Surgery Partners' Q1 2025: Unraveling Contradictions in Payer Mix, Legislation Impact, and Revenue Growth

Payer mix and commercial rates, exposure to site neutrality legislation, volume and revenue growth expectations, payer mix and pricing pressure, and revenue growth expectations are the key contradictions discussed in Surgery Partners' latest 2025Q1 earnings call.



Strong Volume Growth and Revenue Trends:
- Surgery Partners reported first quarter net revenue of $776 million, with adjusted EBITDA at $103.9 million, both in line with expectations.
- The growth was driven by over 160,000 surgical cases, a 4.5% increase from the previous year, primarily due to robust growth in lower acuity specialties and new de novo facilities.

Impact of De Novo Facilities and Case Mix:
- The opening of de novo facilities in the previous year contributed significantly to the growth, with over 29,000 orthopedic cases, showing a 3.4% increase from 2024.
- This was supported by strategic investments in 68 surgical robots to enable complex procedures and targeted recruitment of orthopedic-focused positions.

Margin Expansion and Supply Chain Efficiency:
- Although there was temporary margin pressure due to case mix, Surgery Partners expects margin expansion annually with a focus on ongoing procurement and operating efficiency initiatives.
- The company's strong supply chain management and standardized revenue cycle processes are expected to drive margin improvements, with an emphasis on integrating recent acquisitions.

Regulatory Environment and Tariff Exposure:
- Surgery Partners expressed confidence in navigating regulatory uncertainties, particularly with regard to tariffs, citing significant contract transparency and visibility into tariff exposure through its relationship with HealthTrust.
- The company reported no material exposure to tariff-related price increases and believes it is well-positioned to adjust its approach as needed.