10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

Form 10-Q

_____________________________________

(Mark One)

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

or

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:  001-37576

_____________________________________

Surgery Partners, Inc.

(Exact name of registrant as specified in its charter)

_____________________________________

Delaware	47-3620923
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

340 Seven Springs Way, Suite 600

Brentwood, Tennessee 37027

(Address of principal executive offices and zip code)

(615) 234-5900

(Registrant’s telephone number, including area code)

_____________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	SGRY	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒ No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No  ☒

As of April 25, 2023, there were 126,476,669 shares of the registrant’s common stock outstanding.

SURGERY PARTNERS, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations (Unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	3
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
Signatures		29

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)

	(Unaudited)
	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	245.5	$	282.9
Accounts receivable	452.9		456.3
Inventories	71.8		71.4
Prepaid expenses	29.3		31.4
Other current assets	69.4		79.0
Total current assets	868.9		921.0
Property and equipment, net of accumulated depreciation of $382.7 and $374.3, respectively	844.3		876.6
Goodwill and other intangible assets, net	4,252.6		4,179.4
Investments in and advances to affiliates	191.6		190.3
Right-of-use operating lease assets	274.0		279.1
Long-term deferred tax assets	93.3		91.5
Other long-term assets	118.6		144.2
Total assets	$	6,643.3	$	6,682.1
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	144.4	$	151.6
Accrued payroll and benefits	67.8		68.9
Other current liabilities	200.0		210.1
Current maturities of long-term debt	62.9		62.8
Total current liabilities	475.1		493.4
Long-term debt, less current maturities	2,530.9		2,559.0
Right-of-use operating lease liabilities	268.8		271.4
Other long-term liabilities	80.2		75.4
Non-controlling interests—redeemable	345.8		342.0
Stockholders' equity:
Preferred stock, $0.01 par value; shares authorized - 20,310,000; shares issued or outstanding - none	—		—
Common stock, $0.01 par value; shares authorized - 300,000,000; shares issued and outstanding - 126,480,483 and 125,960,834, respectively	1.3		1.3
Additional paid-in capital	2,478.1		2,478.0
Accumulated other comprehensive income	64.9		76.2
Retained deficit	(582.3)		(557.3)
Total Surgery Partners, Inc. stockholders' equity	1,962.0		1,998.2
Non-controlling interests—non-redeemable	980.5		942.7
Total stockholders' equity	2,942.5		2,940.9
Total liabilities and stockholders' equity	$	6,643.3	$	6,682.1

See notes to unaudited condensed consolidated financial statements.

1

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, dollars in millions, except per share amounts, shares in thousands)

	Three Months Ended March 31,
	2023		2022
Revenues	$	666.2	$	596.2
Operating expenses:
Salaries and benefits	202.2		178.9
Supplies	188.4		171.6
Professional and medical fees	74.6		63.6
Lease expense	21.4		20.0
Other operating expenses	45.6		37.3
Cost of revenues	532.2		471.4
General and administrative expenses	32.0		29.5
Depreciation and amortization	33.7		27.4
Transaction and integration costs	12.5		7.1
Grant funds	(1.1)		(1.2)
Net loss (gain) on disposals, consolidations and deconsolidations	10.5		(0.1)
Equity in earnings of unconsolidated affiliates	(3.3)		(3.1)
Litigation settlements	3.0		(32.8)
Other expense (income), net	0.3		(2.4)
	619.8		495.8
Operating income	46.4		100.4
Interest expense, net	(46.8)		(56.3)
(Loss) income before income taxes	(0.4)		44.1
Income tax benefit (expense)	1.6		(1.3)
Net income	1.2		42.8
Less: Net income attributable to non-controlling interests	(26.1)		(30.6)
Net (loss) income attributable to Surgery Partners, Inc.	$	(24.9)	$	12.2
Net (loss) income per share attributable to common stockholders
Basic	$	(0.20)	$	0.14
Diluted (1)	$	(0.20)	$	0.14
Weighted average common shares outstanding
Basic	125,206		87,995
Diluted (1)	125,206		90,272

(1) The impact of potentially dilutive securities for the three months ended March 31, 2023 was not considered because the effect would be anti-dilutive.

See notes to unaudited condensed consolidated financial statements.

2

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, dollars in millions)

	Three Months Ended March 31,
	2023		2022
Net income	$	1.2	$	42.8
Other comprehensive (loss) income, net of tax:
Derivative activity, net of tax of $0	(11.3)		56.8
Comprehensive (loss) income	(10.1)		99.6
Less: Comprehensive income attributable to non-controlling interests	(26.1)		(30.6)
Comprehensive (loss) income attributable to Surgery Partners, Inc.	$	(36.2)	$	69.0

See notes to unaudited condensed consolidated financial statements.

3

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited, dollars in millions, shares in thousands)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Retained Deficit		Non-Controlling Interests— Non-Redeemable		Total
	Shares	Amount
Balance at December 31, 2021	89,333	$	0.9	$	1,622.3	$	(31.5)	$	(502.7)	$	880.6	$	1,969.6
Net income	—	—		—		—		12.2		20.0		32.2
Equity-based compensation	572	—		7.7		—		—		—		7.7
Other comprehensive income	—	—		—		56.8		—		—		56.8
Acquisition and disposal of shares of non-controlling interests, net	—	—		(4.8)		—		—		(24.3)		(29.1)
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(24.6)		(24.6)
Balance at March 31, 2022	89,905	$	0.9	$	1,625.2	$	25.3	$	(490.5)	$	851.7	$	2,012.6

Balance at December 31, 2022	125,961	$	1.3	$	2,478.0	$	76.2	$	(557.3)	$	942.7	$	2,940.9
Net (loss) income	—	—		—		—		(25.0)		18.3		(6.7)
Equity-based compensation	519	—		3.7		—		—		—		3.7
Other comprehensive loss	—	—		—		(11.3)		—		—		(11.3)
Acquisition and disposal of shares of non-controlling interests, net	—	—		(3.6)		—		—		49.7		46.1
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(30.2)		(30.2)
Balance at March 31, 2023	126,480	$	1.3	$	2,478.1	$	64.9	$	(582.3)	$	980.5	$	2,942.5

See notes to unaudited condensed consolidated financial statements.

4

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, dollars in millions)

	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income	$	1.2	$	42.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	33.7		27.4
Non-cash lease expense	9.0		8.6
Non-cash interest expense, net	6.5		6.1
Equity-based compensation expense	4.2		3.7
Net loss (gain) on disposals, consolidations and deconsolidations	10.5		(0.1)
Deferred income taxes	(1.8)		1.0
Equity in earnings of unconsolidated affiliates, net of distributions received	(0.2)		(0.9)
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable	8.8		2.0
Medicare accelerated payments and deferred governmental grants	(1.2)		(18.0)
Other operating assets and liabilities	3.8		7.2
Net cash provided by operating activities	74.5		79.8
Cash flows from investing activities:
Purchases of property and equipment	(24.3)		(18.2)
Payments for acquisitions, net of cash acquired	(40.7)		(31.1)
Proceeds from disposals of facilities and other assets	8.0		—
Purchases of equity investments	(9.6)		—
Proceeds from sales of equity investments	—		11.5
Other investing activities	(4.1)		(9.3)
Net cash used in investing activities	(70.7)		(47.1)
Cash flows from financing activities:
Principal payments on long-term debt	(15.9)		(17.0)
Borrowings of long-term debt	15.9		11.9
Payments of debt issuance costs	(1.3)		—
Distributions to non-controlling interest holders	(41.9)		(36.2)
Receipts (payments) related to ownership transactions with non-controlling interest holders	5.1		(3.1)
Other financing activities	(3.1)		0.7
Net cash used in financing activities	(41.2)		(43.7)
Net decrease in cash and cash equivalents	(37.4)		(11.0)
Cash and cash equivalents at beginning of period	282.9		389.9
Cash and cash equivalents at end of period	$	245.5	$	378.9

See notes to unaudited condensed consolidated financial statements.

5

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Summary of Accounting Policies

Organization

Surgery Partners, Inc., a Delaware corporation, acting through its subsidiaries, owns and operates a national network of surgical facilities and ancillary services. The surgical facilities, which include ambulatory surgery centers ("ASCs") and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including, among others, gastroenterology, general surgery, ophthalmology, orthopedics and pain management. The Company's surgical hospitals also provide services such as diagnostic imaging, laboratory, obstetrics, oncology, pharmacy, physical therapy and wound care. Ancillary services are comprised of multi-specialty physician practices, urgent care facilities and anesthesia services. Unless the context otherwise indicates, Surgery Partners, Inc. and its subsidiaries are referred to herein as "Surgery Partners," "we," "us," "our" or the "Company."

As of March 31, 2023, the Company owned or operated a portfolio of 145 surgical facilities, comprised of 127 ASCs and 18 surgical hospitals in 31 states. The Company owns these facilities in partnership with physicians and, in some cases, health care systems in the markets and communities it serves. The Company owned a majority interest in 92 of these surgical facilities and consolidated 118 of these facilities for financial reporting purposes.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation of the Company's financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report on Form 10-K").

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in partnerships and limited liability companies controlled by the Company through its ownership of a majority voting interest or other rights granted to the Company by contract to manage and control the affiliate's business. All significant intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes. Examples include, but are not limited to, estimates of accounts receivable allowances, professional and general liabilities and the estimate of deferred tax assets or liabilities. Actual results could differ from those estimates.

Revenues

The Company's revenues generally relate to contracts with patients in which the performance obligations are to provide health care services. The Company recognizes revenues in the period in which its obligations to provide health care services are satisfied and reports the amount that reflects the consideration the Company expects to be entitled to receive. The contractual relationships with patients, in most cases, also involve a third-party payor (e.g., Medicare, Medicaid and private insurance organizations, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by or negotiated with the third-party payors. The payment arrangements with third-party payors for the services provided to the related patients typically specify payments at amounts less than the Company's standard charges. The Company continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

6

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A summary of revenues by service type as a percentage of total revenues follows:

	Three Months Ended March 31,
	2023		2022
Patient service revenues:
Surgical facilities revenues	96.0	%	95.7	%
Ancillary services revenues	2.5	%	2.9	%
Total patient service revenues	98.5	%	98.6	%
Other service revenues	1.5	%	1.4	%
Total revenues	100.0	%	100.0	%

Patient service revenues. This revenue is related to charging facility fees in exchange for providing patient care. The fee charged for health care procedures performed in surgical facilities varies depending on the type of service provided, but usually includes all charges for usage of an operating room, a recovery room, special equipment, medical supplies, nursing staff and medications. The fee does not normally include professional fees charged by the patient’s surgeon, anesthesiologist or other attending physician, which are billed directly by such physicians to the patient or third-party payor. However, in several surgical facilities, the Company charges for anesthesia services. Ancillary service revenues include fees for patient visits to the Company's physician practices, pharmacy services and diagnostic tests ordered by physicians.

Patient service revenues are recognized as performance obligations are satisfied. Performance obligations are based on the nature of services provided. Typically, the Company recognizes revenue at a point in time in which services are rendered and the Company has no obligation to provide further patient services. As the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service.

The Company determines the transaction price based on gross charges for services provided, net of estimated contractual adjustments and discounts from third-party payors. The Company estimates its contractual adjustments and discounts based on contractual agreements, its discount policies and historical experience. Changes in estimated contractual adjustments and discounts are recorded in the period of change.

Other service revenues. Other service revenues include management and administrative service fees derived from the non-consolidated facilities that the Company accounts for under the equity method, management of surgical facilities in which it does not own an interest, and management services provided to physician practices for which the Company is not required to provide capital or additional assets and other non-patient services. The management agreements typically require the Company to provide recurring management services over a multi-year period, which are billed and collected on a monthly basis. The fees derived from these management arrangements are based on a predetermined percentage of the revenues of each facility or practice and are recognized in the period in which management services are rendered and billed.

The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in millions):

	Three Months Ended March 31,
	2023				2022
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	335.6	51.1	%	$	300.2	51.1	%
Government	287.8		43.8	%	249.0		42.4	%
Self-pay	15.6		2.4	%	16.8		2.9	%
Other (1)	17.4		2.7	%	21.7		3.6	%
Total patient service revenues	656.4		100.0	%	587.7		100.0	%
Other service revenues	9.8				8.5
Total revenues	$	666.2			$	596.2

(1)Other is comprised of anesthesia service agreements, automobile liability, letters of protection and other payor types.

Accounts Receivable

Accounts receivable from third-party payors are recorded net of estimated implicit price concessions, which are estimated based on the historical trend of the Company's surgical hospitals’ cash collections and contractual write-offs, and for the Company's surgical facilities in general, established fee schedules, relationships with payors and procedure statistics. While changes in estimated reimbursement from

7

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

third-party payors remain a possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on its financial condition or results of operations.

Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), private insurance organizations, employers and patients. Management recognizes that revenues and receivables from government agencies are significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies. Concentration of credit risk with respect to other payors is limited because of the large number of such payors.

The Company recognizes that final reimbursement of accounts receivable is subject to final approval by each third-party payor. However, because the Company has contracts with its third-party payors and also verifies insurance coverage of the patient before medical services are rendered, the amounts that are pending approval from third-party payors are not considered significant. Amounts are classified outside of self-pay if the Company has an agreement with the third-party payor or has verified a patient’s coverage prior to services rendered. The Company's policy is to collect co-payments and deductibles prior to providing medical services. Patient services of the Company are primarily non-emergency, which allows the surgical facilities to control the procedures for which third-party reimbursement is sought and obtained. The Company does not require collateral from self-pay patients.

The Company's collection policies and procedures are based on the type of payor, size of claim and estimated collection percentage for each patient account. The Company analyzes accounts receivable at each of its surgical facilities to ensure the proper collection and aged category. Collection efforts include direct contact with third-party payors or patients, written correspondence and the use of legal or collection agency assistance, as required.

Income Taxes

The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If a carryforward exists, the Company makes a determination as to whether the carryforward will be utilized in the future. A valuation allowance is established for certain carryforwards when their recoverability is deemed to be uncertain. The carrying value of the net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If our expectations for future operating results on a consolidated basis or at the state jurisdiction level vary from actual results due to changes in health care regulations, general economic conditions, or other factors, we may need to adjust the valuation allowance, for all or a portion of our deferred tax assets. Our income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in our valuation allowance in the period when the change in circumstances occurs. These changes could have a significant impact on our future earnings.

The Company and certain of its subsidiaries file a consolidated federal income tax return. The partnerships, limited liability companies, and certain non-consolidated physician practice corporations also file separate income tax returns. The Company's allocable portion of each partnership's and limited liability company's income or loss is included in taxable income of the Company. The remaining income or loss of each partnership and limited liability company is allocated to the other owners.

The Company's effective tax rate was 400.0% for the three months ended March 31, 2023 compared to 2.9% for the three months ended March 31, 2022. For the three months ended March 31, 2023, the effective tax rate differed from the federal corporate tax rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and a discrete tax benefit of $1.8 million related to the vesting of restricted stock awards. For the three months ended March 31, 2022, the effective tax rate differed from 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and discrete tax benefits of (a) $4.6 million related to the vesting of restricted stock awards, (b) $1.8 million attributable to non-recurring earnings’ impact on the Company’s valuation allowance, and (c) $1.0 million related to entity divestitures. Based upon the application of interim accounting guidance, the tax rate as a percentage of net income after income attributable to non-controlling interests will vary based upon the relative net income from period to period.

Goodwill

Goodwill represents the excess of the fair value of the consideration provided in an acquisition plus the fair value of any non-controlling interests over the fair value of net assets acquired and is not amortized. Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries. A summary of the Company's acquisitions and disposals for the three months ended March 31, 2023 is included in Note 2. "Acquisitions and Disposals."

8

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A summary of activity related to goodwill for the three months ended March 31, 2023 is as follows (in millions):

Balance at December 31, 2022	$	4,137.1
Acquisitions, including post acquisition adjustments	91.3
Disposals	(11.1)
Balance at March 31, 2023	$	4,217.3

A detailed evaluation of potential impairment indicators was performed as of March 31, 2023, which specifically considered recent increases in interest rates, inflation risk and market volatility. On the basis of available evidence as of March 31, 2023, no indicators of impairment were identified. Future estimates of fair value could be adversely affected if the actual outcome of one or more of the Company's assumptions changes materially in the future, including a material decline in the Company’s stock price and the fair value of its long-term debt, lower than expected surgical case volumes, higher market interest rates or increased operating costs. Such changes impacting the calculation of fair value could result in a material impairment charge in the future.

Derivative Instruments and Hedging Activities

The Company records all derivatives on the balance sheet at fair value and any financing elements treated as debt instruments are recorded at amortized cost. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain risks even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

The Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Non-Controlling Interests—Redeemable

Each partnership and limited liability company through which the Company owns and operates its surgical facilities is governed by a partnership or operating agreement, respectively. In certain circumstances, the applicable partnership or operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physician limited partners’ or physician minority members’, as applicable, ownership if certain adverse regulatory events occur, such as it becoming illegal for the physician(s) to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility. The non-controlling interests—redeemable are reported outside of stockholders' equity in the condensed consolidated balance sheets.

A summary of activity related to non-controlling interests—redeemable is as follows (in millions):

	Three Months Ended March 31,
	2023		2022
Balance at beginning of period	$	342.0	$	330.2
Net income attributable to non-controlling interests—redeemable	7.8		10.6
Acquisition of shares of non-controlling interests, net—redeemable	7.7		12.3
Distributions to non-controlling interest—redeemable holders	(11.7)		(11.6)
Balance at end of period	$	345.8	$	341.5

Medicare Accelerated Payments and Deferred Governmental Grants

The Company received grant funds distributed under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and other governmental assistance programs. The recognition of amounts received is conditioned upon attestation with terms and conditions that funds will be used for COVID-19 related healthcare expenses or lost revenues. The Company estimates $1.1 million and $1.2 million of grant funds received qualified for recognition as a reduction in operating expenses for the three months ended March 31, 2023 and 2022, respectively. There were no remaining unrecognized grant funds as of March 31, 2023. As of December 31, 2022 approximately $3 million of unrecognized grant funds received was reflected as a component of other current liabilities within the condensed consolidated balance sheets.

