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What changed in Surgery Partners, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Surgery Partners, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+223 added−212 removedSource: 10-K (2026-03-02) vs 10-K (2025-03-07)

Top changes in Surgery Partners, Inc.'s 2025 10-K

223 paragraphs added · 212 removed · 182 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

45 edited+18 added−11 removed134 unchanged
Biggest changeAs a result of legislative changes related to off-campus HOPDs, certain off-campus HOPDs that began billing under the OPPS (or underwent certain changes) on or after November 2, 2015 are no longer paid for most services under the OPPS. Instead, these facilities are paid under the Medicare Physician Fee Schedule ("MPFS"), which typically results in lower reimbursements.
Biggest changeCertain off-campus HOPDs are paid under the Medicare Physician Fee Schedule ("MPFS"), which typically results in lower reimbursements. Services provided in a dedicated emergency department are still paid under the OPPS.
Certificates of Need, Licensure and Accreditation Capital expenditures for the construction of new health care facilities, the addition of beds or new health care services or the acquisition of existing health care facilities may be reviewable by state regulators under statutory programs that are sometimes referred to as certificate of need laws.
Certificates of Need, Licensure and Accreditation Capital expenditures for the construction of new health care facilities, the addition of beds, new health care services or the acquisition of existing health care facilities may be reviewable by state regulators under statutory programs that are sometimes referred to as certificate of need laws.
We believe that our surgical hospitals comply with EMTALA. With respect to our hospitals that do not have an emergency room, those hospitals maintain a protocol for the transfer of patients requiring emergency treatment.
We believe that our surgical hospitals comply with EMTALA. With respect to our surgical hospitals that do not have an emergency room, those hospitals maintain a protocol for the transfer of patients requiring emergency treatment.
In addition, based on the specific operations of our surgical facilities, some of these facilities maintain a pharmacy license, a controlled substance registration, a clinical laboratory certification waiver, and environmental protection permits for biohazards and/or radioactive materials, as required by applicable law.
In addition, based on the specific operations of our surgical facilities, these facilities maintain a pharmacy license, a controlled substance registration, a clinical laboratory certification waiver or laboratory certification, and environmental protection permits for biohazards and/or radioactive materials, as required by applicable law.
In many cases, we keep certain facilities as single-specialty where it suits an individual facility or market demand. We provide each of our surgical facilities with a full range of financial, marketing and operating services.
However, in many cases, we keep certain facilities as single-specialty where it suits an individual facility or market demand. We provide each of our surgical facilities with a full range of financial, marketing and operating services.
The amounts that our surgical facilities receive in payment for their services may be adversely affected by market and cost factors as well as other factors over which we have no control, including Medicare, Medicaid and state regulations, cost containment and utilization decisions and reduced reimbursement schedules of private insurance payors. 2 Table of Contents The following table sets forth the percentage of total patient service revenues for our consolidated surgical facilities by type of payor for the periods indicated: Year Ended December 31, 2024 2023 2022 Private Insurance 53.5 % 52.5 % 51.5 % Government 41.1 % 41.8 % 42.3 % Self-pay 2.7 % 2.5 % 2.6 % Other 2.7 % 3.2 % 3.6 % Total patient service revenues 100.0 % 100.0 % 100.0 % We receive reimbursement from Medicare for surgical services based on three different payment systems depending on the site of service: outpatient surgical services generally provided in our ASCs, hospital outpatient surgical services and hospital inpatient surgical services.
The amounts that our surgical facilities receive in payment for their services may be adversely affected by market and cost factors as well as other factors over which we have no control, including Medicare, Medicaid and state regulations, cost containment and utilization decisions and reduced reimbursement schedules of private insurance payors. 2 Table of Contents The following table sets forth the percentage of total patient service revenues for our consolidated surgical facilities by type of payor for the periods indicated: Year Ended December 31, 2025 2024 2023 Private Insurance 52.3 % 53.5 % 52.5 % Government 42.8 % 41.1 % 41.8 % Self-pay 2.7 % 2.7 % 2.5 % Other 2.2 % 2.7 % 3.2 % Total patient service revenues 100.0 % 100.0 % 100.0 % We receive reimbursement from Medicare for surgical services based on three different payment systems depending on the site of service: outpatient surgical services generally provided in our ASCs, hospital outpatient surgical services and hospital inpatient surgical services.
Operations During 2024 and 2023, we operated in one reportable segment, Surgical Facilities, which includes the operation of ASCs, surgical hospitals, anesthesia services, urgent care facilities and multi-specialty physician practices. Our surgical facilities primarily provide non-emergency surgical procedures across many specialties, including, among others, orthopedics and pain management, ophthalmology, gastroenterology ("GI") and general surgery.
Operations During 2025 and 2024, we operated in one reportable segment, Surgical Facilities, which includes the operation of ASCs, surgical hospitals, anesthesia services, urgent care facilities and multi-specialty physician practices. Our surgical facilities primarily provide non-emergency surgical procedures across many specialties, including, among others, orthopedics and pain management, ophthalmology, gastroenterology ("GI") and general surgery.
Our Surgical Facilities contributed substantially all of our total revenue in 2024, 2023 and 2022. 1 Table of Contents Our typical ASC is a free-standing facility that performs planned surgical procedures on an outpatient basis for patients not requiring hospitalization and for whom an overnight stay is not expected after surgery.
