Shares of Surgery Partners climbed 20 percent Wednesday after the company’s executives reported a smaller-than-expected second-quarter loss and said they expect that, if current trends hold, to quickly grow earnings in the second half of 2020.
After initially having to deal with a 90 percent drop in case volumes when the spread of COVID-19 led to widespread shutdowns, Brentwood-based Surgery Partners’ business has been steadily recovering and its leaders have been making plans to play some offense as well.
Driving much of the optimism of Executive Chairman Wayne DeVeydt and CEO Eric Evans is a belief that the COVID crisis has both fundamentally changed the perception of surgery centers or short-stay surgical hospitals, which have long sought to pull procedures out of typically more expensive traditional hospitals, and driven some stand-alone or smaller surgery center operators to contemplate being part of a larger, more financially secure organization such as Surgery Partners.
CFO Tom Cowhey told analysts and investors Wednesday that Surgery Partners was able to grow its revenue per case by more than 30 percent during the second quarter, thanks to handling more high-acuity cases and being able to price its services a little higher.
That combination could produce strong profit growth in the near future as volumes return to and surpass pre-pandemic levels: Cowhey said Surgery Partners could finish 2020 with adjusted EBITDA of $250 million to $260 million if volume and pricing trends hold. Surgery Partners’ adjusted EBITDA for the first six months of the year was nearly $105 million. For all of 2019, it was $259 million.
The Surgery Partners team’s optimism Wednesday was mirrored by investors. Shares of Surgery Partners (Ticker: SGRY) closed the day at $19.31, up nearly 21 percent. That big move just about took the stock back to where it was in mid-February, before the market took a dive as COVID landed on U.S. soil.
On his team’s conference call, DeVeydt also said Surgery Partners’ acquisition pipeline is “as robust as we’ve ever seen it” and that the company plans to focus heavily on musculoskeletal and cardiovascular work as it looks to grow. Surgery Partners has signed several letters of intent and is eyeing some larger deals as well, although nothing on a truly large scale.
“There’s no need to bet the farm,” DeVeydt said. “Things are going well, our process works well, we’re able to plug and play these things in efficiently.”
This post originally appeared in our partner publication, the Nashville Post.