The Company received accelerated payments under the Medicare Accelerated and Advance Payment Program. The payments received were deferred and included in the condensed consolidated balance sheets. As of March 31, 2023 and December 31, 2022, the remaining deferred accelerated payments was minimal. During the three months ended March 31, 2022, approximately $18 million was repaid in

9

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

accordance with the terms of the program. These repayments are included as a component of the change in Medicare accelerated payments and deferred government grants in the condensed consolidated statements of cash flows.

The Company’s accounting policies for relief received under the CARES Act and other governmental assistance programs, including the recognition of grant funds, is unchanged from the policies described in Note 1 to the Company’s consolidated financial statements included in the 2022 Annual Report on Form 10-K.

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. The Company uses fair value measurements based on inputs classified into the following hierarchy:

•Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These may include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, depending on the nature of the item being valued.

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, restricted invested assets and accounts payable approximate their fair values under Level 3 calculations.

A summary of the carrying amounts and estimated fair values of the Company's long-term debt follows (in millions):

	Carrying Amount				Fair Value
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Senior secured term loan	$	1,370.1	$	1,370.0	$	1,353.0	$	1,359.7
6.750% senior unsecured notes due 2025	$	185.0	$	185.0	$	181.5	$	183.4
10.000% senior unsecured notes due 2027	$	320.0	$	320.0	$	326.4	$	326.8

The fair values in the table above were based on Level 2 inputs using quoted prices for identical liabilities in inactive markets. The carrying amounts related to the Company's other long-term debt obligations, including finance lease obligations, approximate their fair values based on Level 3 inputs.

Variable Interest Entities

The condensed consolidated financial statements include the accounts of variable interest entities ("VIE") in which the Company is the primary beneficiary under the provisions of the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification 810, "Consolidation". The Company has the power to direct the activities that most significantly impact a VIE's economic performance. Additionally, the Company would absorb the majority of the expected losses from any of these entities should such expected losses occur. As of March 31, 2023, the Company's consolidated VIEs include seven surgical facilities and five physician practices.

The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 were $69.9 million and $64.9 million, respectively, and the total liabilities of the consolidated VIEs were $44.5 million and $40.9 million, respectively.

2. Acquisitions and Disposals

Acquisitions

During the three months ended March 31, 2023:

•The Company acquired a controlling interest in a surgical facility and a physician practice for aggregate cash consideration of $16.2 million, net of cash acquired, and non-cash consideration of $1.3 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities. In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $12.0 million and goodwill of $25.7 million.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

•The Company acquired a controlling interest in two surgical facilities which were previously accounted for as equity method investments for cash consideration of $24.5 million, net of cash acquired. As a result of these transactions, the Company obtained control of the previously non-controlled surgical facilities, resulting in the consolidation of the previously non-consolidated entities. The previously held non-controlling were remeasured and recorded at fair value as of the dates of the transactions. The fair value measurement utilizes Level 3 inputs, which includes unobservable data. The acquisition date fair value of the previously held non-controlling interests was $8.3 million. As a result of stepping up its ownership interest, the Company recognized a loss of $2.9 million included in net loss (gain) on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the three months ended March 31, 2023. The net loss was determined based on the difference between the fair value of the Company's previously held non-controlling interests in the entities and the carrying values immediately prior to the transactions. In connection with the acquisitions, the Company preliminarily recognized non-controlling interests of $34.2 million and goodwill of $65.6 million.

•The Company acquired non-controlling interests in an existing surgical facility and an in-development de novo surgical facility for an aggregate cash purchase price of $12.4 million, of which $2.8 million was deferred and will be paid in April 2023. The non-controlling interests were accounted for as equity method investments and recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets. In April 2023, the Company obtained control of an existing non-controlled surgical facility due to an amendment to the facility operating agreement, resulting in the consolidation of the previously non-consolidated entity.

During the three months ended March 31, 2022, the Company acquired a controlling interest in two surgical facilities, one of which was merged into an existing surgical facility, for aggregate cash consideration of $31.1 million, net of cash acquired, and non-cash consideration of $2.6 million. In connection with the acquisitions, the Company preliminarily recognized non-controlling interests of $10.6 million and goodwill of $42.7 million. During the three months ended March 31, 2023, no significant changes were made to the purchase price allocation of assets and liabilities, existing at the date of acquisition, related to individual acquisitions completed in 2022.

Disposals

During the three months ended March 31, 2023, the Company sold its interests in a surgical facility for a cash sales price of $8.8 million, a portion of which was held in escrow pursuant to the purchase agreement. In connection with the sale, the Company recognized a pre-tax gain of $0.2 million included in net loss (gain) on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the three months ended March 31, 2023.

During the three months ended March 31, 2022:

•The Company sold its interests in a surgical facility, which was previously accounted for as an equity method investment, for net cash proceeds of $11.5 million, and recognized a pre-tax loss of $0.4 million included in loss (gain) on disposals and consolidations, net in the condensed consolidated statements of operations for the three months ended March 31, 2022.

•The Company contributed its interests in two surgical facilities as non-cash consideration for non-controlling interests in two new separate entities. As a result of these transactions, the Company lost control of the previously controlled surgical facilities but retains a non-controlling interest in each, resulting in the deconsolidation of the previously consolidated entities. The remaining non-controlling interests were accounted for as equity method investments, and initially measured and recorded at fair value as of the dates of the transactions. The fair value measurement utilizes Level 3 inputs, which includes unobservable data, to measure the fair value of the retained non-controlling interests. The fair value determination was based on a combination of multiple valuation methods, which included discounted cash flow and market value approach, which incorporates estimates of future earnings and market valuation multiples for certain guideline companies. The fair value of the investments of $9.8 million was recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets. Further, based on the valuation, the transactions resulted in a pretax net loss on deconsolidations of $5.6 million, which is included in net loss (gain) on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2022. The gains were determined based on the difference between the fair value of the Company's retained interests in the entities and the carrying values of both the tangible and intangible assets of the entities immediately prior to the transactions.

11

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Long-Term Debt

A summary of long-term debt follows (in millions):

	March 31, 2023		December 31, 2022
Senior secured term loan (1)	$	1,370.1	$	1,370.0
6.750% senior unsecured notes due 2025	185.0		185.0
10.000% senior unsecured notes due 2027	320.0		320.0
Notes payable and other secured loans	174.9		171.3
Finance lease obligations	553.5		585.7
Less: unamortized debt issuance costs and discounts	(9.7)		(10.2)
Total debt	2,593.8		2,621.8
Less: Current maturities	62.9		62.8
Total long-term debt	$	2,530.9	$	2,559.0

(1)Includes unamortized fair value discount of $2.0 million and $2.1 million as of March 31, 2023 and December 31, 2022, respectively.

Revolving Credit Facility

On January 13, 2023, the Company entered into an amendment to the credit agreement governing its revolving credit facility (the "Revolver"), which amended and supplemented the credit agreement, dated as of August 31, 2017 (the "Credit Agreement"), to provide a $203.8 million increase in the outstanding commitments under the Revolver.

As of March 31, 2023, the Company's availability on its Revolver was $545.9 million (including outstanding letters of credit of $7.9 million). There were no outstanding borrowings under the Revolver as of both March 31, 2023 and December 31, 2022.

4. Leases

The Company's operating leases are primarily for real estate, including medical office buildings, and corporate and other administrative offices. The Company's finance leases are primarily for medical equipment and information technology and telecommunications assets.

The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets (in millions):

	Classification in Consolidated Balance Sheets	March 31, 2023		December 31, 2022
Assets:
Operating lease assets	Right-of-use operating lease assets	$	274.0	$	279.1
Finance lease assets	Property and equipment, net of accumulated depreciation	490.6		529.6
Total leased assets		$	764.6	$	808.7
Liabilities:
Operating lease liabilities:
Current	Other current liabilities	$	38.0	$	36.5
Long-term	Right-of-use operating lease liabilities	268.8		271.4
Total operating lease liabilities		306.8		307.9
Finance lease liabilities:
Current	Current maturities of long-term debt	21.4		20.9
Long-term	Long-term debt, less current maturities	532.1		564.8
Total finance lease liabilities		553.5		585.7
Total lease liabilities		$	860.3	$	893.6

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SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the components of the Company's lease expense included in the condensed consolidated statement of operations (in millions):

	Three Months Ended March 31,
	2023		2022
Operating lease costs	$	16.4	$	16.1
Finance lease costs:
Amortization of leased assets	9.4		9.2
Interest on lease liabilities	12.3		9.9
Total finance lease costs	21.7		19.1
Variable and short-term lease costs	5.2		4.4
Total lease costs	$	43.3	$	39.6

The following table presents supplemental cash flow information (dollars in millions):

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	16.1	$	15.6
Operating cash outflows from finance leases	$	11.7	$	9.8
Financing cash outflows from finance leases	$	6.4	$	6.0
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	8.9	$	22.0
Finance leases	$	15.4	$	89.3

5. Derivatives and Hedging Activities

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy. During 2023 and 2022, such derivatives have been used to hedge the variable cash flows associated with existing variable-rate debt.

The key terms of interest rate swaps and interest rate caps outstanding are presented below:

		March 31, 2023			December 31, 2022
Description	Effective Date	Notional Amount (in millions)		Status	Notional Amount (in millions)		Status	Maturity Date
Pay-fixed swap	May 7, 2021	$	435.0	Active	$	435.0	Active	March 31, 2025
Pay-fixed swap	May 7, 2021	330.0		Active	330.0		Active	March 31, 2025
Pay-fixed swap	May 7, 2021	435.0		Active	435.0		Active	March 31, 2025
Interest rate cap	September 30, 2021	157.2		Active	159.1		Active	March 31, 2025
Interest rate cap	September 30, 2021	8.9		Active	159.1		Active	March 31, 2025
Pay-fixed swap	November 30, 2018	165.0		Active	165.0		Active	November 30, 2023
Pay-fixed swap	November 30, 2018	120.0		Active	120.0		Active	November 30, 2023
Pay-fixed swap	June 28, 2019	150.0		Active	150.0		Active	November 30, 2023
Receive-fixed swap	April 30, 2021	(165.0)		Active	(165.0)		Active	November 30, 2023
Receive-fixed swap	April 30, 2021	(120.0)		Active	(120.0)		Active	November 30, 2023
Receive-fixed swap	April 30, 2021	(150.0)		Active	(150.0)		Active	November 30, 2023
		$	1,366.1		$	1,518.2

As of March 31, 2023, the Company had nine interest rate swaps with a total net notional amount of $1.2 billion. Of the nine interest rate swaps, three are pay-fixed, receive 1-Month LIBOR (subject to a minimum of 0.75%) interest rate swaps designated in cash flow hedging relationships with a total notional amount of $1.2 billion and a termination date of March 31, 2025. The remaining six interest rate

13

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

swaps are undesignated and consist of three pay-fixed, receive 1-Month LIBOR (subject to a minimum of 1.00%) interest rate swaps and three pay 1-Month LIBOR (subject to a minimum of 1.00%), receive-fixed interest rate swaps with a termination date of November 30, 2023. The pay-floating, receive-fixed swaps are designed to economically offset the undesignated pay-fixed, receive-floating swaps.

As of March 31, 2023, the Company had two interest rate caps designated in cash flow hedging relationships with a total notional amount of $166.1 million. The interest rate caps each have a termination date of March 31, 2025. During the three months ended March 31, 2023, the Company partially terminated a previously undesignated portion of one of its interest rate caps. In connection with the termination, the Company received $8.6 million, which is included as a component of operating activities in the condensed consolidated statements of cash flows for the three months ended March 31, 2023.

The pay-fixed, receive floating interest rate swaps did not meet the requirements to be considered derivatives in their entirety as a result of the financing component. Accordingly, the swaps are considered hybrid instruments, consisting of a financing element treated as a debt instrument and an embedded at-market derivative that was designated as a cash flow hedge.

Within the Company’s condensed consolidated balance sheets, the financing elements treated as debt instruments described above are carried at amortized cost and the embedded at-market derivatives and the undesignated swaps are recorded at fair value. The cash flows related to the portion treated as debt are classified as financing activities in the condensed consolidated statements of cash flows while the portion treated as an at-market derivative are classified as operating activities. Cash settlements related to the undesignated swaps will offset and are classified as operating activities in the condensed consolidated cash flows. Within the Company’s condensed consolidated balance sheets, the interest rate caps, including the undesignated portion, are recorded at fair value. The cash flows related to the interest rate caps, including the undesignated portion, are classified as operating activities in the condensed consolidated statements of cash flows.

Our interest rate swap agreements, excluding the portion treated as debt, are recognized at fair value in the condensed consolidated balance sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy. The fair value of the interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The interest rate caps are classified using Level 2 inputs within the fair value hierarchy.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income ("OCI") and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings, as documented at hedge inception in accordance with the Company’s accounting policy election. Amounts reported in accumulated OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Over the next 12 months, the Company estimates that an additional $33.6 million will be reclassified as a decrease to interest expense.

The following table presents the fair values of our derivatives and their location on the condensed consolidated balance sheets (in millions):

		March 31, 2023				December 31, 2022
	Location	Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments
Interest rate caps	Other long-term assets	$	—	$	—	$	9.0	$	—
Interest rate swaps	Other long-term assets	6.2		—		8.5		—
Interest rate swaps	Other long-term liabilities	—		6.2		—		8.5
Derivatives in cash flow hedging relationships
Interest rate caps	Other long-term assets	8.4		—		10.4		—
Interest rate swaps	Other long-term assets	70.6		—		85.5		—
Interest rate swaps	Other long-term liabilities (1)	—		28.3		—		31.9
Total		$	85.2	$	34.5	$	113.4	$	40.4

(1)The balance is related to the financing component of the pay-fixed, receive floating interest rate swaps.

14

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and condensed consolidated statement of operations (in millions):

		Three Months Ended March 31,
	Location	2023		2022
Derivatives not designated as hedging instruments
Loss recognized in income	Other income, net	$	0.6	$	0.1
Derivatives in cash flow hedging relationships
(Loss) gain recognized in OCI (effective portion)		$	(5.2)	$	50.4
(Gain) loss reclassified from accumulated OCI into income (effective portion) (1)	Interest expense, net	$	(6.1)	$	6.4

(1)Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $5.4 million and $5.3 million for the three months ended March 31, 2023 and 2022, respectively.

6. Earnings Per Share

Basic and diluted earnings per share are calculated based on the weighted-average number of shares outstanding in each period and dilutive stock options, unvested shares and warrants, to the extent such securities exist and have a dilutive effect on earnings per share. A reconciliation of the numerator and denominator of basic and diluted earnings per share follows (dollars in millions, except per share amounts; shares in thousands):

	Three Months Ended March 31,
	2023		2022
Numerator:
Net (loss) income attributable to Surgery Partners, Inc.	$	(24.9)	$	12.2
Denominator:
Weighted average shares outstanding- basic	125,206		87,995
Weighted average shares outstanding- diluted (1)	125,206		90,272
(Loss) income per share:
Basic	$	(0.20)	$	0.14
Diluted (1)	$	(0.20)	$	0.14
Dilutive securities outstanding not included in the computation of (loss) income per share as their effect is antidilutive:
Stock options	1,338		1,634
Restricted shares	67		643

(1)The impact of potentially dilutive securities for the three months ended March 31, 2023, was not considered because the effect would be anti-dilutive.

7. Other Current Liabilities

A summary of other current liabilities is as follows (in millions):

	March 31, 2023		December 31, 2022
Right-of-use operating lease liabilities	$	38.0	$	36.5
Amounts due to patients and payors	30.0		31.9
Cost report liabilities	24.2		23.5
Interest payable	23.7		19.4
Acquisition escrow	17.4		28.8
Accrued expenses and other	66.7		70.0
Total	$	200.0	$	210.1

15

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Commitments and Contingencies

Professional, General and Workers' Compensation Liability Risks

The Company is subject to claims and legal actions in the ordinary course of business, including claims relating to patient treatment, employment practices and personal injuries. The Company maintains professional, general and workers' compensation liability insurance in excess of self-insured retentions through third party commercial insurance carriers. Although management believes the coverage is sufficient for the Company's operations, some claims may potentially exceed the scope of coverage in effect. Plaintiffs in these matters may request punitive or other damages that may not be covered by insurance. The Company is not aware of any such proceedings that are reasonably possible to have a material adverse effect on the Company's business, financial position, results of operations or liquidity. Total professional, general and workers' compensation claim liabilities as of March 31, 2023 and December 31, 2022 were $22.1 million and $20.8 million, respectively. Expected insurance recoveries of $12.7 million as of both March 31, 2023 and December 31, 2022 are included as a component of other current assets and other long-term assets in the condensed consolidated balance sheets.

Laws and Regulations

Laws and regulations governing the Company's business, including those relating to the Medicare and Medicaid programs, are complex and subject to interpretation. These laws and regulations govern every aspect of how the Company's surgical facilities conduct their operations, from licensing requirements to how and whether the Company's facilities may receive payments pursuant to the Medicare and Medicaid programs. Compliance with such laws and regulations can be subject to future government agency review and interpretation as well as legislative changes to such laws. Noncompliance with such laws and regulations may subject the Company to significant regulatory sanctions including fines, penalties, and exclusion from the Medicare, Medicaid and other federal health care programs. From time to time, governmental regulatory agencies will conduct inquiries of the Company's practices, including, but not limited to, the Company's compliance with federal and state fraud and abuse laws, billing practices and relationships with physicians.

Stockholder Litigation

On December 4, 2017, a purported Company stockholder filed an action in the Delaware Court of Chancery (the "Delaware Action"). That action is captioned Witmer v. H.I.G. Capital, L.L.C., et al., C.A. No. 2017-0862. The plaintiff in the Delaware Action asserted claims against (i) certain current and former members of the Company’s Board of Directors (together, the "Directors"); (ii) H.I.G. Capital, LLC and certain of its affiliates (collectively, "H.I.G."); and (iii) Bain Capital Private Equity, L.P. and certain of its affiliates (collectively, "Bain Capital" and, together with the Directors and H.I.G., the "Defendants"). The parties to the Delaware Action negotiated a final stipulation of settlement (the “Settlement Stipulation”), which governs the terms of the settlement of the Delaware Action, and which they filed with the Court of Chancery on November 22, 2021. On February 11, 2022, the Court of Chancery approved the settlement of the Delaware Action as memorialized in the Settlement Stipulation. That decision became final and non-appealable on March 14, 2022. The case is now closed. Pursuant to the settlement, the Company received $32.8 million in March 2022, which was included in litigation settlement in the condensed consolidated statements of operations for the three months ended March 31, 2022.