Our Surgical Facilities contributed substantially all of our total revenue in 2025, 2024 and 2023. 1 Table of Contents Our typical ASC is a free-standing facility that performs planned surgical procedures on an outpatient basis for patients not requiring hospitalization and for whom an overnight stay is not expected after surgery.
Based on the OPPS Final Rule, ASC reimbursement rates will increase by 2.9% for 2025. CMS has established the Ambulatory Surgical Center for Quality Reporting ("ASCQR") Program as a pay-for-reporting, quality data program. Our ASCs that participate in the ASCQR Program receive the full annual update to the ASC payment rate.
Based on the OPPS Final Rule, ASC reimbursement rates will increase by 2.6% for 2025. CMS has established the Ambulatory Surgical Center for Quality Reporting ("ASCQR") Program as a pay-for-reporting, quality data program. Our ASCs that participate in the ASCQR Program receive the full annual update to the ASC payment rate.
As of December 31, 2024, the majority of our facilities were accredited by either The Joint Commission or the Accreditation Association for Ambulatory Health Care, two of the major national organizations that establish standards relating to the physical plant, administration, quality of patient care and operation of medical staffs of various types of health care facilities.
As of December 31, 2025, the majority of our facilities were accredited by either The Joint Commission or the Accreditation Association for Ambulatory Health Care, two of the major national organizations that establish standards relating to the physical plant, administration, quality of patient care and operation of medical staffs of various types of health care facilities.
Total Addressable Market Based on management estimates, we believe that the total U.S. outpatient surgical facility market represents greater than $90 billion in annual revenue, including greater than $55 billion of hospital outpatient department procedures and $35 billion of ambulatory surgical center procedures, and we believe that ASCs are capturing an increasing share of the total surgical procedure market.
Total Addressable Market Based on management estimates, we believe that the total U.S. outpatient surgical facility market represents greater than $90 billion in annual revenue, including greater than $55 billion of hospital outpatient department procedures and $45 billion of ambulatory surgical center procedures, and we believe that ASCs are capturing an increasing share of the total surgical procedure market.
In addition, we believe that approximately $60 billion of inpatient surgical cases have the potential to move to outpatient surgery centers, which, together with procedures performed at hospital outpatient departments and ASCs, represents what we believe is a total addressable market of approximately $150 billion.
In addition, we believe that approximately $50 billion of inpatient surgical cases have the potential to move to outpatient surgery centers, which, together with procedures performed at hospital outpatient departments and ASCs, represents what we believe is a total addressable market of approximately $150 billion.
We are one of the largest and fastest growing surgical services businesses in the United States ("U.S."), with more than 200 locations in 31 states, including ambulatory surgery centers ("ASCs"), short-stay surgical hospitals ("surgical hospitals"), and multi-specialty physician practices, among others.
We are one of the largest and fastest growing surgical services businesses in the United States ("U.S."), with more than 200 locations in 30 states, including ambulatory surgery centers ("ASCs"), short-stay surgical hospitals ("surgical hospitals"), and multi-specialty physician practices, among others.
Certificate of need laws are being challenged in many states across the country and any future changes could have positive and negative impacts on our business. We currently operate in 22 states that have certificate of need laws. Our surgical facilities are subject to state licensing requirements.
Certificate of need laws are being challenged in many states across the country and any future changes could have positive and negative impacts on our business. We currently operate in 21 states that have certificate of need laws. Our surgical facilities are subject to state licensing requirements.
Violations of the Stark Law may also result in the imposition of damages equal to three times the amount improperly claimed and civil monetary penalties of up to $15,000 per prohibited claim and $100,000 per prohibited circumvention scheme and exclusion from participation in the Medicare and Medicaid programs.
Violations of the Stark Law may also result in the imposition of damages equal to three times the amount improperly claimed 8 Table of Contents and civil monetary penalties of up to $15,000 per prohibited claim and $100,000 per prohibited circumvention scheme and exclusion from participation in the Medicare and Medicaid programs.
Instead, when a transaction or relationship does not fit within a safe harbor, the facts and circumstances as well as the intent of the parties related to a specific transaction or relationship must be examined to determine whether or not any illegal conduct has occurred.
Instead, when a transaction or relationship does not fit within a safe harbor, the facts and circumstances as well as the 7 Table of Contents intent of the parties related to a specific transaction or relationship must be examined to determine whether or not any illegal conduct has occurred.
For example, various state laws and regulations may require us to notify affected individuals in the event of a data breach involving certain personal information, such as social security numbers, dates of birth and credit card information.
For example, various state laws and regulations may require 9 Table of Contents us to notify affected individuals in the event of a data breach involving certain personal information, such as social security numbers, dates of birth and credit card information.
These audits may result in adjustments to the amounts ultimately determined to be payable to us under these 3 Table of Contents reimbursement programs. Finalization of these audits often takes several years. Providers may appeal any final determination made in connection with an audit.
These audits may result in adjustments to the amounts ultimately determined to be payable to us under these reimbursement programs. Finalization of these audits often takes several years. Providers may appeal any final determination made in connection with an audit.
Under the FFY 2025 final rule, rates for inpatient stays in hospitals paid under the IPPS that successfully report certain quality data under the Hospital Inpatient Quality Reporting ("IQR") Program and demonstrate meaningful use of certified electronic health record ("EHR") technology will be increased by 2.9%.
