run rate earnings within three years [39][40] Question: Are there any service lines considered less core? - Management indicated that they are evaluating opportunities to optimize the portfolio, which may include divesting non-core facilities or expanding partnerships with local health systems [45][80] Question: What is the impact of the potential removal of the inpatient-only list? - Management expressed optimism about the potential for increased revenue from higher acuity procedures being performed in outpatient settings, although they cautioned against overestimating immediate impacts [51][72] Question: How is the company addressing payer behavior and revenue cycle standardization? - Management noted ongoing efforts to improve revenue cycle processes and maintain strong relationships with payers, which are crucial for optimizing cash flow and operational efficiency [62][63]