Acquired Facilities

The Company, through its wholly-owned subsidiaries or controlled partnerships and limited liability companies, has acquired and will continue to acquire surgical facilities with prior operating histories. Such facilities may have unknown or contingent liabilities, including liabilities for failure to comply with health care laws and regulations, such as billing and reimbursement laws and regulations, the federal physician self-referral law, or Stark Law, the statute commonly known as the federal Anti-Kickback statute, the federal False Claims Act, and similar fraud and abuse laws. Although the Company attempts to assure that no such liabilities exist, obtain indemnification from prospective sellers covering such matters and institute policies designed to conform centers to its standards following completion of acquisitions, there can be no assurance that the Company will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. There can be no assurance that any such matter will be covered by indemnification or, if covered, that the liability sustained will not exceed contractual limits or the financial capacity of the indemnifying party.

The Company cannot predict whether federal or state statutory or regulatory provisions will be enacted that would prohibit or otherwise regulate relationships which the Company has established or may establish with other health care providers or have materially adverse effects on its business or revenues arising from such future actions. Management believes, however, that it will be able to adjust the Company's operations so as to be in compliance with any statutory or regulatory provision as may be applicable.

Potential Physician Investor Liability

A majority of the physician investors in the partnerships and limited liability companies which operate the Company's surgical facilities carry general and professional liability insurance on a claims-made basis. Each partnership or limited liability company may, however, be liable for damages to persons or property arising from occurrences at the surgical facilities. Although the various physician investors and other surgeons generally are required to obtain general and professional liability insurance with tail coverage that extends beyond the period of any claims-made policies, such individuals may not be able to obtain coverage in amounts sufficient to cover all potential liability. Since most insurance policies contain exclusions, the physician investors will not be insured against all possible occurrences. In the event of an uninsured or underinsured loss, the value of an investment in the partnership interests or limited liability company membership units and the amount of distributions could be adversely affected.

16

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Segment Reporting

The Company currently operates in two major lines of business that are also the Company's reportable operating segments - the operation of surgical facilities and the operation of ancillary services. The Surgical Facility Services segment includes the operation of ASCs, surgical hospitals and anesthesia services. The Ancillary Services segment consists of multi-specialty physician practices. The "All other" line item primarily consists of the Company's corporate general and administrative functions.

The following tables present financial information for each reportable segment (in millions):

	Three Months Ended March 31,
	2023		2022
Revenues:
Surgical Facility Services	$	649.0	$	578.8
Ancillary Services	17.2		17.4
Total	$	666.2	$	596.2
Adjusted EBITDA:
Surgical Facility Services	$	118.8	$	101.0
Ancillary Services	(1.4)		0.1
All other	(27.3)		(24.0)
Total	$	90.1	$	77.1
Reconciliation of Adjusted EBITDA:
(Loss) income before income taxes	$	(0.4)	$	44.1
Net income attributable to non-controlling interests	(26.1)		(30.6)
Interest expense, net	46.8		56.3
Depreciation and amortization	33.7		27.4
Equity-based compensation expense	4.2		3.7
Transaction, integration and acquisition costs (1)	12.8		7.1
Net loss (gain) on disposals, consolidations and deconsolidations (2)	10.5		(0.1)
Litigation settlements and regulatory change impact (3)	8.0		(30.8)
Undesignated derivative activity	0.6		—
Adjusted EBITDA	$	90.1	$	77.1

(1)This amount includes transaction and integration costs of $12.5 million and $7.1 million for the three months ended March 31, 2023 and 2022, respectively. This amount further includes start-up costs related to de novo surgical facilities of $0.3 million for the three months ended March 31, 2023, with no comparable costs for the three months ended March 31, 2022.

(2)Includes an $8.5 million loss for the three months ended March 31, 2023 related to a surgical facility with a book value of the asset group in excess of the fair value based on a letter of intent.

(3)This amount includes a litigation settlement loss of $3.0 million and a gain of $32.8 million for the three months ended March 31, 2023 and 2022, respectively. This amount also includes other litigation costs of $0.6 million and $2.0 million for the three months ended March 31, 2023 and 2022, respectively. Additionally, the three months ended March 31, 2023, includes $4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection.

	March 31, 2023		December 31, 2022
Assets:
Surgical Facility Services	$	6,049.2	$	6,001.1
Ancillary Services	41.4		41.7
All other	552.7		639.3
Total assets	$	6,643.3	$	6,682.1

17

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Cash purchases of property and equipment:
Surgical Facility Services	$	23.8	$	17.7
Ancillary Services	0.5		0.2
All other	—		0.3
Total cash purchases of property and equipment	$	24.3	$	18.2

10. Subsequent Events

In April 2023, the Company completed the sale of two surgical facilities for cash proceeds of $23.0 million.

In April 2023, the Company acquired non-controlling interests in an in-development de novo surgical facility for a purchase price of $6.1 million.

18

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report and our 2022 Annual Report on Form 10-K. Unless the context otherwise indicates, the terms "Surgery Partners," "we," "us," "our" or the "Company," as used herein, refer to Surgery Partners, Inc. and its subsidiaries. Unless the context implies otherwise, the term “affiliates” means direct and indirect subsidiaries of Surgery Partners, Inc. and partnerships and joint ventures in which such subsidiaries are partners. The terms “facilities” or “hospitals” refer to entities owned and operated by affiliates of Surgery Partners, Inc. and the term “employees” refers to employees of affiliates of Surgery Partners, Inc.

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements, which are based on our current expectations, estimates and assumptions about future events. All statements other than statements of current or historical fact contained in this report are forward-looking statements. These statements include, but are not limited to, statements regarding our future financial position, business strategy, budgets, effective tax rate, projected costs and plans and objectives of management for future operations. The words "projections," "believe," "continue," "drive," "estimate," "expect," "intend," "may," "plan," "will," "could," "would" and similar expressions are generally intended to identify forward-looking statements. These statements involve risks, uncertainties and other factors that may cause actual results to differ from the expectations expressed in the statements. Many of these factors are beyond our ability to control or predict. These factors include, without limitation, reductions in payments from government health care programs and private insurance payors, such as health maintenance organizations, preferred provider organizations, and other managed care organizations and employers; our ability to contract with private insurance payors; changes in our payor mix or surgical case mix; failure to maintain or develop relationships with physicians on beneficial or favorable terms, or at all; the impact of payor controls designed to reduce the number of surgical procedures; our efforts to integrate operations of acquired businesses and surgical facilities, attract new physician partners, or acquire additional surgical facilities; supply chain issues, including shortages or quality control issues with surgery-related products, equipment and medical supplies; competition for physicians, nurses, strategic relationships, acquisitions and managed care contracts; our ability to attract and retain qualified health care professionals; our ability to enforce non-compete restrictions against our physicians; our ability to manage material liabilities whether known or unknown incurred as a result of acquiring surgical facilities; the impact of future legislation and other health care regulatory reform actions, and the effect of that legislation and other regulatory actions on our business; our ability to comply with current health care laws and regulations; the outcome of legal and regulatory proceedings that have been or may be brought against us; changes in the regulatory, economic and other conditions of the states where our surgical facilities are located; our indebtedness; the social and economic impact of a pandemic, epidemic or outbreak of a contagious disease, such as COVID-19, on our business; and the risks and uncertainties set forth under the heading "Risk Factors" in our 2022 Annual Report on Form 10-K and discussed from time to time in our reports filed with the SEC.

Considering these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements. When you consider these forward-looking statements, you should keep in mind these risk factors and other cautionary statements in this report.

These forward-looking statements speak only as of the date made. Other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.

Executive Overview

As of March 31, 2023, we owned or operated, primarily in partnership with physicians, a portfolio of 145 surgical facilities comprised of 127 ASCs and 18 surgical hospitals across 31 states. We owned a majority interest in 92 of these surgical facilities and consolidated 118 of these facilities for financial reporting purposes.

Total revenues for the first quarter of 2023 increased 11.7% to $666.2 million from $596.2 million for the first quarter of 2022. Days adjusted same-facility revenues for the first quarter of 2023 increased 10.3% from the same period last year, with a 4.8% increase in revenue per case and a 5.3% increase in same-facility cases. Additionally, for the first quarter of 2023, Adjusted EBITDA increased 16.9% to $90.1 million compared to $77.1 million for the same period last year. For the first quarter of 2023, the Company’s net loss attributable to Surgery Partners, Inc. was $24.9 million compared to net income of $12.2 million for the first quarter of 2022. A reconciliation of non-GAAP financial measures appears below under "Certain Non-GAAP Measures."

We continue to focus on improving our same-facility performance, selectively acquiring established facilities, developing new facilities and other portfolio management initiatives. During the first quarter of 2023 we completed the following:

•We acquired controlling interests in three surgical facilities, two of which were previously accounted for as equity method investments, and a physician practice for aggregate cash consideration of $40.7 million, net of cash acquired and non-cash consideration of $1.3 million.

•We acquired non-controlling interests in an existing surgical facility and an in-development de novo surgical facility for an aggregate cash purchase price of $12.4 million, of which $2.8 million was deferred and was paid in April 2023.

•We sold our interests in a surgical facility for net cash proceeds of $8.8 million, a portion of which will be held in escrow pursuant to the purchase agreement.

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We had cash and cash equivalents of $245.5 million and $545.9 million of borrowing capacity under our revolving credit facility at March 31, 2023. Operating cash inflows were $74.5 million in the first quarter of 2023, compared to $79.8 million in the prior year period. Net operating cash inflows, including operating cash flows less distributions to non-controlling interests, were $32.6 million for the first quarter of 2023, compared to $43.6 million for the first quarter of 2022.

Revenues

Our revenues consist of patient service revenues and other service revenues. Patient service revenues consist of revenue from our surgical facility services and ancillary services segments. Specifically, patient service revenues include fees for surgical or diagnostic procedures performed at surgical facilities that we consolidate for financial reporting purposes, as well as for patient visits to our physician practices, anesthesia services, pharmacy services and diagnostic screens ordered by our physicians. Other service revenues include management and administrative service fees derived from our non-consolidated facilities that we account for under the equity method, management of surgical facilities and physician practices in which we do not own an interest and management services we provide to physician practices for which we are not required to provide capital or additional assets.

The following table summarizes our revenues by service type as a percentage of total revenues for the periods indicated:

	Three Months Ended March 31,
	2023		2022
Patient service revenues:
Surgical facilities revenues	96.0	%	95.7	%
Ancillary services revenues	2.5	%	2.9	%
Total patient service revenues	98.5	%	98.6	%
Other service revenues	1.5	%	1.4	%
Total revenues	100.0	%	100.0	%

Payor Mix

The following table sets forth by type of payor the percentage of our patient service revenues generated at the surgical facilities which we consolidate for financial reporting purposes in the periods indicated:

	Three Months Ended March 31,
	2023		2022
Private insurance payors	51.1	%	51.1	%
Government payors	43.8	%	42.4	%
Self-pay payors	2.4	%	2.9	%
Other payors (1)	2.7	%	3.6	%
Total	100.0	%	100.0	%

(1)Other is comprised of anesthesia service agreements, automobile liability, letters of protection and other payor types.

Surgical Case Mix

We primarily operate multi-specialty surgical facilities where physicians perform a variety of procedures in various specialties. We believe this diversification helps to protect us from adverse pricing and utilization trends in any individual procedure type and results in greater consistency in our case volume.

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The following table sets forth the percentage of cases in each specialty performed at the surgical facilities which we consolidate for financial reporting purposes for the periods indicated:

	Three Months Ended March 31,
	2023		2022
Orthopedic and pain management	35.7	%	36.8	%
Ophthalmology	24.1	%	24.6	%
Gastrointestinal	23.5	%	22.7	%
General surgery	3.0	%	3.0	%
Other	13.7	%	12.9	%
Total	100.0	%	100.0	%

Critical Accounting Policies

A summary of significant accounting policies is disclosed in our 2022 Annual Report on Form 10-K under the caption “Critical Accounting Policies” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes in the nature of our critical accounting policies or the application of those policies since December 31, 2022.

Results of Operations

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The following table summarizes certain results from the statements of operations for the three months ended March 31, 2023 and 2022 (dollars in millions):

	Three Months Ended March 31,
	2023		2022
Revenues	$	666.2	$	596.2
Operating expenses:
Cost of revenues	532.2		471.4
General and administrative expenses	32.0		29.5
Depreciation and amortization	33.7		27.4
Transaction and integration costs	12.5		7.1
Grant funds	(1.1)		(1.2)
Net loss (gain) on disposals, consolidations and deconsolidations	10.5		(0.1)
Equity in earnings of unconsolidated affiliates	(3.3)		(3.1)
Litigation settlements	3.0		(32.8)
Other expense (income), net	0.3		(2.4)
	619.8		495.8
Operating income	46.4		100.4
Interest expense, net	(46.8)		(56.3)
(Loss) income before income taxes	(0.4)		44.1
Income tax benefit (expense)	1.6		(1.3)
Net income	1.2		42.8
Less: Net income attributable to non-controlling interests	(26.1)		(30.6)
Net (loss) income attributable to Surgery Partners, Inc.	$	(24.9)	$	12.2

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Revenues. Revenues for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 were as follows (dollars in millions):

	Three Months Ended March 31,
	2023		2022
Patient service revenues	$	656.4	$	587.7
Other service revenues	9.8		8.5
Total revenues	$	666.2	$	596.2

Patient service revenues increased 11.7% to $656.4 million for the first quarter of 2023 compared to $587.7 million for the first quarter of 2022. The increase was driven by an 10.3% increase in days adjusted same-facility revenues and acquisitions completed in 2023 and 2022. The increase in days adjusted same-facility revenues was attributable to a 4.8% increase in same-facility revenue per case and a 5.3% increase in same-facility case volumes.

Cost of Revenues. Cost of revenues was $532.2 million for the first quarter of 2023 compared to $471.4 million for the first quarter of 2022. The increase was primarily driven by acquisitions completed since the prior year period. As a percentage of revenues, cost of revenues were 79.9% for the 2023 period and 79.1% for the 2022 period.

General and Administrative Expenses. General and administrative expenses were $32.0 million for the first quarter of 2023 compared to $29.5 million for the first quarter of 2022. As a percentage of revenues, general and administrative expenses were 4.8% for the 2023 period and 4.9% for the 2022 period.

Depreciation and Amortization. Depreciation and amortization expenses were $33.7 million for the first quarter of 2023 compared to $27.4 million for the first quarter of 2022. As a percentage of revenues, depreciation and amortization expenses were 5.1% for the 2023 period compared to 4.6% for the 2022 period.

Transaction and Integration Costs. We incurred $12.5 million of transaction and integration costs for the first quarter of 2023 compared to $7.1 million for the first quarter of 2022. The costs for both periods primarily relate to ongoing development initiatives and the integration of acquisitions.

Net Loss (Gain) on Disposals, Consolidations and Deconsolidations. The net loss on disposals, consolidations and deconsolidations in the first quarter of 2023 was partially attributable to activity discussed in Note. 2. "Acquisitions and Disposals" to our condensed consolidated financial statements included elsewhere in this report. The remaining net loss was attributable to disposals of other long-lived assets.

Litigation Settlements. Litigation settlements in first quarter of 2022 was primarily attributable to the resolution of the stockholder litigation matter, as discussed in Note 8. "Commitments and Contingencies" to our condensed consolidated financial statements included elsewhere in this report.

Interest Expense, Net. As a percentage of revenues, interest expense, net decreased to 7.0% for the 2023 period compared to 9.4% for the 2022 period. The decrease is attributable to the pay down of certain long-term debt in the fourth quarter of 2022.

Income Tax Benefit (Expense). The income tax benefit was $1.6 million for the three months ended March 31, 2023 compared to income tax expense of $1.3 million for the three months ended March 31, 2022. The effective tax rate was 400.0% for the three months ended March 31, 2023 compared to 2.9% for the three months ended March 31, 2022. For the three months ended March 31, 2023, the effective tax rate differed from 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and a discrete tax benefit of $1.8 million related to the vesting of restricted stock awards. For the three months ended March 31, 2022, the effective tax rate differed from 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and discrete tax benefits of (a) $4.6 million related to the vesting of restricted stock awards, (b) $1.8 million attributable to non-recurring earnings’ impact on the Company’s valuation allowance, and (c) $1.0 million related to entity divestitures. Based upon the application of interim accounting guidance, the tax rate as a percentage of net income after income attributable to non-controlling interests will vary based upon the relative net income from period to period.

Net Income Attributable to Non-Controlling Interests. As a percentage of revenues, net income attributable to non-controlling interests was 3.9% for the 2023 period and 5.1% for the 2022 period.

22

Liquidity and Capital Resources

Cash and cash equivalents were $245.5 million at March 31, 2023 compared to $282.9 million at December 31, 2022.

The primary source of our operating cash flows is the collection of accounts receivable from federal and state agencies (under the Medicare and Medicaid programs), private insurance companies and individuals. Our cash flows provided by operating activities was $74.5 million for the first quarter of 2023 compared to $79.8 million in the first quarter of 2022. The $5.3 million decrease was primarily driven by operating cash flows in the first quarter of 2022 that did not repeat in the current year, including the receipt of stockholder litigation proceeds of $32.8 million partially offset by repayments of $18.0 million of Medicare advanced payments provided through the CARES Act.

Net cash used in investing activities during the first quarter of 2023 was $70.7 million compared to $47.1 million for the first quarter of 2022. Key factors contributing to the change include:

•An aggregate increase in payments for acquisitions (net of cash acquired) and purchases of equity method investments of $19.2 million;

•An aggregate decrease of $3.5 million in proceeds from sales of facilities and equity method investments;

•An increase in purchases of property and equipment of $6.1 million;

•A decrease in cash used of $5.2 million related to other investing activities.