Under the FFY 2026 final rule, rates for inpatient stays in hospitals paid under the IPPS that successfully report certain quality data under the Hospital Inpatient Quality Reporting ("IQR") Program and demonstrate meaningful use of certified electronic health record ("EHR") technology will be increased by 2.6%.
While ASCs are not currently subject to federal cost reporting requirements, it is possible that such requirements, which could be costly for us, will be implemented by CMS in the future. Acquisition and Development Programs Acquisition Program.
While ASCs are not currently subject to federal cost reporting requirements, it is possible that such requirements, which could be costly for us, will be implemented by CMS in the future. 3 Table of Contents Acquisition and Development Programs Acquisition Program.
Patient services provided in our ASCs and surgical hospitals (collectively, "surgical facilities" or "facilities") generated approximately $3.1 billion in revenue during 2024. Our Growth Strategies Our differentiated operating model employs a multifaceted strategy to grow revenue, earnings and cash flow.
Patient services provided in our ASCs and surgical hospitals (collectively, "surgical facilities" or "facilities") generated approximately $3.2 billion in revenue during 2025. Our Growth Strategies Our differentiated operating model employs a multifaceted strategy to grow revenue, earnings and cash flow.
As 8 Table of Contents a result, we cannot assure you that our surgical facilities will not be investigated or scrutinized by the governmental authorities empowered to do so or, if challenged, that their activities would be found to be lawful.
As a result, we cannot assure you that our surgical facilities will not be investigated or scrutinized by the governmental authorities empowered to do so or, if challenged, that their activities would be found to be lawful.
The OIG might take the position that the failure of the physician investors to enter into similar guarantees represents a special benefit to the physician investors given to induce patient referrals and that such failure constitutes a violation of the Anti-Kickback Statute.
Physician investors are generally not required to enter into similar guarantees. The OIG might take the position that the failure of the physician investors to enter into similar guarantees represents a special benefit to the physician investors given to induce patient referrals and that such failure constitutes a violation of the Anti-Kickback Statute.
On August 1, 2024, CMS published the IPPS final rule for federal fiscal year ("FFY") 2025, which began on October 1, 2024.
On August 8, 2025, CMS published the IPPS final rule for federal fiscal year ("FFY") 2026, which began on October 1, 2025.
On November 1, 2024, CMS published its OPPS final rule for 2025. The final rule provides for a payment rate increase of 2.9%. Hospitals that do not meet the reporting requirements of the Medicare Hospital Outpatient Quality Reporting Program will be subject to a 2.0% payment rate decrease.
On November 21, 2025, CMS published its OPPS final rule for 2026. The final rule provides for a payment rate increase of 2.6%. Hospitals that do not meet the reporting requirements of the Medicare Hospital Outpatient Quality Reporting Program will be subject to a 2.0% payment rate decrease.
Those hospitals that do not successfully report quality data under the IQR Program (but are meaningful EHR users) would be subject to a one-fourth reduction in their annual payment update.
Those hospitals that do not successfully report quality data under the IQR Program (but are meaningful EHR users) would be subject to an approximate one-third reduction in their annual payment update.
Standards for testing under CLIA are based on the complexity of the tests performed by the laboratory, with tests classified as "high complexity," "moderate complexity," or "waived." Laboratories performing high complexity testing are required to meet more stringent requirements than moderate complexity laboratories.
Laboratories also must undergo proficiency testing and are subject to inspections. Standards for testing under CLIA are based on the complexity of the tests performed by the laboratory, with tests classified as "high complexity," "moderate complexity," or "waived." Laboratories performing high complexity testing are required to meet more stringent requirements than moderate complexity laboratories.
Clinical Laboratory Regulation Our clinical laboratories are subject to federal oversight under the Clinical Laboratory Improvement Amendments of 1988 ("CLIA") which extends federal oversight to virtually all clinical laboratories by requiring that they be certified by the federal government or by a federally-approved accreditation agency.
Clinical Laboratory Regulation Our clinical laboratories are subject to federal oversight under the Clinical Laboratory Improvement Amendments of 1988 ("CLIA") which extends federal oversight to virtually all clinical laboratories by requiring that they be certified by the federal government or by a federally-approved accreditation agency. CLIA requires that all clinical laboratories meet quality assurance, quality control and personnel standards.
We employ a dedicated acquisition team with experience in health care services. Our team seeks to acquire surgical facilities that meet our criteria, including prominence and quality of physician partners, specialty mix, opportunities for growth, level of competition in the local market, level of private insurance penetration and our ability to access private insurance contracts.
Our team seeks to acquire surgical facilities that meet our criteria, including prominence and quality of physician partners, specialty mix, opportunities for growth, level of competition in the local market, level of private insurance penetration and our ability to access private insurance contracts.
While we believe that our insurance policies are adequate in amount and coverage for our operations, we make no assurances that the insurance coverage is sufficient to cover all future claims or will continue to be available in adequate amounts or at a reasonable cost. Private Insurance Payors Most private third-party payors reimburse us for services pursuant to written contracts.
While we believe that our insurance policies are adequate in amount and coverage for our operations, we make no assurances that the insurance coverage is sufficient to cover all future claims or will continue to be available in adequate amounts or at a reasonable cost.
Surgical Facilities Operations As of December 31, 2024, we owned or operated 161 surgical facilities, including 142 ASCs and 19 licensed surgical hospitals.
Surgical Facilities Operations As of December 31, 2025, we owned or operated 176 surgical facilities, including 157 ASCs and 19 licensed surgical hospitals.
