10-K: Surgery Partners Reports Improved 2025 Results Amid Growth

Surgery Partners, Inc. reported a significant reduction in net loss and growth in revenue and Adjusted EBITDA for the fiscal year ended December 31, 2025, driven by same-facility performance and strategic acquisitions.

Summary

• Total revenues for 2025 increased by 6.2% to $3.3 billion, up from $3.1 billion in 2024.
• Net loss attributable to Surgery Partners, Inc. significantly decreased to $77.9 million in 2025, compared to $168.1 million in 2024.
• Adjusted EBITDA increased by 3.5% to $526.2 million in 2025, up from $508.2 million in 2024.
• Same-facility revenues grew by 4.9% in 2025, with a 3.4% increase in case volumes and a 1.4% increase in revenue per case.
• The company acquired a controlling interest in 12 surgical facilities and several physician practices for $162.1 million cash, net of cash acquired, during 2025.
• As of December 31, 2025, Surgery Partners owned or operated 176 surgical facilities across 30 states, including 157 ambulatory surgery centers (ASCs) and 19 surgical hospitals.
• Patient service revenues accounted for 97.5% of total revenues, with private insurance representing 52.3% and government payors 42.8% of patient service revenues in 2025.
• Orthopedics and pain management remained the largest specialty, accounting for 40.7% of cases in 2025.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing as moderately positive. While the company continues to report a net loss, the significant reduction in that loss, coupled with solid revenue and Adjusted EBITDA growth, indicates an improving financial trajectory. However, substantial debt levels and potential future headwinds from regulatory changes temper a higher score.

Positives

• Total revenues increased by 6.2% to $3.3 billion in 2025, demonstrating strong top-line growth.
• Net loss attributable to Surgery Partners, Inc. improved substantially, decreasing from $168.1 million in 2024 to $77.9 million in 2025.
• Adjusted EBITDA grew by 3.5% to $526.2 million, indicating improved operational efficiency and profitability before non-operating items.
• Same-facility revenues increased by 4.9%, driven by a 3.4% rise in case volumes and a 1.4% increase in revenue per case, highlighting organic growth.
• Strategic acquisitions of 12 surgical facilities and several physician practices for $162.1 million in 2025 expand the company's network and market presence.
• The company successfully refinanced $1.4 billion in term loans and revolving credit commitments in August 2025, extending maturities and adjusting interest rates.
• Issued an additional $425.0 million in senior unsecured notes due 2032, strengthening capital structure and providing funds for general corporate purposes and future acquisitions.

Negatives

• The company reported a net loss attributable to Surgery Partners, Inc. of $77.9 million in 2025, continuing a history of net losses.
• Interest expense, net, significantly increased to $272.6 million in 2025 from $201.7 million in 2024, primarily due to the maturity of prior interest rate swaps and increased senior unsecured notes.
• Cost of revenues as a percentage of total revenues increased to 76.9% in 2025 from 76.1% in 2024, driven by increased performance of high acuity procedures.
• Depreciation and amortization expenses increased to $176.0 million in 2025 from $152.6 million in 2024, partly due to accelerated depreciation on certain long-lived assets.
• The expiration of Affordable Care Act subsidies on December 31, 2025, is anticipated to result in significant increases in premiums, potentially leading to decreased enrollment and a rise in uninsured individuals or a shift to government program coverage, negatively impacting financial performance.
• The One Big Beautiful Bill Act (OBBBA), passed July 4, 2025, reduced federal Medicaid expenditures and tightened eligibility, likely increasing the uninsured population and negatively impacting the company's financial performance due to reliance on federal health care programs.