Net cash used in financing activities during the first quarter of 2023 was $41.2 million compared to cash used in financing activities of $43.7 million for the first quarter of 2022. Key factors contributing to the change include:

• An increase of $4.0 million in borrowings of long-term debt;

•An increase in proceeds related to ownership transactions with non-controlling interest holders of $8.2 million, partially offset by an increase in distributions to non-controlling interest holders of an $5.7 million;

•An increase in cash used of $3.8 million related to other financing activities.

Capital Resources

Net working capital was approximately $393.8 million at March 31, 2023 compared to $427.6 million at December 31, 2022. The decrease is primarily due to a decrease in cash, as discussed above, partially offset by a decrease in accounts payable.

In addition to cash flows from operations and available cash, other sources of capital include amounts available on our Revolver as well as anticipated continued access to the capital markets.

Material Cash Requirements

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the three months ended March 31, 2023 from those disclosed under “Material Cash Requirements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K.

Summary

Broad economic factors, including recent increases in interest rates, inflation and supply chain risks and market volatility, could negatively affect our payor mix, increase the relative proportion of lower margin services we provide and reduce patient volumes, as well as diminish our ability to collect outstanding receivables. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working capital.

If general economic conditions continue to deteriorate or remain uncertain for an extended period of time, our ability to access capital could be harmed, which could negatively affect our liquidity and ability to repay our outstanding debt.

Based on our current level of operations, we believe cash flows from operations, available cash, available capacity on our Revolver and continued anticipated access to capital markets, will be adequate to meet our short-term (i.e., 12 months) and long-term (beyond 12 months) liquidity needs.

Certain Non-GAAP Measures

Adjusted EBITDA and Adjusted EBITDA excluding grant funds are not measurements of financial performance under GAAP and should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with GAAP. The items excluded from these non-GAAP metrics are significant components in understanding and evaluating our financial performance. We believe such adjustments are appropriate, as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance. Our calculation of Adjusted EBITDA and Adjusted EBITDA excluding grant funds may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA and Adjusted EBITDA excluding grant funds as measures of financial performance. Adjusted EBITDA and Adjusted EBITDA excluding grant funds are key measures used by our management to assess operating performance, make business decisions and allocate resources.

23

The following table reconciles Adjusted EBITDA and Adjusted EBITDA excluding grant funds to (loss) income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited):

	Three Months Ended March 31,
	2023		2022
Condensed Consolidated Statements of Operations Data:
(Loss) income before income taxes	$	(0.4)	$	44.1
Plus (minus):
Net income attributable to non-controlling interests	(26.1)		(30.6)
Interest expense, net	46.8		56.3
Depreciation and amortization	33.7		27.4
Equity-based compensation expense	4.2		3.7
Transaction, integration and acquisition costs (1)	12.8		7.1
Net loss (gain) on disposals, consolidations and deconsolidations	10.5		(0.1)
Litigation settlements and regulatory change impact (2)	8.0		(30.8)
Undesignated derivative activity	0.6		—
Adjusted EBITDA	$	90.1	$	77.1
Less: Impact of grant funds (3)	(1.1)		(1.0)
Adjusted EBITDA excluding grant funds	$	89.0	$	76.1

(1)This amount includes transaction and integration costs of $12.5 million and $7.1 million for the three months ended March 31, 2023 and 2022, respectively. This amount further includes start-up costs related to de novo surgical facilities of $0.3 million for the three months ended March 31, 2023, with no comparable costs for the three months ended March 31, 2022.

(2)This amount includes a litigation settlement loss of $3.0 million and a gain of $32.8 million for the three months ended March 31, 2023 and 2022, respectively. This amount also includes other litigation costs of $0.6 million and $2.0 million for the three months ended March 31, 2023 and 2022, respectively. Additionally, the three months ended March 31, 2023, includes $4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection.

(3)Represents the impact of grant funds recognized, net of amounts attributable to non-controlling interests.

We use Credit Agreement EBITDA as a measure of liquidity and to determine our compliance under certain covenants pursuant to our credit facilities. Credit Agreement EBITDA is determined on a trailing twelve-month basis. We have included it because we believe that it provides investors with additional information about our ability to incur and service debt and make capital expenditures. Credit Agreement EBITDA is not a measurement of liquidity under GAAP and should not be considered in isolation or as a substitute for any other measure calculated in accordance with GAAP. The items excluded from Credit Agreement EBITDA are significant components in understanding and evaluating our liquidity. Our calculation of Credit Agreement EBITDA may not be comparable to similarly titled measures reported by other companies.

When we use the term “Credit Agreement EBITDA,” we are referring to Adjusted EBITDA, as defined above, further adjusted for acquisitions and synergies. These adjustments do not relate to our historical financial performance and instead relate to estimates compiled by our management and calculated in conformance with the definition of “Consolidated EBITDA” used in the credit agreements governing our credit facilities.

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The following table reconciles Credit Agreement EBITDA to cash flows from operating activities, the most directly comparable GAAP financial measure (in millions and unaudited):

	Twelve Months Ended March 31, 2023
Cash flows from operating activities	$	153.5
Plus (minus):
Non-cash interest expense, net	(26.3)
Non-cash lease expense	(35.2)
Deferred income taxes	(19.1)
Equity in earnings of unconsolidated affiliates, net of distributions received	1.1
Other non-cash income	7.5
Changes in operating assets and liabilities, net of acquisitions and divestitures	140.5
Income tax expense	20.4
Net income attributable to non-controlling interests	(137.1)
Interest expense, net	225.4
Transaction, integration and acquisition costs	54.3
Litigation settlements and regulatory change impact	14.1
Hurricane-related impacts	1.5
Undesignated derivative activity	(7.4)
Acquisitions and synergies (1)	92.3
Credit Agreement EBITDA	$	485.5

(1)Represents impact of acquisitions as if each acquisition had occurred on April 1, 2022. Further this includes revenue and cost synergies from other business initiatives and de novo facilities and an adjustment for the effects of adopting the new lease accounting standard, as defined in the credit agreement governing the Senior Secured Credit Facilities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risk primarily from exposure to changes in interest rates based on our financing, investing and cash management activities. We utilize a balanced mix of maturities along with both fixed rate and variable rate debt to manage our exposures to changes in interest rates. Additionally, we periodically enter into interest rate swap and cap agreements to manage our exposure to interest rate fluctuations. Our interest rate swap and cap agreements involve the exchange of fixed and variable rate interest payments between two parties, based on common notional principal amounts and maturity dates. The notional amounts of the interest rate swap and cap agreements represent balances used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the interest rate swap and cap agreements are with creditworthy financial institutions. The interest payments under these agreements are settled on a net basis. These derivatives have been recognized in the financial statements at their respective fair values. Changes in the fair value of these derivatives, which are designated as cash flow hedges, are included in other comprehensive income.

Our variable rate debt instruments are primarily indexed to the prime rate or LIBOR. Without derivatives, interest rate changes would result in gains or losses in the market value of our fixed rate debt portfolio due to differences in market interest rates and the rates at the inception of the debt agreements. Based on our indebtedness and the effectiveness of our interest rate swap and cap agreements at March 31, 2023, we do not expect changes in interest rates to have a material effect on our net earnings or cash flows in 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including the chief executive officer and the chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of March 31, 2023. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective.

25

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

26

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are, from time to time, subject to claims and suits, or threats of claims or suits, relating to our business, including claims for damages for personal injuries, breach of management contracts and employment related claims. In certain of these actions, plaintiffs request payment for damages, including punitive damages, which may not be covered by insurance or may otherwise have a material adverse effect on our business or results of operations. In the opinion of management, we are not currently a party to any proceedings that would have a material adverse effect on our business, financial condition or results of operations.

Item 1A. Risk Factors

There have been no material changes with respect to the risk factors discussed in our 2022 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company did not repurchase any shares of common stock during the three months ended March 31, 2023. At March 31, 2023, the Company continued to have authority to repurchase up to $46.0 million of shares of common stock under its Board-authorized share repurchase program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

No.	Description
10.1	Ninth Amendment to the Credit Agreement, dated as of January 13, 2023, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., the other Guarantors party thereto, Jefferies Finance LLC and the other lenders party thereto (incorporated herein by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K filed March 1, 2023).
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Taxonomy Extension Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL (included in Exhibit 101).

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SURGERY PARTNERS, INC.
By:	/s/ David T. Doherty David T. Doherty Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Date: May 2, 2023

29

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, J. Eric Evans, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Surgery Partners, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By: /s/ J. Eric Evans J. Eric Evans Chief Executive Officer

Date: May 2, 2023

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, David T. Doherty, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Surgery Partners, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By: /s/ David T. Doherty David T. Doherty Executive Vice President and Chief Financial Officer

Date: May 2, 2023

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Surgery Partners, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)    The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

By: /s/ J. Eric Evans J. Eric Evans Chief Executive Officer

Date: May 2, 2023

By: /s/ David T. Doherty David T. Doherty Executive Vice President and Chief Financial Officer

Date: May 2, 2023

XML

Cover - shares	3 Months Ended
	Mar. 31, 2023	Apr. 25, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-37576
Entity Registrant Name	Surgery Partners, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	47-3620923
Entity Address, Address Line One	340 Seven Springs Way, Suite 600
Entity Address, City or Town	Brentwood
Entity Address, State or Province	TN
Entity Address, Postal Zip Code	37027
City Area Code	615
Local Phone Number	234-5900
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	SGRY
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		126,476,669
Entity Central Index Key	0001638833
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 245.5	$ 282.9
Accounts receivable	452.9	456.3
Inventories	71.8	71.4
Prepaid expenses	29.3	31.4
Other current assets	69.4	79.0
Total current assets	868.9	921.0
Property and equipment, net of accumulated depreciation of $382.7 and $374.3, respectively	844.3	876.6
Goodwill and other intangible assets, net	4,252.6	4,179.4
Investments in and advances to affiliates	191.6	190.3
Right-of-use operating lease assets	274.0	279.1
Long-term deferred tax assets	93.3	91.5
Other long-term assets	118.6	144.2
Total assets	6,643.3	6,682.1
Current liabilities:
Accounts payable	144.4	151.6
Accrued payroll and benefits	67.8	68.9
Other current liabilities	200.0	210.1
Current maturities of long-term debt	62.9	62.8
Total current liabilities	475.1	493.4
Long-term debt, less current maturities	2,530.9	2,559.0
Right-of-use operating lease liabilities	268.8	271.4
Other long-term liabilities	80.2	75.4
Non-controlling interests—redeemable	345.8	342.0
Stockholders' equity:
Preferred stock, $0.01 par value; shares authorized - 20,310,000; shares issued or outstanding - none	0.0	0.0
Common stock, $0.01 par value; shares authorized - 300,000,000; shares issued and outstanding - 126,480,483 and 125,960,834, respectively	1.3	1.3
Additional paid-in capital	2,478.1	2,478.0
Accumulated other comprehensive income	64.9	76.2
Retained deficit	(582.3)	(557.3)
Total Surgery Partners, Inc. stockholders' equity	1,962.0	1,998.2
Non-controlling interests—non-redeemable	980.5	942.7
Total stockholders' equity	2,942.5	2,940.9
Total liabilities and stockholders' equity	$ 6,643.3	$ 6,682.1

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Accumulated depreciation on property and equipment	$ 382.7	$ 374.3
Preferred stock, par value (in USD per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (shares)	20,310,000	20,310,000
Preferred stock, shares issued (shares)	0	0
Preferred stock, shares outstanding (shares)	0	0
Common stock, par value (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	300,000,000	300,000,000
Common stock, shares issued (shares)	126,480,483	125,960,834
Common stock, shares outstanding (shares)	126,480,483	125,960,834

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Millions		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Revenues		$ 666.2	$ 596.2
Operating expenses:
Salaries and benefits		202.2	178.9
Supplies		188.4	171.6
Professional and medical fees		74.6	63.6
Lease expense		21.4	20.0
Other operating expenses		45.6	37.3
Cost of revenues		532.2	471.4
General and administrative expenses		32.0	29.5
Depreciation and amortization		33.7	27.4
Transaction and integration costs		12.5	7.1
Grant funds		(1.1)	(1.2)
Net loss (gain) on disposals, consolidations and deconsolidations		10.5	(0.1)
Equity in earnings of unconsolidated affiliates		(3.3)	(3.1)
Litigation settlements		3.0	(32.8)
Other expense (income), net		0.3	(2.4)
Total operating expenses		619.8	495.8
Operating income		46.4	100.4
Interest expense, net		(46.8)	(56.3)
(Loss) income before income taxes		(0.4)	44.1
Income tax benefit (expense)		1.6	(1.3)
Net income		1.2	42.8
Less: Net income attributable to non-controlling interests		(26.1)	(30.6)
Net (loss) income attributable to Surgery Partners, Inc.		$ (24.9)	$ 12.2
Net (loss) income per share attributable to common stockholders
Basic (in USD per share)		$ (0.20)	$ 0.14
Diluted (in USD per share)	[1]	$ (0.20)	$ 0.14
Weighted average common shares outstanding
Basic (shares)		125,206	87,995
Diluted (shares)	[1]	125,206	90,272

[1] The impact of potentially dilutive securities for the three months ended March 31, 2023 was not considered because the effect would be anti-dilutive.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 1.2	$ 42.8
Other comprehensive (loss) income, net of tax:
Derivative activity, net of tax of $0	(11.3)	56.8
Comprehensive (loss) income	(10.1)	99.6
Less: Comprehensive income attributable to non-controlling interests	(26.1)	(30.6)
Comprehensive (loss) income attributable to Surgery Partners, Inc.	$ (36.2)	$ 69.0

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Derivative activity, tax	$ 0.0	$ 0.0

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive (Loss) Income	Retained Deficit	Non-Controlling Interests— Non-Redeemable
Balance at beginning of period (shares) at Dec. 31, 2021		89,333,000
Balance at beginning of period at Dec. 31, 2021	$ 1,969.6	$ 0.9	$ 1,622.3	$ (31.5)	$ (502.7)	$ 880.6
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	32.2				12.2	20.0
Equity-based compensation (shares)		572,000
Equity-based compensation	7.7		7.7
Other Comprehensive income (loss)	56.8			56.8
Acquisition and disposal of shares of non-controlling interests, net	(29.1)		(4.8)			(24.3)
Distributions to non-controlling interests—non-redeemable holders	(24.6)					(24.6)
Balance at end of period (shares) at Mar. 31, 2022		89,905,000
Balance at end of period at Mar. 31, 2022	$ 2,012.6	$ 0.9	1,625.2	25.3	(490.5)	851.7
Balance at beginning of period (shares) at Dec. 31, 2022	125,960,834	125,961,000
Balance at beginning of period at Dec. 31, 2022	$ 2,940.9	$ 1.3	2,478.0	76.2	(557.3)	942.7
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(6.7)				(25.0)	18.3
Equity-based compensation (shares)		519,000
Equity-based compensation	3.7		3.7
Other Comprehensive income (loss)	(11.3)			(11.3)
Acquisition and disposal of shares of non-controlling interests, net	46.1		(3.6)			49.7
Distributions to non-controlling interests—non-redeemable holders	$ (30.2)					(30.2)
Balance at end of period (shares) at Mar. 31, 2023	126,480,483	126,480,000
Balance at end of period at Mar. 31, 2023	$ 2,942.5	$ 1.3	$ 2,478.1	$ 64.9	$ (582.3)	$ 980.5

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net income	$ 1.2	$ 42.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	33.7	27.4
Non-cash lease expense	9.0	8.6
Non-cash interest expense, net	6.5	6.1
Equity-based compensation expense	4.2	3.7
Net loss (gain) on disposals, consolidations and deconsolidations	10.5	(0.1)
Deferred income taxes	(1.8)	1.0
Equity in earnings of unconsolidated affiliates, net of distributions received	(0.2)	(0.9)
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable	8.8	2.0
Medicare accelerated payments and deferred governmental grants	(1.2)	(18.0)
Other operating assets and liabilities	3.8	7.2
Net cash provided by operating activities	74.5	79.8
Cash flows from investing activities:
Purchases of property and equipment	(24.3)	(18.2)
Payments for acquisitions, net of cash acquired	(40.7)	(31.1)
Proceeds from disposals of facilities and other assets	8.0	0.0
Purchases of equity investments	(9.6)	0.0
Proceeds from sales of equity investments	0.0	11.5
Other investing activities	(4.1)	(9.3)
Net cash used in investing activities	(70.7)	(47.1)
Cash flows from financing activities:
Principal payments on long-term debt	(15.9)	(17.0)
Borrowings of long-term debt	15.9	11.9
Payments of debt issuance costs	(1.3)	0.0
Distributions to non-controlling interest holders	(41.9)	(36.2)
Receipts (payments) related to ownership transactions with non-controlling interest holders	5.1	(3.1)
Other financing activities	(3.1)	0.7
Net cash used in financing activities	(41.2)	(43.7)
Net decrease in cash and cash equivalents	(37.4)	(11.0)
Cash and cash equivalents at beginning of period	282.9	389.9
Cash and cash equivalents at end of period	$ 245.5	$ 378.9

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Organization and Summary of Accounting Policies

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Summary of Accounting Policies

Organization and Summary of Accounting Policies

Organization

Surgery Partners, Inc., a Delaware corporation, acting through its subsidiaries, owns and operates a national network of surgical facilities and ancillary services. The surgical facilities, which include ambulatory surgery centers ("ASCs") and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including, among others, gastroenterology, general surgery, ophthalmology, orthopedics and pain management. The Company's surgical hospitals also provide services such as diagnostic imaging, laboratory, obstetrics, oncology, pharmacy, physical therapy and wound care. Ancillary services are comprised of multi-specialty physician practices, urgent care facilities and anesthesia services. Unless the context otherwise indicates, Surgery Partners, Inc. and its subsidiaries are referred to herein as "Surgery Partners," "we," "us," "our" or the "Company."