Of the 161 surgical facilities that were operational as of December 31, 2024, we hold majority ownership in 83 of these surgical facilities and consolidated 118 for financial reporting purposes.
Of the 176 surgical facilities that were operational as of December 31, 2025, we hold majority ownership in 90 of these surgical facilities and consolidated 121 for financial reporting purposes.
In addition, 4 Table of Contents revenue in the fourth quarter could also be impacted by an increased utilization of services due to annual deductibles which are not usually met until later in the year and also as patients utilize their health care benefits before they expire at year-end.
In addition, revenue in the fourth quarter could also be impacted by an increased utilization of services due to annual deductibles which are not usually met until later in the year and also as patients utilize their health care benefits before they expire at year-end. 4 Table of Contents Human Capital Resources At December 31, 2025, we had approximately 16,000 employees, including full-time and part-time employees.
These contracts generally require that we offer discounts from our established charges. In rare cases our payments come from private insurance payors with which we do not have written contracts.
Private Insurance Payors Most group health third-party payors reimburse us for services pursuant to written contracts. These contracts generally require that we offer discounts from our established charges. In rare cases our payments come from private insurance payors with which we do not have written contracts.
As an example, the Tax and Jobs Act of 2017 effectively eliminated the tax penalty associated with the so-called "individual mandate," which required most individuals to obtain qualifying health insurance coverage or pay a tax penalty. As of December 31, 2024, however, further legislative efforts to repeal and replace the Affordable Care Act in full have not been successful.
Efforts to repeal the Affordable Care Act have persisted since its enactment. As an example, the Tax and Jobs Act of 2017 effectively eliminated the tax penalty associated with the so-called "individual mandate," which required most individuals to obtain qualifying health insurance coverage or pay a tax penalty.
Human Capital Resources At December 31, 2024, we had approximately 15,000 employees, including full-time and part-time employees. None of our employees are represented by a collective bargaining agreement. Our mission is to enhance patient quality of life through partnership. We appreciate that our colleagues are key to creating value and believe that we have a good relationship with them.
None of our employees are represented by a collective bargaining agreement. Our mission is to enhance patient quality of life through partnership. We appreciate that our colleagues are key to creating value and believe that we have a good relationship with them.
Competition In each market in which we operate a surgical facility, we compete with hospitals and operators of other surgical facilities to attract physicians and patients.
We seek to include each surgical facility as a participating provider in national and local managed care plans. Competition In each market in which we operate a surgical facility, we compete with hospitals and operators of other surgical facilities to attract physicians and patients.
We generally structure our partnerships where either we are a majority owner partnered with physicians or we are a minority owner with buy-up rights. These buy-up rights give us the option to own a controlling interest at some point in the future. Alternatively, we may choose to pursue a strategic relationship with physicians and a health care system.
We generally structure our partnerships where either we are a majority owner partnered with physicians or we are a minority owner with potential buy-up opportunities. These buy-up opportunities in certain circumstances can give us the option to own a controlling interest at some point in the future.
The imposition of these regulatory requirements may have the effect of increasing operating costs and reducing the profitability of our operations.
Federal, state and local governments are expanding the regulatory requirements on businesses like ours. The imposition of these regulatory requirements may have the effect of increasing operating costs and reducing the profitability of our operations.
We also market our surgical facilities directly to private insurance payors via our contracting and credentialing programs. Payor marketing activities conducted by our corporate office management and facility administrators emphasize the high quality of care, cost advantages and convenience of our surgical facilities, and are focused on making each surgical facility an approved provider under local managed care plans.
We also market our surgical facilities directly to private insurance payors via our contracting and credentialing programs. Payor marketing activities are conducted by our corporate managed care department team. We emphasize the high quality of surgical care, cost advantages over local competitors, and high patient satisfaction with our surgical facilities.
Many private insurance health plans require our facilities to be accredited by one or both of these organizations in order to be participating providers.
These accredited facilities are subject to periodic surveys by the accrediting organization to ensure that they are in compliance with the applicable standards. Many private insurance health plans require our facilities to be accredited by one of these organizations in order to be participating providers.
Although all such repayments requested to date have been immaterial, we are unable to quantify the aggregate financial impact of these audits on our facilities given the pending appeals and uncertainty about the extent of future audits. 6 Table of Contents Federal Anti-Kickback Statute and Medicare Fraud and Abuse Laws The Social Security Act of 1935 includes provisions addressing false statements, illegal remuneration and other instances of fraud and abuse in federal health care programs.
Although all such repayments requested to date have been immaterial, we are unable to quantify the aggregate financial impact of these audits on our facilities given the pending appeals and uncertainty about the extent of future audits.
We also submit a 5 Table of Contents claim for the services to the private insurance payor along with full disclosure that we have charged the patient an in-network patient responsibility amount.
We also submit a claim for the services to the private insurance payor along with full disclosure that we have charged the patient an in-network patient responsibility amount. 5 Table of Contents Governmental Regulation General We are subject to federal, state and local laws dealing with issues such as occupational safety, employment, medical leave, insurance regulations, civil rights, discrimination, building codes, medical waste and other environmental issues.
However, we cannot assure you that the OIG would find our compliance programs to be adequate or that our management agreements would be found to comply with the Anti-Kickback Statute. Certain of our ASCs have entered into arrangements for professional services, including arrangements for anesthesia services.