Risks

• Dependence on payments from third-party payors, including government health care programs and private insurance organizations, where reductions or eliminations could materially and adversely affect revenue and profitability.
• Inability to negotiate and enter into favorable contracts or maintain satisfactory relationships with private insurance payors, potentially decreasing revenue and profitability.
• Significant changes in payor mix (e.g., shift towards Medicare/Medicaid) or surgical case mix (e.g., shift to lower revenue cases) could materially adversely affect business, results of operations, and financial condition.
• Impairment of ability to provide medical services and reduced revenue if good relationships with affiliated physicians are not maintained, as most physicians are not contractually required to use company facilities.
• Challenges in integrating operations of acquired surgical facilities, attracting new physician partners, and acquiring/developing additional facilities on favorable terms, which could limit future growth.
• Shortages or quality control issues with surgery-related products, equipment, and medical supplies could disrupt operations, affect case volume, and reduce profitability.
• Intense competition from other health care facilities and providers for physicians, patients, strategic relationships, and managed care contracts.
• Competition for physicians and clinical personnel, including nurses, and shortages of qualified personnel could increase labor costs and adversely affect revenue, profitability, and cash flows.
• Growth of patient receivables or deterioration in collection ability due to economic conditions could materially adversely affect business and financial condition.
• Cybersecurity attacks or intrusions could disrupt business, result in loss/disclosure of sensitive information, damage reputation, increase costs, or lead to fines and financial losses.
• Failure to comply with federal and state privacy and security regulations (HIPAA, HITECH Act) could result in significant liability or reputational harm.
• Uncertainty regarding the effect of future changes in healthcare laws, regulations, policies, and government programs on business, financial condition, or results of operations.
• Non-compliance with numerous federal and state laws and regulations relating to facility operation could incur significant penalties, costs, or require operational changes.
• Surgical facilities do not fully satisfy requirements for safe harbors under the federal Anti-Kickback Statute, potentially leading to criminal/civil penalties, loss of licenses, and exclusion from governmental programs.
• Failure to comply with physician self-referral laws (Stark Law) could result in substantial monetary penalties and significant loss of revenue.
• Federal law restricts the ability of surgical hospitals to expand capacity, limiting growth for 'grandfathered' physician-owned hospitals.
• Ongoing federal and state audits and investigations, including actions for false and other improper claims, could result in substantial costs and penalties.
• Exposure to large malpractice or other legal claims, which may not be fully covered by insurance, could require significant damage payments.
• Failure to comply with Medicare's conditions for coverage and participation may result in loss of program payment or other governmental sanctions.
• Decreased Medicare payments if facilities fail to report and meet various quality metrics.
• State efforts to regulate the construction, acquisition, or expansion of health care facilities could prevent future growth.
• Antitrust enforcement actions if market share is deemed too concentrated or commercial payor contract negotiating practices are found illegal.
• Significant influence of the largest stockholder (Bain Capital affiliates) over decisions, potentially limiting other stockholders' influence.
• Provisions in charter documents and Delaware law may deter takeover efforts beneficial to stockholder value.
• Designation of Delaware courts as the sole forum for certain stockholder actions could limit stockholders' ability to obtain a favorable judicial forum.

Future Outlook

The company anticipates potential negative impacts on its financial performance in 2026 due to the expiration of Affordable Care Act subsidies, which are expected to lead to significant premium increases, decreased enrollment, and a shift towards uninsured or government program coverage. Additionally, the One Big Beautiful Bill Act (OBBBA) is projected to reduce overall healthcare spending and increase regulatory burdens, potentially increasing the uninsured population and negatively affecting reimbursement from federal health care programs. The company will continue to focus on improving same-facility performance, selective acquisitions, and new facility development.

Management Comments

• Our mission is to enhance patient quality of life through partnership.
• We appreciate that our colleagues are key to creating value and believe that we have a good relationship with them.
• We continue to focus on improving our same-facility performance, selectively acquiring established facilities, developing new facilities and pursuing other portfolio management initiatives.