As of March 31, 2023, the Company owned or operated a portfolio of 145 surgical facilities, comprised of 127 ASCs and 18 surgical hospitals in 31 states. The Company owns these facilities in partnership with physicians and, in some cases, health care systems in the markets and communities it serves. The Company owned a majority interest in 92 of these surgical facilities and consolidated 118 of these facilities for financial reporting purposes.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation of the Company's financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report on Form 10-K").

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in partnerships and limited liability companies controlled by the Company through its ownership of a majority voting interest or other rights granted to the Company by contract to manage and control the affiliate's business. All significant intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes. Examples include, but are not limited to, estimates of accounts receivable allowances, professional and general liabilities and the estimate of deferred tax assets or liabilities. Actual results could differ from those estimates.

Revenues

The Company's revenues generally relate to contracts with patients in which the performance obligations are to provide health care services. The Company recognizes revenues in the period in which its obligations to provide health care services are satisfied and reports the amount that reflects the consideration the Company expects to be entitled to receive. The contractual relationships with patients, in most cases, also involve a third-party payor (e.g., Medicare, Medicaid and private insurance organizations, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by or negotiated with the third-party payors. The payment arrangements with third-party payors for the services provided to the related patients typically specify payments at amounts less than the Company's standard charges. The Company continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

A summary of revenues by service type as a percentage of total revenues follows:

	Three Months Ended March 31,
	2023		2022
Patient service revenues:
Surgical facilities revenues	96.0	%	95.7	%
Ancillary services revenues	2.5	%	2.9	%
Total patient service revenues	98.5	%	98.6	%
Other service revenues	1.5	%	1.4	%
Total revenues	100.0	%	100.0	%

Patient service revenues. This revenue is related to charging facility fees in exchange for providing patient care. The fee charged for health care procedures performed in surgical facilities varies depending on the type of service provided, but usually includes all charges for usage of an operating room, a recovery room, special equipment, medical supplies, nursing staff and medications. The fee does not normally include professional fees charged by the patient’s surgeon, anesthesiologist or other attending physician, which are billed directly by such physicians to the patient or third-party payor. However, in several surgical facilities, the Company charges for anesthesia services. Ancillary service revenues include fees for patient visits to the Company's physician practices, pharmacy services and diagnostic tests ordered by physicians.

Patient service revenues are recognized as performance obligations are satisfied. Performance obligations are based on the nature of services provided. Typically, the Company recognizes revenue at a point in time in which services are rendered and the Company has no obligation to provide further patient services. As the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service.

The Company determines the transaction price based on gross charges for services provided, net of estimated contractual adjustments and discounts from third-party payors. The Company estimates its contractual adjustments and discounts based on contractual agreements, its discount policies and historical experience. Changes in estimated contractual adjustments and discounts are recorded in the period of change.

Other service revenues. Other service revenues include management and administrative service fees derived from the non-consolidated facilities that the Company accounts for under the equity method, management of surgical facilities in which it does not own an interest, and management services provided to physician practices for which the Company is not required to provide capital or additional assets and other non-patient services. The management agreements typically require the Company to provide recurring management services over a multi-year period, which are billed and collected on a monthly basis. The fees derived from these management arrangements are based on a predetermined percentage of the revenues of each facility or practice and are recognized in the period in which management services are rendered and billed.

The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in millions):

	Three Months Ended March 31,
	2023				2022
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	335.6	51.1	%	$	300.2	51.1	%
Government	287.8		43.8	%	249.0		42.4	%
Self-pay	15.6		2.4	%	16.8		2.9	%
Other (1)	17.4		2.7	%	21.7		3.6	%
Total patient service revenues	656.4		100.0	%	587.7		100.0	%
Other service revenues	9.8				8.5
Total revenues	$	666.2			$	596.2

(1)Other is comprised of anesthesia service agreements, automobile liability, letters of protection and other payor types.

Accounts Receivable

Accounts receivable from third-party payors are recorded net of estimated implicit price concessions, which are estimated based on the historical trend of the Company's surgical hospitals’ cash collections and contractual write-offs, and for the Company's surgical facilities in general, established fee schedules, relationships with payors and procedure statistics. While changes in estimated reimbursement from

third-party payors remain a possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on its financial condition or results of operations.

Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), private insurance organizations, employers and patients. Management recognizes that revenues and receivables from government agencies are significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies. Concentration of credit risk with respect to other payors is limited because of the large number of such payors.

The Company recognizes that final reimbursement of accounts receivable is subject to final approval by each third-party payor. However, because the Company has contracts with its third-party payors and also verifies insurance coverage of the patient before medical services are rendered, the amounts that are pending approval from third-party payors are not considered significant. Amounts are classified outside of self-pay if the Company has an agreement with the third-party payor or has verified a patient’s coverage prior to services rendered. The Company's policy is to collect co-payments and deductibles prior to providing medical services. Patient services of the Company are primarily non-emergency, which allows the surgical facilities to control the procedures for which third-party reimbursement is sought and obtained. The Company does not require collateral from self-pay patients.

The Company's collection policies and procedures are based on the type of payor, size of claim and estimated collection percentage for each patient account. The Company analyzes accounts receivable at each of its surgical facilities to ensure the proper collection and aged category. Collection efforts include direct contact with third-party payors or patients, written correspondence and the use of legal or collection agency assistance, as required.

Income Taxes

The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If a carryforward exists, the Company makes a determination as to whether the carryforward will be utilized in the future. A valuation allowance is established for certain carryforwards when their recoverability is deemed to be uncertain. The carrying value of the net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If our expectations for future operating results on a consolidated basis or at the state jurisdiction level vary from actual results due to changes in health care regulations, general economic conditions, or other factors, we may need to adjust the valuation allowance, for all or a portion of our deferred tax assets. Our income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in our valuation allowance in the period when the change in circumstances occurs. These changes could have a significant impact on our future earnings.

The Company and certain of its subsidiaries file a consolidated federal income tax return. The partnerships, limited liability companies, and certain non-consolidated physician practice corporations also file separate income tax returns. The Company's allocable portion of each partnership's and limited liability company's income or loss is included in taxable income of the Company. The remaining income or loss of each partnership and limited liability company is allocated to the other owners.

The Company's effective tax rate was 400.0% for the three months ended March 31, 2023 compared to 2.9% for the three months ended March 31, 2022. For the three months ended March 31, 2023, the effective tax rate differed from the federal corporate tax rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and a discrete tax benefit of $1.8 million related to the vesting of restricted stock awards. For the three months ended March 31, 2022, the effective tax rate differed from 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and discrete tax benefits of (a) $4.6 million related to the vesting of restricted stock awards, (b) $1.8 million attributable to non-recurring earnings’ impact on the Company’s valuation allowance, and (c) $1.0 million related to entity divestitures. Based upon the application of interim accounting guidance, the tax rate as a percentage of net income after income attributable to non-controlling interests will vary based upon the relative net income from period to period.

Goodwill

Goodwill represents the excess of the fair value of the consideration provided in an acquisition plus the fair value of any non-controlling interests over the fair value of net assets acquired and is not amortized. Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries. A summary of the Company's acquisitions and disposals for the three months ended March 31, 2023 is included in Note 2. "Acquisitions and Disposals."

A summary of activity related to goodwill for the three months ended March 31, 2023 is as follows (in millions):

Balance at December 31, 2022	$	4,137.1
Acquisitions, including post acquisition adjustments	91.3
Disposals	(11.1)
Balance at March 31, 2023	$	4,217.3

A detailed evaluation of potential impairment indicators was performed as of March 31, 2023, which specifically considered recent increases in interest rates, inflation risk and market volatility. On the basis of available evidence as of March 31, 2023, no indicators of impairment were identified. Future estimates of fair value could be adversely affected if the actual outcome of one or more of the Company's assumptions changes materially in the future, including a material decline in the Company’s stock price and the fair value of its long-term debt, lower than expected surgical case volumes, higher market interest rates or increased operating costs. Such changes impacting the calculation of fair value could result in a material impairment charge in the future.

Derivative Instruments and Hedging Activities

The Company records all derivatives on the balance sheet at fair value and any financing elements treated as debt instruments are recorded at amortized cost. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain risks even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

The Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Non-Controlling Interests—Redeemable

Each partnership and limited liability company through which the Company owns and operates its surgical facilities is governed by a partnership or operating agreement, respectively. In certain circumstances, the applicable partnership or operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physician limited partners’ or physician minority members’, as applicable, ownership if certain adverse regulatory events occur, such as it becoming illegal for the physician(s) to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility. The non-controlling interests—redeemable are reported outside of stockholders' equity in the condensed consolidated balance sheets.

A summary of activity related to non-controlling interests—redeemable is as follows (in millions):

	Three Months Ended March 31,
	2023		2022
Balance at beginning of period	$	342.0	$	330.2
Net income attributable to non-controlling interests—redeemable	7.8		10.6
Acquisition of shares of non-controlling interests, net—redeemable	7.7		12.3
Distributions to non-controlling interest—redeemable holders	(11.7)		(11.6)
Balance at end of period	$	345.8	$	341.5

Medicare Accelerated Payments and Deferred Governmental Grants

The Company received grant funds distributed under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and other governmental assistance programs. The recognition of amounts received is conditioned upon attestation with terms and conditions that funds will be used for COVID-19 related healthcare expenses or lost revenues. The Company estimates $1.1 million and $1.2 million of grant funds received qualified for recognition as a reduction in operating expenses for the three months ended March 31, 2023 and 2022, respectively. There were no remaining unrecognized grant funds as of March 31, 2023. As of December 31, 2022 approximately $3 million of unrecognized grant funds received was reflected as a component of other current liabilities within the condensed consolidated balance sheets.

The Company received accelerated payments under the Medicare Accelerated and Advance Payment Program. The payments received were deferred and included in the condensed consolidated balance sheets. As of March 31, 2023 and December 31, 2022, the remaining deferred accelerated payments was minimal. During the three months ended March 31, 2022, approximately $18 million was repaid in

accordance with the terms of the program. These repayments are included as a component of the change in Medicare accelerated payments and deferred government grants in the condensed consolidated statements of cash flows.

The Company’s accounting policies for relief received under the CARES Act and other governmental assistance programs, including the recognition of grant funds, is unchanged from the policies described in Note 1 to the Company’s consolidated financial statements included in the 2022 Annual Report on Form 10-K.

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. The Company uses fair value measurements based on inputs classified into the following hierarchy:

•Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These may include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, depending on the nature of the item being valued.

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, restricted invested assets and accounts payable approximate their fair values under Level 3 calculations.

A summary of the carrying amounts and estimated fair values of the Company's long-term debt follows (in millions):

	Carrying Amount				Fair Value
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Senior secured term loan	$	1,370.1	$	1,370.0	$	1,353.0	$	1,359.7
6.750% senior unsecured notes due 2025	$	185.0	$	185.0	$	181.5	$	183.4
10.000% senior unsecured notes due 2027	$	320.0	$	320.0	$	326.4	$	326.8

The fair values in the table above were based on Level 2 inputs using quoted prices for identical liabilities in inactive markets. The carrying amounts related to the Company's other long-term debt obligations, including finance lease obligations, approximate their fair values based on Level 3 inputs.

Variable Interest Entities

The condensed consolidated financial statements include the accounts of variable interest entities ("VIE") in which the Company is the primary beneficiary under the provisions of the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification 810, "Consolidation". The Company has the power to direct the activities that most significantly impact a VIE's economic performance. Additionally, the Company would absorb the majority of the expected losses from any of these entities should such expected losses occur. As of March 31, 2023, the Company's consolidated VIEs include seven surgical facilities and five physician practices.

The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 were $69.9 million and $64.9 million, respectively, and the total liabilities of the consolidated VIEs were $44.5 million and $40.9 million, respectively.

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Acquisitions and Disposals

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisitions and Disposals

Acquisitions and Disposals

Acquisitions

During the three months ended March 31, 2023:

•The Company acquired a controlling interest in a surgical facility and a physician practice for aggregate cash consideration of $16.2 million, net of cash acquired, and non-cash consideration of $1.3 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities. In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $12.0 million and goodwill of $25.7 million.

•The Company acquired a controlling interest in two surgical facilities which were previously accounted for as equity method investments for cash consideration of $24.5 million, net of cash acquired. As a result of these transactions, the Company obtained control of the previously non-controlled surgical facilities, resulting in the consolidation of the previously non-consolidated entities. The previously held non-controlling were remeasured and recorded at fair value as of the dates of the transactions. The fair value measurement utilizes Level 3 inputs, which includes unobservable data. The acquisition date fair value of the previously held non-controlling interests was $8.3 million. As a result of stepping up its ownership interest, the Company recognized a loss of $2.9 million included in net loss (gain) on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the three months ended March 31, 2023. The net loss was determined based on the difference between the fair value of the Company's previously held non-controlling interests in the entities and the carrying values immediately prior to the transactions. In connection with the acquisitions, the Company preliminarily recognized non-controlling interests of $34.2 million and goodwill of $65.6 million.

•The Company acquired non-controlling interests in an existing surgical facility and an in-development de novo surgical facility for an aggregate cash purchase price of $12.4 million, of which $2.8 million was deferred and will be paid in April 2023. The non-controlling interests were accounted for as equity method investments and recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets. In April 2023, the Company obtained control of an existing non-controlled surgical facility due to an amendment to the facility operating agreement, resulting in the consolidation of the previously non-consolidated entity.

During the three months ended March 31, 2022, the Company acquired a controlling interest in two surgical facilities, one of which was merged into an existing surgical facility, for aggregate cash consideration of $31.1 million, net of cash acquired, and non-cash consideration of $2.6 million. In connection with the acquisitions, the Company preliminarily recognized non-controlling interests of $10.6 million and goodwill of $42.7 million. During the three months ended March 31, 2023, no significant changes were made to the purchase price allocation of assets and liabilities, existing at the date of acquisition, related to individual acquisitions completed in 2022.

Disposals

During the three months ended March 31, 2023, the Company sold its interests in a surgical facility for a cash sales price of $8.8 million, a portion of which was held in escrow pursuant to the purchase agreement. In connection with the sale, the Company recognized a pre-tax gain of $0.2 million included in net loss (gain) on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the three months ended March 31, 2023.

During the three months ended March 31, 2022:

•The Company sold its interests in a surgical facility, which was previously accounted for as an equity method investment, for net cash proceeds of $11.5 million, and recognized a pre-tax loss of $0.4 million included in loss (gain) on disposals and consolidations, net in the condensed consolidated statements of operations for the three months ended March 31, 2022.

•The Company contributed its interests in two surgical facilities as non-cash consideration for non-controlling interests in two new separate entities. As a result of these transactions, the Company lost control of the previously controlled surgical facilities but retains a non-controlling interest in each, resulting in the deconsolidation of the previously consolidated entities. The remaining non-controlling interests were accounted for as equity method investments, and initially measured and recorded at fair value as of the dates of the transactions. The fair value measurement utilizes Level 3 inputs, which includes unobservable data, to measure the fair value of the retained non-controlling interests. The fair value determination was based on a combination of multiple valuation methods, which included discounted cash flow and market value approach, which incorporates estimates of future earnings and market valuation multiples for certain guideline companies. The fair value of the investments of $9.8 million was recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets. Further, based on the valuation, the transactions resulted in a pretax net loss on deconsolidations of $5.6 million, which is included in net loss (gain) on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2022. The gains were determined based on the difference between the fair value of the Company's retained interests in the entities and the carrying values of both the tangible and intangible assets of the entities immediately prior to the transactions.

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Long-Term Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

A summary of long-term debt follows (in millions):

	March 31, 2023		December 31, 2022
Senior secured term loan (1)	$	1,370.1	$	1,370.0
6.750% senior unsecured notes due 2025	185.0		185.0
10.000% senior unsecured notes due 2027	320.0		320.0
Notes payable and other secured loans	174.9		171.3
Finance lease obligations	553.5		585.7
Less: unamortized debt issuance costs and discounts	(9.7)		(10.2)
Total debt	2,593.8		2,621.8
Less: Current maturities	62.9		62.8
Total long-term debt	$	2,530.9	$	2,559.0

(1)Includes unamortized fair value discount of $2.0 million and $2.1 million as of March 31, 2023 and December 31, 2022, respectively.

Revolving Credit Facility

On January 13, 2023, the Company entered into an amendment to the credit agreement governing its revolving credit facility (the "Revolver"), which amended and supplemented the credit agreement, dated as of August 31, 2017 (the "Credit Agreement"), to provide a $203.8 million increase in the outstanding commitments under the Revolver.

As of March 31, 2023, the Company's availability on its Revolver was $545.9 million (including outstanding letters of credit of $7.9 million). There were no outstanding borrowings under the Revolver as of both March 31, 2023 and December 31, 2022.

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Leases

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Leases

The Company's operating leases are primarily for real estate, including medical office buildings, and corporate and other administrative offices. The Company's finance leases are primarily for medical equipment and information technology and telecommunications assets.

The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets (in millions):

	Classification in Consolidated Balance Sheets	March 31, 2023		December 31, 2022
Assets:
Operating lease assets	Right-of-use operating lease assets	$	274.0	$	279.1
Finance lease assets	Property and equipment, net of accumulated depreciation	490.6		529.6
Total leased assets		$	764.6	$	808.7
Liabilities:
Operating lease liabilities:
Current	Other current liabilities	$	38.0	$	36.5
Long-term	Right-of-use operating lease liabilities	268.8		271.4
Total operating lease liabilities		306.8		307.9
Finance lease liabilities:
Current	Current maturities of long-term debt	21.4		20.9
Long-term	Long-term debt, less current maturities	532.1		564.8
Total finance lease liabilities		553.5		585.7
Total lease liabilities		$	860.3	$	893.6

The following table presents the components of the Company's lease expense included in the condensed consolidated statement of operations (in millions):

	Three Months Ended March 31,
	2023		2022
Operating lease costs	$	16.4	$	16.1
Finance lease costs:
Amortization of leased assets	9.4		9.2
Interest on lease liabilities	12.3		9.9
Total finance lease costs	21.7		19.1
Variable and short-term lease costs	5.2		4.4
Total lease costs	$	43.3	$	39.6

The following table presents supplemental cash flow information (dollars in millions):

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	16.1	$	15.6
Operating cash outflows from finance leases	$	11.7	$	9.8
Financing cash outflows from finance leases	$	6.4	$	6.0
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	8.9	$	22.0
Finance leases	$	15.4	$	89.3

Leases

Leases

The Company's operating leases are primarily for real estate, including medical office buildings, and corporate and other administrative offices. The Company's finance leases are primarily for medical equipment and information technology and telecommunications assets.