However, we cannot assure you that the OIG would find our compliance programs to be adequate or that our management agreements would be found to comply with the Anti-Kickback Statute. We also may guarantee a surgical facility’s third-party debt financing and certain lease obligations as part of our obligations under a management agreement.
Emergency Medical Treatment and Active Labor Act Our surgical hospitals are subject to the Emergency Medical Treatment and Active Labor Act ("EMTALA").
As of December 31, 2025, however, HHS had yet to publish a final rule formalizing these proposals. Emergency Medical Treatment and Active Labor Act Our surgical hospitals are subject to the Emergency Medical Treatment and Active Labor Act ("EMTALA").
Removed
Services provided in a dedicated emergency department are still paid under the OPPS. This change has not significantly affected reimbursement to any of our HOPDs, but we cannot assure you that our HOPDs will not be impacted in the future.
Added
Alternatively, we may choose to pursue a strategic relationship with physicians and a health care system. We employ a dedicated acquisition team with experience in health care services.
Removed
Governmental Regulation General We are subject to federal, state and local laws dealing with issues such as occupational safety, employment, medical leave, insurance regulations, civil rights, discrimination, building codes and medical waste and other environmental issues. Federal, state and local governments are expanding the regulatory requirements on businesses like ours.
Added
Recent Developments and Potential Changes in Health Care Policy The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the "Affordable Care Act"), extended health coverage to millions of uninsured legal U.S. residents through a combination of private sector health insurance reforms and public program expansion.
Removed
The effect of accreditation by these organizations is to exempt the facilities from routine surveys by state agencies to determine compliance with CMS requirements. These accredited facilities are subject to periodic surveys by the accrediting organization to ensure that they are in compliance with the applicable standards.
Added
The expansion of health insurance coverage under the Affordable Care Act resulted in an increase in the number of patients using our facilities with either private or public program coverage and a decrease in uninsured and charity case admissions, along with reductions in Medicare and Medicaid reimbursement to healthcare providers.
Removed
Affordable Care Act Repeal Efforts Initiatives to repeal or modify the Patient Protection and Affordable Care Act (the "Affordable Care Act") have persisted over the past several years.
Added
However, further legislative efforts to repeal and replace the Affordable Care Act in full have not been successful.
Removed
These provisions include the statute commonly known as the federal Anti-Kickback statute (the "Anti-Kickback Statute").
Added
Various laws and regulations that have been implemented since the Affordable Care Act’s enactment have successfully lengthened the enrollment period, expanded income eligibility, and reduced premium caps for subsidies for individuals purchasing Affordable Care Act coverage through state and federal marketplaces; however, the Affordable Care Act subsidies expired on December 31, 2025 following Congress’ failure to renew and extend them.
Removed
In a Special Advisory Bulletin issued in April 2003, the OIG focused on "questionable" contractual arrangements where a health care provider in one line of business (the "Owner") expands into a related health care business by contracting with an existing provider of a related item or service (the "Manager/Supplier") to provide the new item or service to the Owner’s existing patient population, including federal health 7 Table of Contents care program patients (so called "suspect Contractual Joint Ventures").
Added
It is widely anticipated that their expiration will result in significant increases in premiums, likely leading to decreased enrollment and a corresponding rise in the number of uninsured individuals or, at minimum, a shift of individuals from commercial coverage to government program coverage.
Removed
The Manager/Supplier not only manages the new line of business, but may also supply it with inventory, employees, space, billing, and other services. In other words, the Owner contracts out substantially the entire operation of the related line of business to the Manager/Supplier-otherwise a potential competitor-receiving in return the profits of the business as remuneration for its referrals.
Added
An increase in the uninsured population in addition to or combined with a wide-scale transition of patients from commercial to government program coverage may have a negative impact on the Company’s financial performance by reducing demand for services and decreasing reimbursement for such services when rendered.
Removed
Through an Advisory Opinion, the OIG extended this suspect contractual joint venture analysis to arrangements between anesthesiologists and physician owners of ASCs. In Advisory Opinion No. 12-06 (May 25, 2012), the OIG concluded that certain proposed arrangements between anesthesia groups and physician-owned ASCs could result in prohibited remuneration under the federal Anti-Kickback Statute.
Added
We cannot predict whether or how Congress may further extend or modify provisions of or relating to the Affordable Care Act or other laws affecting the healthcare industry generally, nor can we predict how the current administration will influence, promulgate or implement rules, regulations or executive orders that affect the healthcare industry directly or indirectly.
Removed
We believe our arrangements for anesthesia services are distinguishable from those described in Advisory Opinion 12-06 (May 25, 2012) and are in compliance with the requirements of the federal Anti-Kickback Statute. However, we cannot assure you that regulatory authorities would agree with that position.
Added
We may also experience potential impacts on our business, in ways we cannot anticipate, from healthcare-related policy changes at the state level.
Removed
We also may guarantee a surgical facility’s third-party debt financing and certain lease obligations as part of our obligations under a management agreement. Physician investors are generally not required to enter into similar guarantees.
Added
Some federal and state changes, initiatives and requirements could, among other things, negatively impact our patient volumes, case mix and revenue mix, increase our operating costs, adversely affect the reimbursement we receive for our services, impact our competitive position or require us to expand resources to modify certain aspects of our operations. 6 Table of Contents More specifically, we are unable to predict the effect of future government healthcare funding policy changes on our business.