Industry Context

StockSavvy.ai notes that Surgery Partners operates within a favorable industry trend characterized by an aging population, advancements in medical technology, and a push from payors and government to shift high-acuity procedures from acute care to lower-cost outpatient settings. The company's focus on ambulatory surgery centers (ASCs) aligns with the estimated 6% annual growth in ASC procedure volume, outpacing hospital outpatient departments (2%) and inpatient declines (-2%). The total addressable market for outpatient surgical facilities is estimated at over $90 billion, with a potential $50 billion shift from inpatient to outpatient, providing significant growth opportunities for efficient operators like Surgery Partners.

Comparison to Industry Standards

• Surgery Partners competes with large national companies such as HCA Healthcare, Inc., AMSURG Corp., Tenet Healthcare Corporation, and Optum, Inc. in the surgical facility market.
• The company's strategy of developing and acquiring surgical facilities in partnership with local physicians and health care systems is a common model in the competitive healthcare services industry.
• The reported 4.9% same-facility revenue growth and 3.4% same-facility case volume increase are competitive within the growing outpatient surgical market, especially when compared to the estimated 6% annual growth in ASC procedures.

Management Changes

Corporate Governance

Legal Proceedings

• The company is subject to claims and legal actions in the ordinary course of business, including those relating to patient treatment, employment practices, and personal injuries.
• Management believes there are no current proceedings that would have a material adverse effect on the company's business, financial condition, results of operations, or liquidity.

Related Party Transactions

• The company incurred lease costs of $25.1 million in 2025 under operating lease agreements with physician investors who are related parties.
• Paid rent of $31.3 million in 2025 under finance lease agreements with physician investors and a lessor who are related parties.

Stakeholder Impact

• Shareholders: Potential for stock price volatility due to ongoing net losses, significant debt, and regulatory uncertainties, but also potential upside from continued revenue and EBITDA growth and share repurchase program.
• Employees: Continued focus on attracting, developing, and retaining talent, but also facing rising labor costs and potential unionization attempts.
• Customers (Patients): Continued focus on high-quality, cost-effective surgical and ancillary care, but potential for increased out-of-pocket costs due to changes in insurance subsidies and payor practices.
• Suppliers: Dependence on timely and cost-effective supply of surgery-related products, equipment, and medical supplies, with risks of shortages and quality control issues.
• Creditors: High leverage with approximately $3.7 billion in outstanding indebtedness, but recent refinancing efforts aim to manage debt service obligations and maintain compliance with covenants.

Next Steps

• Continue to improve same-facility performance through targeted physician recruitment, service line expansion, and efficient operating models.
• Execute a disciplined acquisition strategy to expand presence in the surgical facility market.
• Develop new surgical facilities in cooperation with local physician partners and health care systems.
• Monitor and adapt to changes in healthcare laws and regulations, particularly regarding the impact of the One Big Beautiful Bill Act (OBBBA) and the expiration of Affordable Care Act subsidies.
• Comply with new HIPAA security regulations if the proposed changes by HHS are enacted, potentially incurring significant costs for implementation.

Key Dates

Recommendation

While Surgery Partners demonstrated improved financial results in 2025 with reduced net losses and growth in revenue and Adjusted EBITDA, significant risks persist. The company carries a substantial debt load, and the future regulatory environment, particularly with the expiration of ACA subsidies and the impact of the OBBBA, introduces considerable uncertainty regarding reimbursement and patient volumes. The strategic acquisitions and organic growth are positive, but the long-term path to sustained profitability and debt reduction needs clearer visibility. A 'hold' recommendation allows investors to monitor how the company navigates these challenges and capitalizes on industry trends without taking on immediate additional risk or divesting from a potentially improving situation.

Keywords

Surgical Facilities, Ambulatory Surgery Centers, ASCs, Healthcare Services, Hospital Outpatient Departments, Medicare, Medicaid, Private Insurance, Financial Performance, Acquisitions, Debt, Cybersecurity, Regulatory Compliance, Risk Management, Corporate Governance, Orthopedics, Pain Management, Ophthalmology, Gastroenterology, Senior Notes