The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets (in millions):

	Classification in Consolidated Balance Sheets	March 31, 2023		December 31, 2022
Assets:
Operating lease assets	Right-of-use operating lease assets	$	274.0	$	279.1
Finance lease assets	Property and equipment, net of accumulated depreciation	490.6		529.6
Total leased assets		$	764.6	$	808.7
Liabilities:
Operating lease liabilities:
Current	Other current liabilities	$	38.0	$	36.5
Long-term	Right-of-use operating lease liabilities	268.8		271.4
Total operating lease liabilities		306.8		307.9
Finance lease liabilities:
Current	Current maturities of long-term debt	21.4		20.9
Long-term	Long-term debt, less current maturities	532.1		564.8
Total finance lease liabilities		553.5		585.7
Total lease liabilities		$	860.3	$	893.6

The following table presents the components of the Company's lease expense included in the condensed consolidated statement of operations (in millions):

	Three Months Ended March 31,
	2023		2022
Operating lease costs	$	16.4	$	16.1
Finance lease costs:
Amortization of leased assets	9.4		9.2
Interest on lease liabilities	12.3		9.9
Total finance lease costs	21.7		19.1
Variable and short-term lease costs	5.2		4.4
Total lease costs	$	43.3	$	39.6

The following table presents supplemental cash flow information (dollars in millions):

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	16.1	$	15.6
Operating cash outflows from finance leases	$	11.7	$	9.8
Financing cash outflows from finance leases	$	6.4	$	6.0
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	8.9	$	22.0
Finance leases	$	15.4	$	89.3

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Derivatives and Hedging Activities

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Derivatives and Hedging Activities

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy. During 2023 and 2022, such derivatives have been used to hedge the variable cash flows associated with existing variable-rate debt.

The key terms of interest rate swaps and interest rate caps outstanding are presented below:

		March 31, 2023			December 31, 2022
Description	Effective Date	Notional Amount (in millions)		Status	Notional Amount (in millions)		Status	Maturity Date
Pay-fixed swap	May 7, 2021	$	435.0	Active	$	435.0	Active	March 31, 2025
Pay-fixed swap	May 7, 2021	330.0		Active	330.0		Active	March 31, 2025
Pay-fixed swap	May 7, 2021	435.0		Active	435.0		Active	March 31, 2025
Interest rate cap	September 30, 2021	157.2		Active	159.1		Active	March 31, 2025
Interest rate cap	September 30, 2021	8.9		Active	159.1		Active	March 31, 2025
Pay-fixed swap	November 30, 2018	165.0		Active	165.0		Active	November 30, 2023
Pay-fixed swap	November 30, 2018	120.0		Active	120.0		Active	November 30, 2023
Pay-fixed swap	June 28, 2019	150.0		Active	150.0		Active	November 30, 2023
Receive-fixed swap	April 30, 2021	(165.0)		Active	(165.0)		Active	November 30, 2023
Receive-fixed swap	April 30, 2021	(120.0)		Active	(120.0)		Active	November 30, 2023
Receive-fixed swap	April 30, 2021	(150.0)		Active	(150.0)		Active	November 30, 2023
		$	1,366.1		$	1,518.2

As of March 31, 2023, the Company had nine interest rate swaps with a total net notional amount of $1.2 billion. Of the nine interest rate swaps, three are pay-fixed, receive 1-Month LIBOR (subject to a minimum of 0.75%) interest rate swaps designated in cash flow hedging relationships with a total notional amount of $1.2 billion and a termination date of March 31, 2025. The remaining six interest rate

swaps are undesignated and consist of three pay-fixed, receive 1-Month LIBOR (subject to a minimum of 1.00%) interest rate swaps and three pay 1-Month LIBOR (subject to a minimum of 1.00%), receive-fixed interest rate swaps with a termination date of November 30, 2023. The pay-floating, receive-fixed swaps are designed to economically offset the undesignated pay-fixed, receive-floating swaps.

As of March 31, 2023, the Company had two interest rate caps designated in cash flow hedging relationships with a total notional amount of $166.1 million. The interest rate caps each have a termination date of March 31, 2025. During the three months ended March 31, 2023, the Company partially terminated a previously undesignated portion of one of its interest rate caps. In connection with the termination, the Company received $8.6 million, which is included as a component of operating activities in the condensed consolidated statements of cash flows for the three months ended March 31, 2023.

The pay-fixed, receive floating interest rate swaps did not meet the requirements to be considered derivatives in their entirety as a result of the financing component. Accordingly, the swaps are considered hybrid instruments, consisting of a financing element treated as a debt instrument and an embedded at-market derivative that was designated as a cash flow hedge.

Within the Company’s condensed consolidated balance sheets, the financing elements treated as debt instruments described above are carried at amortized cost and the embedded at-market derivatives and the undesignated swaps are recorded at fair value. The cash flows related to the portion treated as debt are classified as financing activities in the condensed consolidated statements of cash flows while the portion treated as an at-market derivative are classified as operating activities. Cash settlements related to the undesignated swaps will offset and are classified as operating activities in the condensed consolidated cash flows. Within the Company’s condensed consolidated balance sheets, the interest rate caps, including the undesignated portion, are recorded at fair value. The cash flows related to the interest rate caps, including the undesignated portion, are classified as operating activities in the condensed consolidated statements of cash flows.

Our interest rate swap agreements, excluding the portion treated as debt, are recognized at fair value in the condensed consolidated balance sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy. The fair value of the interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The interest rate caps are classified using Level 2 inputs within the fair value hierarchy.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income ("OCI") and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings, as documented at hedge inception in accordance with the Company’s accounting policy election. Amounts reported in accumulated OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Over the next 12 months, the Company estimates that an additional $33.6 million will be reclassified as a decrease to interest expense.

The following table presents the fair values of our derivatives and their location on the condensed consolidated balance sheets (in millions):

		March 31, 2023				December 31, 2022
	Location	Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments
Interest rate caps	Other long-term assets	$	—	$	—	$	9.0	$	—
Interest rate swaps	Other long-term assets	6.2		—		8.5		—
Interest rate swaps	Other long-term liabilities	—		6.2		—		8.5
Derivatives in cash flow hedging relationships
Interest rate caps	Other long-term assets	8.4		—		10.4		—
Interest rate swaps	Other long-term assets	70.6		—		85.5		—
Interest rate swaps	Other long-term liabilities (1)	—		28.3		—		31.9
Total		$	85.2	$	34.5	$	113.4	$	40.4

(1)The balance is related to the financing component of the pay-fixed, receive floating interest rate swaps.

The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and condensed consolidated statement of operations (in millions):

		Three Months Ended March 31,
	Location	2023		2022
Derivatives not designated as hedging instruments
Loss recognized in income	Other income, net	$	0.6	$	0.1
Derivatives in cash flow hedging relationships
(Loss) gain recognized in OCI (effective portion)		$	(5.2)	$	50.4
(Gain) loss reclassified from accumulated OCI into income (effective portion) (1)	Interest expense, net	$	(6.1)	$	6.4

(1)Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $5.4 million and $5.3 million for the three months ended March 31, 2023 and 2022, respectively.

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Earnings Per Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Basic and diluted earnings per share are calculated based on the weighted-average number of shares outstanding in each period and dilutive stock options, unvested shares and warrants, to the extent such securities exist and have a dilutive effect on earnings per share. A reconciliation of the numerator and denominator of basic and diluted earnings per share follows (dollars in millions, except per share amounts; shares in thousands):

	Three Months Ended March 31,
	2023		2022
Numerator:
Net (loss) income attributable to Surgery Partners, Inc.	$	(24.9)	$	12.2
Denominator:
Weighted average shares outstanding- basic	125,206		87,995
Weighted average shares outstanding- diluted (1)	125,206		90,272
(Loss) income per share:
Basic	$	(0.20)	$	0.14
Diluted (1)	$	(0.20)	$	0.14
Dilutive securities outstanding not included in the computation of (loss) income per share as their effect is antidilutive:
Stock options	1,338		1,634
Restricted shares	67		643

(1)The impact of potentially dilutive securities for the three months ended March 31, 2023, was not considered because the effect would be anti-dilutive.

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Other Current Liabilities

3 Months Ended

Mar. 31, 2023

Other Liabilities Disclosure [Abstract]

Other Current Liabilities

Other Current Liabilities

A summary of other current liabilities is as follows (in millions):

	March 31, 2023		December 31, 2022
Right-of-use operating lease liabilities	$	38.0	$	36.5
Amounts due to patients and payors	30.0		31.9
Cost report liabilities	24.2		23.5
Interest payable	23.7		19.4
Acquisition escrow	17.4		28.8
Accrued expenses and other	66.7		70.0
Total	$	200.0	$	210.1

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Professional, General and Workers' Compensation Liability Risks

The Company is subject to claims and legal actions in the ordinary course of business, including claims relating to patient treatment, employment practices and personal injuries. The Company maintains professional, general and workers' compensation liability insurance in excess of self-insured retentions through third party commercial insurance carriers. Although management believes the coverage is sufficient for the Company's operations, some claims may potentially exceed the scope of coverage in effect. Plaintiffs in these matters may request punitive or other damages that may not be covered by insurance. The Company is not aware of any such proceedings that are reasonably possible to have a material adverse effect on the Company's business, financial position, results of operations or liquidity. Total professional, general and workers' compensation claim liabilities as of March 31, 2023 and December 31, 2022 were $22.1 million and $20.8 million, respectively. Expected insurance recoveries of $12.7 million as of both March 31, 2023 and December 31, 2022 are included as a component of other current assets and other long-term assets in the condensed consolidated balance sheets.

Laws and Regulations

Laws and regulations governing the Company's business, including those relating to the Medicare and Medicaid programs, are complex and subject to interpretation. These laws and regulations govern every aspect of how the Company's surgical facilities conduct their operations, from licensing requirements to how and whether the Company's facilities may receive payments pursuant to the Medicare and Medicaid programs. Compliance with such laws and regulations can be subject to future government agency review and interpretation as well as legislative changes to such laws. Noncompliance with such laws and regulations may subject the Company to significant regulatory sanctions including fines, penalties, and exclusion from the Medicare, Medicaid and other federal health care programs. From time to time, governmental regulatory agencies will conduct inquiries of the Company's practices, including, but not limited to, the Company's compliance with federal and state fraud and abuse laws, billing practices and relationships with physicians.

Stockholder Litigation

On December 4, 2017, a purported Company stockholder filed an action in the Delaware Court of Chancery (the "Delaware Action"). That action is captioned Witmer v. H.I.G. Capital, L.L.C., et al., C.A. No. 2017-0862. The plaintiff in the Delaware Action asserted claims against (i) certain current and former members of the Company’s Board of Directors (together, the "Directors"); (ii) H.I.G. Capital, LLC and certain of its affiliates (collectively, "H.I.G."); and (iii) Bain Capital Private Equity, L.P. and certain of its affiliates (collectively, "Bain Capital" and, together with the Directors and H.I.G., the "Defendants"). The parties to the Delaware Action negotiated a final stipulation of settlement (the “Settlement Stipulation”), which governs the terms of the settlement of the Delaware Action, and which they filed with the Court of Chancery on November 22, 2021. On February 11, 2022, the Court of Chancery approved the settlement of the Delaware Action as memorialized in the Settlement Stipulation. That decision became final and non-appealable on March 14, 2022. The case is now closed. Pursuant to the settlement, the Company received $32.8 million in March 2022, which was included in litigation settlement in the condensed consolidated statements of operations for the three months ended March 31, 2022.

Acquired Facilities

The Company, through its wholly-owned subsidiaries or controlled partnerships and limited liability companies, has acquired and will continue to acquire surgical facilities with prior operating histories. Such facilities may have unknown or contingent liabilities, including liabilities for failure to comply with health care laws and regulations, such as billing and reimbursement laws and regulations, the federal physician self-referral law, or Stark Law, the statute commonly known as the federal Anti-Kickback statute, the federal False Claims Act, and similar fraud and abuse laws. Although the Company attempts to assure that no such liabilities exist, obtain indemnification from prospective sellers covering such matters and institute policies designed to conform centers to its standards following completion of acquisitions, there can be no assurance that the Company will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. There can be no assurance that any such matter will be covered by indemnification or, if covered, that the liability sustained will not exceed contractual limits or the financial capacity of the indemnifying party.

The Company cannot predict whether federal or state statutory or regulatory provisions will be enacted that would prohibit or otherwise regulate relationships which the Company has established or may establish with other health care providers or have materially adverse effects on its business or revenues arising from such future actions. Management believes, however, that it will be able to adjust the Company's operations so as to be in compliance with any statutory or regulatory provision as may be applicable.

Potential Physician Investor Liability

A majority of the physician investors in the partnerships and limited liability companies which operate the Company's surgical facilities carry general and professional liability insurance on a claims-made basis. Each partnership or limited liability company may, however, be liable for damages to persons or property arising from occurrences at the surgical facilities. Although the various physician investors and other surgeons generally are required to obtain general and professional liability insurance with tail coverage that extends beyond the period of any claims-made policies, such individuals may not be able to obtain coverage in amounts sufficient to cover all potential liability. Since most insurance policies contain exclusions, the physician investors will not be insured against all possible occurrences. In the event of an uninsured or underinsured loss, the value of an investment in the partnership interests or limited liability company membership units and the amount of distributions could be adversely affected.

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Segment Reporting

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company currently operates in two major lines of business that are also the Company's reportable operating segments - the operation of surgical facilities and the operation of ancillary services. The Surgical Facility Services segment includes the operation of ASCs, surgical hospitals and anesthesia services. The Ancillary Services segment consists of multi-specialty physician practices. The "All other" line item primarily consists of the Company's corporate general and administrative functions.

The following tables present financial information for each reportable segment (in millions):

	Three Months Ended March 31,
	2023		2022
Revenues:
Surgical Facility Services	$	649.0	$	578.8
Ancillary Services	17.2		17.4
Total	$	666.2	$	596.2
Adjusted EBITDA:
Surgical Facility Services	$	118.8	$	101.0
Ancillary Services	(1.4)		0.1
All other	(27.3)		(24.0)
Total	$	90.1	$	77.1
Reconciliation of Adjusted EBITDA:
(Loss) income before income taxes	$	(0.4)	$	44.1
Net income attributable to non-controlling interests	(26.1)		(30.6)
Interest expense, net	46.8		56.3
Depreciation and amortization	33.7		27.4
Equity-based compensation expense	4.2		3.7
Transaction, integration and acquisition costs (1)	12.8		7.1
Net loss (gain) on disposals, consolidations and deconsolidations (2)	10.5		(0.1)
Litigation settlements and regulatory change impact (3)	8.0		(30.8)
Undesignated derivative activity	0.6		—
Adjusted EBITDA	$	90.1	$	77.1

(1)This amount includes transaction and integration costs of $12.5 million and $7.1 million for the three months ended March 31, 2023 and 2022, respectively. This amount further includes start-up costs related to de novo surgical facilities of $0.3 million for the three months ended March 31, 2023, with no comparable costs for the three months ended March 31, 2022.

(2)Includes an $8.5 million loss for the three months ended March 31, 2023 related to a surgical facility with a book value of the asset group in excess of the fair value based on a letter of intent.

(3)This amount includes a litigation settlement loss of $3.0 million and a gain of $32.8 million for the three months ended March 31, 2023 and 2022, respectively. This amount also includes other litigation costs of $0.6 million and $2.0 million for the three months ended March 31, 2023 and 2022, respectively. Additionally, the three months ended March 31, 2023, includes $4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection.

	March 31, 2023		December 31, 2022
Assets:
Surgical Facility Services	$	6,049.2	$	6,001.1
Ancillary Services	41.4		41.7
All other	552.7		639.3
Total assets	$	6,643.3	$	6,682.1

	Three Months Ended March 31,
	2023		2022
Cash purchases of property and equipment:
Surgical Facility Services	$	23.8	$	17.7
Ancillary Services	0.5		0.2
All other	—		0.3
Total cash purchases of property and equipment	$	24.3	$	18.2

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Subsequent Events

3 Months Ended

Mar. 31, 2023

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

In April 2023, the Company completed the sale of two surgical facilities for cash proceeds of $23.0 million.

In April 2023, the Company acquired non-controlling interests in an in-development de novo surgical facility for a purchase price of $6.1 million.

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Organization and Summary of Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation of the Company's financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report on Form 10-K").

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in partnerships and limited liability companies controlled by the Company through its ownership of a majority voting interest or other rights granted to the Company by contract to manage and control the affiliate's business. All significant intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes. Examples include, but are not limited to, estimates of accounts receivable allowances, professional and general liabilities and the estimate of deferred tax assets or liabilities. Actual results could differ from those estimates.

Revenues

Revenues

The Company's revenues generally relate to contracts with patients in which the performance obligations are to provide health care services. The Company recognizes revenues in the period in which its obligations to provide health care services are satisfied and reports the amount that reflects the consideration the Company expects to be entitled to receive. The contractual relationships with patients, in most cases, also involve a third-party payor (e.g., Medicare, Medicaid and private insurance organizations, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by or negotiated with the third-party payors. The payment arrangements with third-party payors for the services provided to the related patients typically specify payments at amounts less than the Company's standard charges. The Company continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

Patient service revenues. This revenue is related to charging facility fees in exchange for providing patient care. The fee charged for health care procedures performed in surgical facilities varies depending on the type of service provided, but usually includes all charges for usage of an operating room, a recovery room, special equipment, medical supplies, nursing staff and medications. The fee does not normally include professional fees charged by the patient’s surgeon, anesthesiologist or other attending physician, which are billed directly by such physicians to the patient or third-party payor. However, in several surgical facilities, the Company charges for anesthesia services. Ancillary service revenues include fees for patient visits to the Company's physician practices, pharmacy services and diagnostic tests ordered by physicians.