Removed
CLIA requires that all clinical laboratories meet quality assurance, quality control and personnel 9 Table of Contents standards. Laboratories also must undergo proficiency testing and are subject to inspections.
Added
The Medicare and Medicaid programs are subject to: • Statutory and regulatory changes, administrative and judicial rulings, executive orders, interpretations and determinations concerning eligibility requirements, funding levels and the method of calculating reimbursements, among other things; • Requirements for utilization review; and • Federal and state funding restrictions.
Added
Any of these factors could materially increase or decrease payments from government programs in the future, as well as affect the cost of providing services to our patients and the timing of payments to our facilities.
Added
If the rates paid by governmental payers are reduced, if the scope of services covered by governmental payers is limited, if eligibility or enrollment is further restricted, if there are changes to align payment rates for certain procedures across various care settings, or if we or one or more of our facilities are excluded from participation in the Medicare or Medicaid program or any other government healthcare program, there could be a material adverse effect on our business, financial condition, results of operations or cash flows.
Added
Furthermore, we cannot predict the impact healthcare policy risks and uncertainties may have on the trading price of our common stock. One Big Beautiful Bill Act On July 4, 2025, Congress passed the One Big Beautiful Bill Act (the “OBBBA”), its budget reconciliation act for federal fiscal year 2025.
Added
The OBBBA includes provisions that may impact the financial performance of the Company through substantial modifications to the state and federal statutes and regulations to which the Company’s operations are subject. OBBBA provisions that may impact the Company have varying effective dates, and analysis of their impact and timing is ongoing.
Added
The Company is unable to predict whether or how future legislation, rulemaking, or judicial action will impact implementation of the OBBBA. Of particular relevance to the Company’s operations, the OBBBA has reduced the federal government’s overall Medicaid expenditures and tightened Medicaid eligibility requirements, each of which are likely to drive an increase in the uninsured population.
Added
Because the Company’s facilities rely in part of reimbursement from federal health care programs, including Medicaid, for the reimbursement of services rendered, these changes may have a negative impact on the Company’s financial performance. Ongoing budgetary uncertainties and continued efforts to reduce the federal deficit may result in further payment reductions from both the Medicaid and Medicare programs.
Added
Federal Anti-Kickback Statute and Medicare Fraud and Abuse Laws The Social Security Act of 1935 includes provisions addressing false statements, illegal remuneration and other instances of fraud and abuse in federal health care programs. These provisions include the statute commonly known as the federal Anti-Kickback statute (the "Anti-Kickback Statute").

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

58 edited+10 added−10 removed220 unchanged
Biggest changeThrough these loans we may have a security interest in the partnership’s or limited liability company’s assets, depending upon the terms thereof in each instance. However, our financial condition and results of operations would be materially adversely affected if our surgical facilities are unable to repay these intercompany loans, or such loans are challenged under certain health care laws.
Biggest changeHowever, our financial condition and results of operations would be materially adversely affected if our surgical facilities are unable to repay these intercompany loans, or such loans are challenged under certain health care laws. Additionally, at December 31, 2025, our global intercompany note, which we use to transfer debt balances between our subsidiaries, had a zero balance.
The amounts that we receive from the Medicare and Medicaid programs for our services are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations concerning patient eligibility requirements, funding levels and the method of calculating payments or reimbursements, among other things; refinements to the Medicare Ambulatory Surgery Center payment system and refinements made by CMS to Medicare’s reimbursement policies; requirements for utilization review; and federal and state funding restrictions; any of which 12 Table of Contents could materially adversely affect payments we receive from these government programs, as well as affect the timing of payments to our facilities.
The amounts that we receive from the Medicare and Medicaid programs for our services are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations concerning patient eligibility requirements, funding levels and the method of calculating payments or reimbursements, among other things; refinements to the Medicare Ambulatory Surgery Center payment system and refinements made by 12 Table of Contents CMS to Medicare’s reimbursement policies; requirements for utilization review; and federal and state funding restrictions; any of which could materially adversely affect payments we receive from these government programs, as well as affect the timing of payments to our facilities.
Violations of the Stark Law will also create liability under the federal False Claims Act. Exclusion of our ASCs or hospitals from these programs through judicial or agency interpretation of existing laws or additional legislative restrictions on physician ownership or investments in health care entities could result in a significant loss of reimbursement revenue.
Violations of the Stark Law will also create liability under the federal False Claims Act. Exclusion of our ASCs or surgical hospitals from these programs through judicial or agency interpretation of existing laws or additional legislative restrictions on physician ownership or investments in health care entities could result in a significant loss of reimbursement revenue.
In addition to the Senior Indebtedness, our aggregate principal amount of indebtedness outstanding includes approximately $1.0 billion of notes payable and finance lease obligations primarily related to property and equipment for operations. Our level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness.
In addition to the Senior Indebtedness, our aggregate principal amount of indebtedness outstanding includes approximately $1.1 billion of notes payable and finance lease obligations primarily related to property and equipment for operations. Our level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness.
Certain of the agreements governing the limited partnerships ("LPs"), general partnerships ("GPs") and limited liability companies ("LLCs") through which we own and operate our facilities contain provisions that give our partners or other members rights that may, in certain circumstances, be adverse to our interests.
Certain of the agreements governing the limited partnerships ("LPs"), limited liability partnerships ("LLPs"), general partnerships ("GPs") and limited liability companies ("LLCs") through which we own and operate our facilities contain provisions that give our partners or other members rights that may, in certain circumstances, be adverse to our interests.
