Surgery Partners, Inc. (SGRY)

“We partner with physicians, not compete against them.”

Surgery Partners operates a network of over 300 surgical facilities—ambulatory surgery centers, surgical hospitals, and ancillary services—across 30 states. The company’s positioning is built on a deliberate operational choice: it grows through joint ventures with physicians and health systems rather than through wholly owned facilities. This partnership model has reshaped the economics of outpatient surgery and is shifting how health systems think about capital deployment and physician alignment.

The shift from single ownership to joint ventures

Surgery Partners’ core insight is that ambulatory surgery centers and surgical hospitals are not pure real-estate or pure operations plays. They are physician-dependent businesses. A surgical facility without surgeons, anesthesiologists, and qualified nursing staff is an empty building. A facility where surgeons are alienated shareholders or outside contractors generates lower case volumes, lower utilization, and higher operational friction.

Historically, surgery centers and surgical hospitals were built in two ways: either physicians owned and operated them directly, or hospital systems owned them as owned-subsidiary operations. Surgery Partners introduced a third model: the company partners with physicians to jointly own and operate facilities. Surgery Partners typically contributes capital, provides operational expertise, and handles administrative functions. Physicians contribute their relationships, their surgical schedules, their clinical judgment, and their upside from facility profitability.

This structure aligns incentives in ways pure ownership does not. A physician who owns a piece of the surgery center has a material stake in its efficiency, its case volumes, and its profitability. That stake draws surgeons into facilities and generates referral volumes that wholly owned or hospital-owned facilities struggle to match.

The business model at work

Surgery Partners identifies geographic markets with fragmented surgery center ownership, clusters of physicians looking for partnership, or health systems seeking to retain surgical services within their network. The company then partners with local physicians or health systems to jointly own new facilities or to acquire and reposition existing ones.

The partnership model comes in several forms. A typical structure: Surgery Partners owns a controlling or significant stake, physicians own a meaningful minority, and the partners structure the joint venture to share profits, voting rights, and decision-making authority. Alternatively, Surgery Partners may be the minority partner, providing operational and capital management while physicians or health systems retain majority control.

The company generates revenue through management fees (for providing operational services), capture of the center’s profits (through its ownership stake), and ancillary services like physician staffing and billing support. Surgeries performed at these facilities are typically paid directly by insurers or patients, not by Surgery Partners; the company’s margin comes from running the facility efficiently, not from billing for procedures.

Specialization and acuity as strategic focus

Surgery Partners operates across multiple surgical specialties: orthopedics and spine, pain management, ophthalmology, gastroenterology, general surgery, and others. Historically the company pursued a portfolio approach, acquiring whatever surgery centers became available. In recent years, management has narrowed the focus toward higher-acuity specialties—orthopedics, cardiology, complex general surgery—and is building depth in these categories.

High-acuity surgery generates higher reimbursement per case, attracts higher-caliber surgeons, and is less vulnerable to competition from hospital outpatient departments or home-based procedures. A routine cataract surgery can be performed in a small ambulatory center or even in a physician’s office. A complex joint replacement or a cardiac procedure requires an accredited surgical facility with sophisticated equipment and skilled staff. Surgery Partners’ pivot toward acuity is a bet that this segment is defensible and profitable.

The health-system partnership strategy

A newer development is the company’s explicit focus on joint ventures with large health systems. In late 2025, Surgery Partners partnered with Baylor Scott & White Health to jointly own a surgical hospital in Bryan, Texas. This deal represents a model Surgery Partners sees as repeatable: the company provides capital and operational expertise; the health system provides physician relationships and patient referrals; the partners share ownership and profit.

This strategy allows Surgery Partners to enter markets and specialties it might not penetrate through standalone acquisitions. It also gives health systems a way to retain surgical services—and surgical profit—within their network without having to operate facilities directly. Many large health systems are under margin pressure and see surgery centers as a way to generate higher profit per case than hospital outpatient departments do.

The fragmented supply chain

Ambulatory surgery centers are highly fragmented. No national operator has anything approaching a dominant market share. Surgery Partners is one of the largest players, but competes against hundreds of smaller regional operators, physician-owned groups, and health-system surgery centers. This fragmentation creates both opportunity and risk.

The opportunity: Surgery Partners can continue to grow by acquiring or partnering with independent facilities, consolidating them under unified management, and driving operational improvements. The company has deployed capital aggressively toward acquisitions and new partnerships.

The risk: volume is dispersed, and each facility’s performance depends on the health of its surgical specialties and the strength of its physician relationships. A shift in referral patterns, a departure of a key surgeon, or an economic downturn that reduces elective surgery volume can hit a facility hard.

Capital intensity and return on investment

Surgery Partners is capital-intensive. Each new facility requires investment in real estate, equipment, working capital, and startup operating losses before reaching profitability. The company has been deploying large amounts of capital annually, with management signaling plans to deploy $200 million or more in acquisitions in 2026.

The returns on that capital depend on utilization—how many surgeries are performed, how efficiently the center runs, and what reimbursement rates the company negotiates with insurers. Well-run, high-volume centers in good markets can generate attractive returns. Poorly located or underutilized facilities destroy capital.

Management’s discipline in capital allocation has improved; the company now invests more selectively, favoring high-acuity procedures and health-system partnerships over broad-based acquisition. That selectivity should improve returns, though high capital intensity remains a structural feature of the business.

How to research Surgery Partners

Start with the company’s 10-K filing (SEC CIK 0001638833), which details the company’s facility portfolio, specialties, and geographic reach. Pay attention to the section on joint ventures: which partners are material, what are the terms of the partnerships, and what risks are disclosed around physician departures or partnership terminations?

Watch quarterly calls for updates on acquisition pipeline and deployment rates. The company’s growth depends on buying or partnering with new facilities, so understanding the deal flow and the company’s selectivity is critical.

Track utilization metrics if available: case volumes, case mix, and average reimbursement per case all drive profitability. These metrics are often detailed in investor presentations or industry reports.

Monitor regulatory risk. Healthcare is heavily regulated, and reimbursement rates are set or influenced by Medicare and insurance companies. Changes in reimbursement policy, particularly for outpatient surgery, would affect Surgery Partners’ margins and return on capital.

The company’s core strength is its operational expertise and its ability to partner with physicians in a way that generates alignment and volume. Its core risk is capital intensity and dependence on continued access to capital at reasonable costs to fuel growth.