Patient service revenues are recognized as performance obligations are satisfied. Performance obligations are based on the nature of services provided. Typically, the Company recognizes revenue at a point in time in which services are rendered and the Company has no obligation to provide further patient services. As the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service.

The Company determines the transaction price based on gross charges for services provided, net of estimated contractual adjustments and discounts from third-party payors. The Company estimates its contractual adjustments and discounts based on contractual agreements, its discount policies and historical experience. Changes in estimated contractual adjustments and discounts are recorded in the period of change.

Other service revenues. Other service revenues include management and administrative service fees derived from the non-consolidated facilities that the Company accounts for under the equity method, management of surgical facilities in which it does not own an interest, and management services provided to physician practices for which the Company is not required to provide capital or additional assets and other non-patient services. The management agreements typically require the Company to provide recurring management services over a multi-year period, which are billed and collected on a monthly basis. The fees derived from these management arrangements are based on a predetermined percentage of the revenues of each facility or practice and are recognized in the period in which management services are rendered and billed.

Accounts Receivable

Accounts Receivable

Accounts receivable from third-party payors are recorded net of estimated implicit price concessions, which are estimated based on the historical trend of the Company's surgical hospitals’ cash collections and contractual write-offs, and for the Company's surgical facilities in general, established fee schedules, relationships with payors and procedure statistics. While changes in estimated reimbursement from

third-party payors remain a possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on its financial condition or results of operations.

Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), private insurance organizations, employers and patients. Management recognizes that revenues and receivables from government agencies are significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies. Concentration of credit risk with respect to other payors is limited because of the large number of such payors.

The Company recognizes that final reimbursement of accounts receivable is subject to final approval by each third-party payor. However, because the Company has contracts with its third-party payors and also verifies insurance coverage of the patient before medical services are rendered, the amounts that are pending approval from third-party payors are not considered significant. Amounts are classified outside of self-pay if the Company has an agreement with the third-party payor or has verified a patient’s coverage prior to services rendered. The Company's policy is to collect co-payments and deductibles prior to providing medical services. Patient services of the Company are primarily non-emergency, which allows the surgical facilities to control the procedures for which third-party reimbursement is sought and obtained. The Company does not require collateral from self-pay patients.

The Company's collection policies and procedures are based on the type of payor, size of claim and estimated collection percentage for each patient account. The Company analyzes accounts receivable at each of its surgical facilities to ensure the proper collection and aged category. Collection efforts include direct contact with third-party payors or patients, written correspondence and the use of legal or collection agency assistance, as required.

Income Taxes

Income Taxes

The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If a carryforward exists, the Company makes a determination as to whether the carryforward will be utilized in the future. A valuation allowance is established for certain carryforwards when their recoverability is deemed to be uncertain. The carrying value of the net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If our expectations for future operating results on a consolidated basis or at the state jurisdiction level vary from actual results due to changes in health care regulations, general economic conditions, or other factors, we may need to adjust the valuation allowance, for all or a portion of our deferred tax assets. Our income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in our valuation allowance in the period when the change in circumstances occurs. These changes could have a significant impact on our future earnings.

The Company and certain of its subsidiaries file a consolidated federal income tax return. The partnerships, limited liability companies, and certain non-consolidated physician practice corporations also file separate income tax returns. The Company's allocable portion of each partnership's and limited liability company's income or loss is included in taxable income of the Company. The remaining income or loss of each partnership and limited liability company is allocated to the other owners.

Goodwill

GoodwillGoodwill represents the excess of the fair value of the consideration provided in an acquisition plus the fair value of any non-controlling interests over the fair value of net assets acquired and is not amortized. Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries.

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

The Company records all derivatives on the balance sheet at fair value and any financing elements treated as debt instruments are recorded at amortized cost. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain risks even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

The Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Non-Controlling Interests—Redeemable

Non-Controlling Interests—Redeemable

Each partnership and limited liability company through which the Company owns and operates its surgical facilities is governed by a partnership or operating agreement, respectively. In certain circumstances, the applicable partnership or operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physician limited partners’ or physician minority members’, as applicable, ownership if certain adverse regulatory events occur, such as it becoming illegal for the physician(s) to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility. The non-controlling interests—redeemable are reported outside of stockholders' equity in the condensed consolidated balance sheets.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. The Company uses fair value measurements based on inputs classified into the following hierarchy:

•Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These may include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, depending on the nature of the item being valued.

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, restricted invested assets and accounts payable approximate their fair values under Level 3 calculations.

Variable Interest Entities

Variable Interest EntitiesThe condensed consolidated financial statements include the accounts of variable interest entities ("VIE") in which the Company is the primary beneficiary under the provisions of the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification 810, "Consolidation". The Company has the power to direct the activities that most significantly impact a VIE's economic performance. Additionally, the Company would absorb the majority of the expected losses from any of these entities should such expected losses occur.

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Organization and Summary of Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Revenues

A summary of revenues by service type as a percentage of total revenues follows:

	Three Months Ended March 31,
	2023		2022
Patient service revenues:
Surgical facilities revenues	96.0	%	95.7	%
Ancillary services revenues	2.5	%	2.9	%
Total patient service revenues	98.5	%	98.6	%
Other service revenues	1.5	%	1.4	%
Total revenues	100.0	%	100.0	%

The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in millions):

	Three Months Ended March 31,
	2023				2022
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	335.6	51.1	%	$	300.2	51.1	%
Government	287.8		43.8	%	249.0		42.4	%
Self-pay	15.6		2.4	%	16.8		2.9	%
Other (1)	17.4		2.7	%	21.7		3.6	%
Total patient service revenues	656.4		100.0	%	587.7		100.0	%
Other service revenues	9.8				8.5
Total revenues	$	666.2			$	596.2

(1)Other is comprised of anesthesia service agreements, automobile liability, letters of protection and other payor types.

Schedule of Rollforward of Goodwill

A summary of activity related to goodwill for the three months ended March 31, 2023 is as follows (in millions):

Balance at December 31, 2022	$	4,137.1
Acquisitions, including post acquisition adjustments	91.3
Disposals	(11.1)
Balance at March 31, 2023	$	4,217.3

Schedule of Rollforward of Noncontrolling Interest - Redeemable

A summary of activity related to non-controlling interests—redeemable is as follows (in millions):

	Three Months Ended March 31,
	2023		2022
Balance at beginning of period	$	342.0	$	330.2
Net income attributable to non-controlling interests—redeemable	7.8		10.6
Acquisition of shares of non-controlling interests, net—redeemable	7.7		12.3
Distributions to non-controlling interest—redeemable holders	(11.7)		(11.6)
Balance at end of period	$	345.8	$	341.5

Schedule of Carrying Amounts and Fair Values of Long-Term Debt

A summary of the carrying amounts and estimated fair values of the Company's long-term debt follows (in millions):

	Carrying Amount				Fair Value
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Senior secured term loan	$	1,370.1	$	1,370.0	$	1,353.0	$	1,359.7
6.750% senior unsecured notes due 2025	$	185.0	$	185.0	$	181.5	$	183.4
10.000% senior unsecured notes due 2027	$	320.0	$	320.0	$	326.4	$	326.8

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Summary of Long-term Debt

A summary of long-term debt follows (in millions):

	March 31, 2023		December 31, 2022
Senior secured term loan (1)	$	1,370.1	$	1,370.0
6.750% senior unsecured notes due 2025	185.0		185.0
10.000% senior unsecured notes due 2027	320.0		320.0
Notes payable and other secured loans	174.9		171.3
Finance lease obligations	553.5		585.7
Less: unamortized debt issuance costs and discounts	(9.7)		(10.2)
Total debt	2,593.8		2,621.8
Less: Current maturities	62.9		62.8
Total long-term debt	$	2,530.9	$	2,559.0

(1)Includes unamortized fair value discount of $2.0 million and $2.1 million as of March 31, 2023 and December 31, 2022, respectively.

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Components of Right-of-use Assets and Liabilities Related to Leases

The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets (in millions):

	Classification in Consolidated Balance Sheets	March 31, 2023		December 31, 2022
Assets:
Operating lease assets	Right-of-use operating lease assets	$	274.0	$	279.1
Finance lease assets	Property and equipment, net of accumulated depreciation	490.6		529.6
Total leased assets		$	764.6	$	808.7
Liabilities:
Operating lease liabilities:
Current	Other current liabilities	$	38.0	$	36.5
Long-term	Right-of-use operating lease liabilities	268.8		271.4
Total operating lease liabilities		306.8		307.9
Finance lease liabilities:
Current	Current maturities of long-term debt	21.4		20.9
Long-term	Long-term debt, less current maturities	532.1		564.8
Total finance lease liabilities		553.5		585.7
Total lease liabilities		$	860.3	$	893.6

Schedule of Lease Expense and Cash Flow Information

The following table presents the components of the Company's lease expense included in the condensed consolidated statement of operations (in millions):

	Three Months Ended March 31,
	2023		2022
Operating lease costs	$	16.4	$	16.1
Finance lease costs:
Amortization of leased assets	9.4		9.2
Interest on lease liabilities	12.3		9.9
Total finance lease costs	21.7		19.1
Variable and short-term lease costs	5.2		4.4
Total lease costs	$	43.3	$	39.6

The following table presents supplemental cash flow information (dollars in millions):

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	16.1	$	15.6
Operating cash outflows from finance leases	$	11.7	$	9.8
Financing cash outflows from finance leases	$	6.4	$	6.0
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	8.9	$	22.0
Finance leases	$	15.4	$	89.3

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Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Interest Rate Swaps and Interest Rate Caps Outstanding

During 2023 and 2022, such derivatives have been used to hedge the variable cash flows associated with existing variable-rate debt.

The key terms of interest rate swaps and interest rate caps outstanding are presented below:

		March 31, 2023			December 31, 2022
Description	Effective Date	Notional Amount (in millions)		Status	Notional Amount (in millions)		Status	Maturity Date
Pay-fixed swap	May 7, 2021	$	435.0	Active	$	435.0	Active	March 31, 2025
Pay-fixed swap	May 7, 2021	330.0		Active	330.0		Active	March 31, 2025
Pay-fixed swap	May 7, 2021	435.0		Active	435.0		Active	March 31, 2025
Interest rate cap	September 30, 2021	157.2		Active	159.1		Active	March 31, 2025
Interest rate cap	September 30, 2021	8.9		Active	159.1		Active	March 31, 2025
Pay-fixed swap	November 30, 2018	165.0		Active	165.0		Active	November 30, 2023
Pay-fixed swap	November 30, 2018	120.0		Active	120.0		Active	November 30, 2023
Pay-fixed swap	June 28, 2019	150.0		Active	150.0		Active	November 30, 2023
Receive-fixed swap	April 30, 2021	(165.0)		Active	(165.0)		Active	November 30, 2023
Receive-fixed swap	April 30, 2021	(120.0)		Active	(120.0)		Active	November 30, 2023
Receive-fixed swap	April 30, 2021	(150.0)		Active	(150.0)		Active	November 30, 2023
		$	1,366.1		$	1,518.2

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table presents the fair values of our derivatives and their location on the condensed consolidated balance sheets (in millions):

		March 31, 2023				December 31, 2022
	Location	Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments
Interest rate caps	Other long-term assets	$	—	$	—	$	9.0	$	—
Interest rate swaps	Other long-term assets	6.2		—		8.5		—
Interest rate swaps	Other long-term liabilities	—		6.2		—		8.5
Derivatives in cash flow hedging relationships
Interest rate caps	Other long-term assets	8.4		—		10.4		—
Interest rate swaps	Other long-term assets	70.6		—		85.5		—
Interest rate swaps	Other long-term liabilities (1)	—		28.3		—		31.9
Total		$	85.2	$	34.5	$	113.4	$	40.4

(1)The balance is related to the financing component of the pay-fixed, receive floating interest rate swaps.

Schedule of Effect of Interest Rate Swaps

The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and condensed consolidated statement of operations (in millions):

		Three Months Ended March 31,
	Location	2023		2022
Derivatives not designated as hedging instruments
Loss recognized in income	Other income, net	$	0.6	$	0.1
Derivatives in cash flow hedging relationships
(Loss) gain recognized in OCI (effective portion)		$	(5.2)	$	50.4
(Gain) loss reclassified from accumulated OCI into income (effective portion) (1)	Interest expense, net	$	(6.1)	$	6.4

(1)Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $5.4 million and $5.3 million for the three months ended March 31, 2023 and 2022, respectively.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Schedule of Reconciliation of Numerator and Denominator of Basic and Diluted Earnings per Share

A reconciliation of the numerator and denominator of basic and diluted earnings per share follows (dollars in millions, except per share amounts; shares in thousands):

	Three Months Ended March 31,
	2023		2022
Numerator:
Net (loss) income attributable to Surgery Partners, Inc.	$	(24.9)	$	12.2
Denominator:
Weighted average shares outstanding- basic	125,206		87,995
Weighted average shares outstanding- diluted (1)	125,206		90,272
(Loss) income per share:
Basic	$	(0.20)	$	0.14
Diluted (1)	$	(0.20)	$	0.14
Dilutive securities outstanding not included in the computation of (loss) income per share as their effect is antidilutive:
Stock options	1,338		1,634
Restricted shares	67		643

(1)The impact of potentially dilutive securities for the three months ended March 31, 2023, was not considered because the effect would be anti-dilutive.

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Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2023

Other Liabilities Disclosure [Abstract]

Summary of Other Current Liabilities

A summary of other current liabilities is as follows (in millions):

	March 31, 2023		December 31, 2022
Right-of-use operating lease liabilities	$	38.0	$	36.5
Amounts due to patients and payors	30.0		31.9
Cost report liabilities	24.2		23.5
Interest payable	23.7		19.4
Acquisition escrow	17.4		28.8
Accrued expenses and other	66.7		70.0
Total	$	200.0	$	210.1

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Schedule of Segment Revenue and Operating Income

The following tables present financial information for each reportable segment (in millions):

	Three Months Ended March 31,
	2023		2022
Revenues:
Surgical Facility Services	$	649.0	$	578.8
Ancillary Services	17.2		17.4
Total	$	666.2	$	596.2
Adjusted EBITDA:
Surgical Facility Services	$	118.8	$	101.0
Ancillary Services	(1.4)		0.1
All other	(27.3)		(24.0)
Total	$	90.1	$	77.1
Reconciliation of Adjusted EBITDA:
(Loss) income before income taxes	$	(0.4)	$	44.1
Net income attributable to non-controlling interests	(26.1)		(30.6)
Interest expense, net	46.8		56.3
Depreciation and amortization	33.7		27.4
Equity-based compensation expense	4.2		3.7
Transaction, integration and acquisition costs (1)	12.8		7.1
Net loss (gain) on disposals, consolidations and deconsolidations (2)	10.5		(0.1)
Litigation settlements and regulatory change impact (3)	8.0		(30.8)
Undesignated derivative activity	0.6		—
Adjusted EBITDA	$	90.1	$	77.1

(1)This amount includes transaction and integration costs of $12.5 million and $7.1 million for the three months ended March 31, 2023 and 2022, respectively. This amount further includes start-up costs related to de novo surgical facilities of $0.3 million for the three months ended March 31, 2023, with no comparable costs for the three months ended March 31, 2022.

(2)Includes an $8.5 million loss for the three months ended March 31, 2023 related to a surgical facility with a book value of the asset group in excess of the fair value based on a letter of intent.

(3)This amount includes a litigation settlement loss of $3.0 million and a gain of $32.8 million for the three months ended March 31, 2023 and 2022, respectively. This amount also includes other litigation costs of $0.6 million and $2.0 million for the three months ended March 31, 2023 and 2022, respectively. Additionally, the three months ended March 31, 2023, includes $4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection.