A significant shift in our case mix toward a higher percentage of lower revenue cases, which could occur for reasons beyond our control, could result in a material adverse effect on our business, prospects, results of operations and financial condition.
Additionally, a significant shift in our case mix toward a higher percentage of lower revenue cases, which could occur for reasons beyond our control, could result in a material adverse effect on our business, prospects, results of operations and financial condition.
Our amended and restated certificate of incorporation (the "Certificate of Incorporation") provides that, subject to certain exceptions and to the fullest extent permitted by applicable law, the Court of Chancery of the State of Delaware (the "Court of Chancery") will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a 25 Table of Contents fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware, our Certificate of Incorporation or our amended and restated bylaws or (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine (each, a "Covered Proceeding").
Our amended and restated certificate of incorporation (the "Certificate of Incorporation") provides that, subject to certain exceptions and to the fullest extent permitted by applicable law, the Court of Chancery of the State of Delaware (the "Court of Chancery") will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware, our Certificate of Incorporation or our amended and restated bylaws or (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine (each, a "Covered Proceeding").
If the proportion of our services subject to out-of-network fee schedules increases, we may experience a decrease in volume at our ASCs or other facilities due to fewer referrals of out-of-network patients. Additionally, payments from workers’ compensation payors represented approximately 4% of our patient service revenue in 2024, 2023 and 2022.
If the proportion of our services subject to out-of-network fee schedules increases, we may experience a decrease in volume at our ASCs or other facilities due to fewer referrals of out-of-network patients. Additionally, payments from workers’ compensation payors represented approximately 4% of our patient service revenue in 2025, 2024 and 2023.
The Senior Indebtedness imposes significant operating and financial restrictions and limit the ability of us and our restricted subsidiaries to, among other things: • incur additional indebtedness and guarantee indebtedness; • pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock; • prepay, redeem or repurchase certain debt; • make loans and investments; • sell or otherwise dispose of assets; • sell stock of our subsidiaries; • incur liens; 18 Table of Contents • enter into transactions with affiliates; • enter into agreements restricting certain of our subsidiaries’ ability to pay dividends; and • consolidate, merge or sell all or substantially all of our assets.
The Senior Indebtedness imposes significant operating and financial restrictions and limit the ability of us and our restricted subsidiaries to, among other things: • incur additional indebtedness and guarantee indebtedness; • pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock; • prepay, redeem or repurchase certain debt; • make loans and investments; • sell or otherwise dispose of assets; • sell stock of our subsidiaries; • incur liens; • enter into transactions with affiliates; • enter into agreements restricting certain of our subsidiaries’ ability to pay dividends; and • consolidate, merge or sell all or substantially all of our assets.
Payments from private insurance payors, including state workers’ compensation programs and managed care organizations, represented approximately 54%, 53% and 52% of our patient service revenue in 2024, 2023 and 2022, respectively. Most of these payments came from private insurance payors with which our facilities have contracts.
Payments from private insurance payors, including state workers’ compensation programs and managed care organizations, represented approximately 52%, 54% and 53% of our patient service revenue in 2025, 2024 and 2023, respectively. Most of these payments came from private insurance payors with which our facilities have contracts.
Although the credit agreement governing the New Credit Facilities and the indentures governing the 2032 Unsecured Notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.
Although the credit agreement governing the Secured Credit Facilities and the indentures governing the 2032 Unsecured Notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.
If we experience the loss of key personnel or if the effort devoted to the integration of acquired facilities diverts significant management or other resources from other operational activities, our operations could be impaired. Additionally, in some acquisitions, we 14 Table of Contents may have to renegotiate, or risk losing, one or more of the facility’s private insurance contracts.
If we experience the loss of key personnel or if the effort devoted to the integration of acquired facilities diverts significant management or other resources from other operational activities, our operations could be impaired. Additionally, in some acquisitions, we may have to renegotiate, or risk losing, one or more of the facility’s private insurance contracts.
In some markets, the lack of availability of clinical personnel, such as nurses, has become a significant operating issue facing all health care providers. This shortage may require us to continue to enhance wages and benefits to recruit and retain qualified personnel or to contract for more expensive 15 Table of Contents temporary personnel.
In some markets, the lack of availability of clinical personnel, such as nurses, has become a significant operating issue facing all health care providers. This shortage may require us to continue to enhance wages and benefits to recruit and retain qualified personnel or to contract for more expensive temporary personnel.
Our case volume and surgical case mix may be adversely affected by patients’ unwillingness to pay for procedures in our facilities. Higher numbers of unemployed individuals generally translates into more individuals without health care insurance to help pay for procedures, thereby increasing the potential for persons to elect not to have procedures performed.
Our case volume and surgical case mix may be adversely affected by patients’ unwillingness to pay for procedures in our facilities. Higher numbers of unemployed individuals generally translates into more individuals without health care insurance to help pay for 13 Table of Contents procedures, thereby increasing the potential for persons to elect not to have procedures performed.
“Business-Governmental Regulation-Federal and State Privacy and Security Requirements” included elsewhere in this Annual Report. 20 Table of Contents Many states in which we operate may impose supplemental laws that are more protective of the privacy and security of PII than HIPAA. Where these state laws are more protective than HIPAA, we have to comply with their stricter provisions.