Schedule of Reconciliation of Assets from Segment to Consolidated

	March 31, 2023		December 31, 2022
Assets:
Surgical Facility Services	$	6,049.2	$	6,001.1
Ancillary Services	41.4		41.7
All other	552.7		639.3
Total assets	$	6,643.3	$	6,682.1

Schedule of Financial Information by Reportable Segment

	Three Months Ended March 31,
	2023		2022
Cash purchases of property and equipment:
Surgical Facility Services	$	23.8	$	17.7
Ancillary Services	0.5		0.2
All other	—		0.3
Total cash purchases of property and equipment	$	24.3	$	18.2

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Organization and Summary of Accounting Policies - Organization (Details)	Mar. 31, 2023 facility state
Summary of Investment Holdings [Line Items]
Number of surgical facilities owned	145
Number of states in which entity operates | state	31
Number of surgical facilities owned, majority interest	92
Number of surgical facilities owned, consolidated	118
Facilities, Ambulatory Surgery Centers
Summary of Investment Holdings [Line Items]
Number of surgical facilities owned	127
Facilities, Surgical Hospitals
Summary of Investment Holdings [Line Items]
Number of surgical facilities owned	18

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Organization and Summary of Accounting Policies - Schedule of Revenues by Service Type (Details) - Revenue Source - Revenue	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue from External Customer [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	100.00%	100.00%
Patent service revenues
Revenue from External Customer [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	98.50%	98.60%
Surgical Facility Services
Revenue from External Customer [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	96.00%	95.70%
Ancillary Services
Revenue from External Customer [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	2.50%	2.90%
Other service revenues
Revenue from External Customer [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	1.50%	1.40%

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Organization and Summary of Accounting Policies - Schedule of Revenues by Sources (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Total revenues	$ 666.2	$ 596.2
Patient service revenues
Disaggregation of Revenue [Line Items]
Total revenues	$ 656.4	$ 587.7
Patient service revenues | Customer | Revenue
Disaggregation of Revenue [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	100.00%	100.00%
Private insurance
Disaggregation of Revenue [Line Items]
Total revenues	$ 335.6	$ 300.2
Private insurance | Customer | Revenue
Disaggregation of Revenue [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	51.10%	51.10%
Government
Disaggregation of Revenue [Line Items]
Total revenues	$ 287.8	$ 249.0
Government | Customer | Revenue
Disaggregation of Revenue [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	43.80%	42.40%
Self-pay
Disaggregation of Revenue [Line Items]
Total revenues	$ 15.6	$ 16.8
Self-pay | Customer | Revenue
Disaggregation of Revenue [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	2.40%	2.90%
Other
Disaggregation of Revenue [Line Items]
Total revenues	$ 17.4	$ 21.7
Other | Customer | Revenue
Disaggregation of Revenue [Line Items]
Revenue by service type as a proportion of total revenues (as a percent)	2.70%	3.60%
Other service revenues
Disaggregation of Revenue [Line Items]
Total revenues	$ 9.8	$ 8.5

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Organization and Summary of Accounting Policies - Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Effective tax rate (percent)	400.00%	2.90%
Tax benefits related to vesting of restricted stock awards	$ 1.8	$ 4.6
Tax benefits attributable to non-recurring earnings' impact on the valuation allowance		1.8
Tax benefits related to the sale of partnership interests		$ 1.0

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Organization and Summary of Accounting Policies - Schedule of Rollforward of Goodwill (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)
Goodwill [Roll Forward]
Goodwill, beginning of period	$ 4,137.1
Acquisitions, including post acquisition adjustments	91.3
Disposals	(11.1)
Goodwill, end of period	$ 4,217.3

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Organization and Summary of Accounting Policies - Schedule of Non-Controlling Interests - Redeemable (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Non-Controlling Interests - Redeemable [Roll Forward]
Balance at beginning of period	$ 342.0	$ 330.2
Net income attributable to non-controlling interests—redeemable	7.8	10.6
Acquisition of shares of non-controlling interests, net—redeemable	7.7	12.3
Distributions to non-controlling interest—redeemable holders	(11.7)	(11.6)
Balance at end of period	$ 345.8	$ 341.5

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Organization and Summary of Accounting Policies - Medicare Accelerated Payments and Deferred Governmental Grants (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Grant funds	$ (1.1)	$ (1.2)
Unrecognized grant funds received			$ 3.0
Repayments of grants received		$ 18.0

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Organization and Summary of Accounting Policies - Schedule of Carrying Amount and Fair Value of Long-Term Debt (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Secured Debt | Senior secure term loan | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt	$ 1,370.1	$ 1,370.0
Secured Debt | Senior secure term loan | Fair Value | Fair Value, Inputs, Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt	$ 1,353.0	1,359.7
Senior Notes | 6.750% senior unsecured notes due 2025
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Stated interest rate (percent)	6.75%
Senior Notes | 6.750% senior unsecured notes due 2025 | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt	$ 185.0	185.0
Senior Notes | 6.750% senior unsecured notes due 2025 | Fair Value | Fair Value, Inputs, Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt	$ 181.5	183.4
Senior Notes | 10.000% senior unsecured notes due 2027
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Stated interest rate (percent)	10.00%
Senior Notes | 10.000% senior unsecured notes due 2027 | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt	$ 320.0	320.0
Senior Notes | 10.000% senior unsecured notes due 2027 | Fair Value | Fair Value, Inputs, Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt	$ 326.4	$ 326.8

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Organization and Summary of Accounting Policies - Variable Interest Entities (Details) $ in Millions	Mar. 31, 2023 facility	Mar. 31, 2023 physician_practice	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Variable Interest Entity [Line Items]
Number of facilities included in VIE	7	5
Assets			$ 6,643.3	$ 6,682.1
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Assets			69.9	64.9
Liabilities			$ 44.5	$ 40.9

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Acquisitions and Disposals - Acquisitions (Details) $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2023 USD ($) facility	Mar. 31, 2022 USD ($) facility	Dec. 31, 2022 USD ($)
Business Acquisition [Line Items]
Payments for acquisitions, net of cash acquired	$ 40.7	$ 31.1
Goodwill	4,217.3		$ 4,137.1
Payments to acquire equity method investments	9.6	0.0
Surgical Facility and Physician Practice
Business Acquisition [Line Items]
Payments for acquisitions, net of cash acquired	16.2
Noncash consideration	1.3
Recognized non-controlling interests	12.0
Goodwill	25.7
Surgical Facilities
Business Acquisition [Line Items]
Payments for acquisitions, net of cash acquired	24.5	31.1
Noncash consideration		2.6
Recognized non-controlling interests	34.2	10.6
Goodwill	$ 65.6	$ 42.7
Number of facilities acquired | facility	2	2
Non-controlling interest, fair value			$ 8.3
Net (loss) gain on fair value of non-controlling interest	$ 2.9
Existing Surgical Facility
Business Acquisition [Line Items]
Payments to acquire equity method investments	12.4
Payments for acquisitions, deferred	$ 2.8
Surgical Facilities, Existing Markets
Business Acquisition [Line Items]
Number of facilities acquired | facility		1

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Acquisitions and Disposals - Disposals and Deconsolidations (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($) business_entity facility
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from disposals of facilities and other assets	$ 8.0	$ 0.0
One Surgical Facility | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from disposals of facilities and other assets	8.8
Pre-tax gain (loss) on disposals and deconsolidations	0.2
2022 Disposals
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Pre-tax gain (loss) on disposals and deconsolidations	$ (5.6)
2022 Disposals | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from disposals of facilities and other assets		11.5
Pre-tax gain (loss) on disposals and deconsolidations		$ (0.4)
Number of surgical facilities contributed as non-cash consideration | facility		2
Fair value of investments		$ 9.8
2022 Disposals | Disposed of by Sale | Series of Individually Immaterial Business Acquisitions
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of facilities acquired | business_entity		2

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Long-Term Debt - Summary of Long-term Debt (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Finance lease obligations	$ 553.5	$ 585.7
Less: unamortized debt issuance costs and discounts	(9.7)	(10.2)
Total debt	2,593.8	2,621.8
Less: Current maturities	62.9	62.8
Total long-term debt	2,530.9	2,559.0
Secured Debt | Senior secure term loan
Debt Instrument [Line Items]
Long-term debt	1,370.1	1,370.0
Unamortized fair value discount	2.0	2.1
Senior Notes | 6.750% senior unsecured notes due 2025
Debt Instrument [Line Items]
Long-term debt	$ 185.0	185.0
Stated interest rate (percent)	6.75%
Senior Notes | 10.000% senior unsecured notes due 2027
Debt Instrument [Line Items]
Long-term debt	$ 320.0	320.0
Stated interest rate (percent)	10.00%
Notes payable and other secured loans
Debt Instrument [Line Items]
Long-term debt	$ 174.9	$ 171.3

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Long-Term Debt - Narrative (Details) - Secured Debt - USD ($)	Jan. 13, 2023	Mar. 31, 2023	Dec. 31, 2022
Revolving Credit Facility
Debt Instrument [Line Items]
Availability on line of credit instrument		$ 545,900,000
Revolving Credit Facility | The Revolver
Debt Instrument [Line Items]
Line of credit facility, increase in borrowing capacity	$ 203,800,000
Amount of line of credit outstanding		0	$ 0
Letter of Credit
Debt Instrument [Line Items]
Availability on line of credit instrument		$ 7,900,000

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Leases - Schedule of Components of Right-of-use Assets and Liabilities Related to Leases (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Assets:
Operating lease assets	$ 274.0	$ 279.1
Finance lease assets	490.6	529.6
Total leased assets	764.6	808.7
Operating lease liabilities:
Current	38.0	36.5
Long-term	268.8	271.4
Total operating lease liabilities	306.8	307.9
Finance lease liabilities:
Current	21.4	20.9
Long-term	532.1	564.8
Finance lease obligations	553.5	585.7
Total lease liabilities	$ 860.3	$ 893.6
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Property and equipment, net of accumulated depreciation of $382.7 and $374.3, respectively	Property and equipment, net of accumulated depreciation of $382.7 and $374.3, respectively
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Other current liabilities	Other current liabilities
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	Less: Current maturities	Less: Current maturities
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Long-term debt, less current maturities	Long-term debt, less current maturities

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Leases - Lease Expense and Cash Flow Information (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases [Abstract]
Operating lease costs	$ 16.4	$ 16.1
Finance lease costs:
Amortization of leased assets	9.4	9.2
Interest on lease liabilities	12.3	9.9
Total finance lease costs	21.7	19.1
Variable and short-term lease costs	5.2	4.4
Total lease costs	43.3	39.6
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	16.1	15.6
Operating cash outflows from finance leases	11.7	9.8
Financing cash outflows from finance leases	6.4	6.0
Right-of-use assets obtained in exchange for operating lease obligations	8.9	22.0
Right-of-use assets obtained in exchange for finance lease obligations	$ 15.4	$ 89.3

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Derivatives and Hedging Activities - Schedule of Interest Rate Swaps and Interest Rate Caps Outstanding (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative asset, notional amount	$ 85.2	$ 113.4
Derivative liability, notional amount	(34.5)	(40.4)
Derivative notional amount	1,366.1	1,518.2
Pay-fixed swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative asset, notional amount	435.0	435.0
Pay-fixed swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative asset, notional amount	330.0	330.0
Pay-fixed swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative asset, notional amount	435.0	435.0
Interest rate cap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative asset, notional amount	157.2	159.1
Interest rate cap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative asset, notional amount	8.9	159.1
Pay-fixed swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative asset, notional amount	165.0	165.0
Pay-fixed swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative asset, notional amount	120.0	120.0
Pay-fixed swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative asset, notional amount	150.0	150.0
Receive-fixed swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative liability, notional amount	(165.0)	(165.0)
Receive-fixed swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative liability, notional amount	(120.0)	(120.0)
Receive-fixed swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Derivative liability, notional amount	$ (150.0)	$ (150.0)

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Derivatives and Hedging Activities - Narrative (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($) interest_rate_swap	Dec. 31, 2022 USD ($)
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Derivative notional amount | $	$ 1,366.1	$ 1,518.2
Amount estimated to be reclassified as a reduction to interest expense over next 12 months | $	$ 33.6
Interest Rate Swap | Derivatives in cash flow hedging relationships
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Number of interest rate swaps | interest_rate_swap	9
Derivative notional amount | $	$ 1,200.0
Three Pay-fixed Interest Rate Swaps Subject To Minimum Of 0.75% | Derivatives in cash flow hedging relationships
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Number of interest rate swaps | interest_rate_swap	3
Derivative notional amount | $	$ 1,200.0
Three Pay-fixed Interest Rate Swaps Subject To Minimum Of 0.75% | Derivatives in cash flow hedging relationships | LIBOR | Minimum
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Variable interest rate of derivative instrument (percent)	0.75%
Six Undersigned Interest Rate Swaps | Derivatives in cash flow hedging relationships
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Number of interest rate swaps | interest_rate_swap	6
Three Pay-fixed Interest Rate Swaps Subject To Minimum Of 1.00% | Derivatives in cash flow hedging relationships
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Number of interest rate swaps | interest_rate_swap	3
Three Pay-fixed Interest Rate Swaps Subject To Minimum Of 1.00% | Derivatives in cash flow hedging relationships | LIBOR | Minimum
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Variable interest rate of derivative instrument (percent)	1.00%
Three Interest Rate Swaps That Pay 1-Month LIBOR Subject To Minimum Of 1.00% | Derivatives in cash flow hedging relationships
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Number of interest rate swaps | interest_rate_swap	3
Three Interest Rate Swaps That Pay 1-Month LIBOR Subject To Minimum Of 1.00% | Derivatives in cash flow hedging relationships | LIBOR | Minimum
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Variable interest rate of derivative instrument (percent)	1.00%
Interest Rate Caps
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Number of interest rate swaps | interest_rate_swap	2
Derivative notional amount | $	$ 166.1
Interest Rate Caps | Derivatives not designated as hedging instruments
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Gain on termination | $	$ 8.6

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Derivatives and Hedging Activities - Schedule of Derivative Instruments in Statement of Financial Position, Fair Value (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Derivative asset, notional amount	$ 85.2	$ 113.4
Derivative liability, notional amount	34.5	40.4
Derivatives not designated as hedging instruments | Other long-term assets | Interest Rate Caps
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Derivative asset, notional amount		9.0
Derivatives not designated as hedging instruments | Other long-term assets | Interest Rate Swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Derivative asset, notional amount	6.2	8.5
Derivatives not designated as hedging instruments | Other long-term liabilities | Interest Rate Swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Derivative liability, notional amount	6.2	8.5
Derivatives in cash flow hedging relationships | Other long-term assets | Interest Rate Caps
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Derivative asset, notional amount	8.4	10.4
Derivatives in cash flow hedging relationships | Other long-term assets | Interest Rate Swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Derivative asset, notional amount	70.6	85.5
Derivatives in cash flow hedging relationships | Other long-term liabilities | Interest Rate Swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Derivative liability, notional amount	$ 28.3	$ 31.9

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Derivatives and Hedging Activities - Pre-tax Effect of Derivatives on AOCI and Statement of Operations (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Amortization of accumulated OCI related	$ 5.4	$ 5.3
OCI, Cash Flow Hedge, Reclassification for Discontinuance, Statement of Income or Comprehensive Income [Extensible Enumeration]	Interest expense, net
Derivatives not designated as hedging instruments
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Loss recognized in income	$ 0.6	0.1
Derivatives in cash flow hedging relationships
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
(Loss) gain recognized in OCI (effective portion)	(5.2)	50.4
Loss (gain) reclassified from accumulated OCI into income (effective portion)	$ (6.1)	$ 6.4

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Earnings Per Share - Summary (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
Numerator:
Net (loss) income attributable to Surgery Partners, Inc.		$ (24.9)	$ 12.2
Denominator:
Weighted average shares outstanding- basic (shares)		125,206	87,995
Weighted average shares outstanding- diluted (shares)	[1]	125,206	90,272
(Loss) income per share:
Basic (in USD per share)		$ (0.20)	$ 0.14
Diluted (in USD per share)	[1]	$ (0.20)	$ 0.14
Stock options
(Loss) income per share:
Dilutive securities outstanding not included in the computation of (loss) income per share as their effect is antidilutive (shares)		1,338	1,634
Restricted shares
(Loss) income per share:
Dilutive securities outstanding not included in the computation of (loss) income per share as their effect is antidilutive (shares)		67	643

[1] The impact of potentially dilutive securities for the three months ended March 31, 2023 was not considered because the effect would be anti-dilutive.

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Other Current Liabilities - Summary (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Other Liabilities Disclosure [Abstract]
Right-of-use operating lease liabilities	$ 38.0	$ 36.5
Amounts due to patients and payors	30.0	31.9
Cost report liabilities	24.2	23.5
Interest payable	23.7	19.4
Acquisition escrow	17.4	28.8
Accrued expenses and other	66.7	70.0
Total	$ 200.0	$ 210.1

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Commitments and Contingencies (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]
Professional, general and workers' compensation insurance reserve		$ 22.1		$ 20.8
Expected insurance recoveries		12.7		$ 12.7
Litigation settlement	$ 32.8	$ (3.0)	$ 32.8

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Segment Reporting - Schedule of Segment Revenue and Operating Income (Details) $ in Millions	1 Months Ended	3 Months Ended
	Mar. 31, 2022 USD ($)	Mar. 31, 2023 USD ($) segment	Mar. 31, 2022 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment		2
Segment Reporting Information [Line Items]
Revenues		$ 666.2	$ 596.2
Adjusted EBITDA		90.1	77.1
Reconciliation of Adjusted EBITDA:
(Loss) income before income taxes		(0.4)	44.1
Net income attributable to non-controlling interests		(26.1)	(30.6)
Interest expense, net		46.8	56.3
Depreciation and amortization		33.7	27.4
Equity-based compensation expense		4.2	3.7
Transaction, integration and acquisition costs		12.8	7.1
Net loss (gain) on disposals, consolidations and deconsolidations		10.5	(0.1)
Litigation settlements and regulatory change impact		8.0	(30.8)
Undesignated derivative activity		0.6	0.0
Adjusted EBITDA		90.1	77.1
Transaction and integration costs		12.5	7.1
Start-up costs		0.3
(Loss) gain on litigation settlement	$ 32.8	(3.0)	32.8
Other litigation costs		0.6	2.0
Additional interest expense for Florida LOP regulation change		4.4
Surgical Facility Services
Reconciliation of Adjusted EBITDA:
Net loss (gain) on disposals, consolidations and deconsolidations		(8.5)
Operating Segments | Surgical Facility Services
Segment Reporting Information [Line Items]
Revenues		649.0	578.8
Adjusted EBITDA		118.8	101.0
Reconciliation of Adjusted EBITDA:
Adjusted EBITDA		118.8	101.0
Operating Segments | Ancillary Services
Segment Reporting Information [Line Items]
Revenues		17.2	17.4
Adjusted EBITDA		(1.4)	0.1
Reconciliation of Adjusted EBITDA:
Adjusted EBITDA		(1.4)	0.1
All other
Segment Reporting Information [Line Items]
Adjusted EBITDA		(27.3)	(24.0)
Reconciliation of Adjusted EBITDA:
Adjusted EBITDA		$ (27.3)	$ (24.0)

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Segment Reporting - Assets and Cash Purchases of Property and Equipment by Operating Segment (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Segment Reporting Information [Line Items]
Total assets	$ 6,643.3		$ 6,682.1
Total cash purchases of property and equipment	24.3	$ 18.2
Operating Segments | Surgical Facility Services
Segment Reporting Information [Line Items]
Total assets	6,049.2		6,001.1
Total cash purchases of property and equipment	23.8	17.7
Operating Segments | Ancillary Services
Segment Reporting Information [Line Items]
Total assets	41.4		41.7
Total cash purchases of property and equipment	0.5	0.2
All other
Segment Reporting Information [Line Items]
Total assets	552.7		$ 639.3
Total cash purchases of property and equipment	$ 0.0	$ 0.3

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Subsequent Events (Details) $ in Millions	1 Months Ended	3 Months Ended
	Apr. 30, 2023 USD ($) facility	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)
Subsequent Event [Line Items]
Proceeds from disposals of facilities and other assets		$ 8.0	$ 0.0
Payments to acquire equity method investments		$ 9.6	$ 0.0
Subsequent Event | Disposed of by Sale | Two Surgical Facilities
Subsequent Event [Line Items]
Number of interests sold | facility	2
Proceeds from disposals of facilities and other assets	$ 23.0
Subsequent Event | In-Development De Novo Surgical Facility
Subsequent Event [Line Items]
Payments to acquire equity method investments	$ 6.1