“Business-Governmental Regulation-Federal and State Privacy and Security Requirements” included elsewhere in this Annual Report. Many states in which we operate may impose supplemental laws that are more protective of the privacy and security of PII than HIPAA. Where these state laws are more protective than HIPAA, we have to comply with their stricter provisions.
We may also be unable to immediately collect the accounts receivable of an acquired facility while we align the payors’ payment systems and accounts with our own systems. Finally, certain transactions can require licensure changes which, in turn, result in disruptions in payment for services.
We may also be unable to immediately 14 Table of Contents collect the accounts receivable of an acquired facility while we align the payors’ payment systems and accounts with our own systems. Finally, certain transactions can require licensure changes which, in turn, result in disruptions in payment for services.
As a result of these and other covenants and restrictions, we may be limited in how we conduct our business. In addition, we may be required to maintain a specified financial maintenance ratio in connection with the Senior Indebtedness if the Revolver is utilized in excess of a specified threshold.
As a result of these and other covenants and restrictions, we may be limited in how we conduct our business. In addition, we may be required to maintain a specified financial maintenance ratio in connection with the Senior Indebtedness if the Revolver is utilized in excess 18 Table of Contents of a specified threshold.
For example, CMS has implemented the RAC program, involving Medicare claims audits nationwide, and employs MICs to perform post-payment audits of Medicaid claims and identify overpayments. In 23 Table of Contents addition to RACs and MICs, the state Medicaid agencies and other contractors have increased their review activities.
For example, CMS has implemented the RAC program, involving Medicare claims audits nationwide, and employs MICs to perform post-payment audits of Medicaid claims and identify overpayments. In addition to RACs and MICs, the state Medicaid agencies and other contractors have increased their review activities.
A substantial portion of hospital payment is at risk depending on its individual performance 24 Table of Contents relative to benchmarks and other hospitals’ performance. There is a substantial risk that our Medicare payments could be reduced if our hospitals fail to perform adequately on these measures.
A substantial portion of hospital payment is at risk depending on its individual performance relative to benchmarks and other hospitals’ performance. There is a substantial risk that our Medicare payments could be reduced if our hospitals fail to perform adequately on these measures.
In addition, some of the governmental and regulatory bodies that regulate us are considering or may in the future consider enhanced or new regulatory requirements. These authorities may also seek to exercise their supervisory or 21 Table of Contents enforcement authority in new or more robust ways.
In addition, some of the governmental and regulatory bodies that regulate us are considering or may in the future consider enhanced or new regulatory requirements. These authorities may also seek to exercise their supervisory or enforcement authority in new or more robust ways.
Our revenue is particularly sensitive to regulatory, economic and other conditions in the state of Idaho. As of December 31, 2024, we owned and operated three consolidated surgical hospitals and four consolidated ASCs in Idaho, representing approximately 29% of our revenue during fiscal year 2024. These surgical facilities also provide ancillary services, including physician practices, radiation oncology and anesthesia services.
Our revenue is particularly sensitive to regulatory, economic and other conditions in the state of Idaho. As of December 31, 2025, we owned and operated three consolidated surgical hospitals and four consolidated ASCs in Idaho, representing approximately 28% of our revenue during fiscal year 2025. These surgical facilities also provide ancillary services, including physician practices, radiation oncology and anesthesia services.
We also depend on the available labor pool of semi-skilled and unskilled workers in each of the markets in which we operate. If our labor costs increase, we may not be able to raise rates to offset these increased costs.
We also depend on the available labor pool of semi-skilled and unskilled workers in each of the markets in which we operate. 15 Table of Contents If our labor costs increase, we may not be able to raise rates to offset these increased costs.
Legal and Regulatory Risks If we fail to comply with or otherwise incur liabilities under the numerous federal and state laws and regulations relating to the operation of our facilities, we could incur significant penalties or other costs or be required to make significant changes to our operations.
If we fail to comply with or otherwise incur liabilities under the numerous federal and state laws and regulations relating to the operation of our facilities, we could incur significant penalties or other costs or be required to make significant changes to our operations.
New health information standards could have a significant effect on the manner in which we do business, and the cost of complying with new standards could be significant. We may not remain in compliance with the diverse privacy requirements in all of the jurisdictions in which we do business.
New health information standards could have a significant effect on the manner in which we do business, and the cost of complying with new standards could be significant. We may not remain in 20 Table of Contents compliance with the diverse privacy requirements in all of the jurisdictions in which we do business.
In such instances, the physicians and/or physician groups typically also guarantee their pro-rata share of such indebtedness. 19 Table of Contents Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly. Borrowings under the Credit Facilities are at variable rates of interest and expose us to interest rate risk.
In such instances, the physicians and/or physician groups typically also guarantee their pro-rata share of such indebtedness. Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly. Borrowings under the Secured Credit Facilities are at variable rates of interest and expose us to interest rate risk.
In addition, pending a determination regarding our compliance with these conditions, payment to us may be suspended and we may be required to devote significant time, effort and expense to demonstrate satisfactory compliance. Our facilities could face decreased Medicare payments if they fail to report and meet various quality metrics.
In addition, pending a determination regarding our compliance with these conditions, payment to us may be suspended and we may be required to devote significant time, effort and expense to demonstrate satisfactory compliance. 24 Table of Contents Our facilities could face decreased Medicare payments if they fail to report and meet various quality metrics.
These different payors typically have different billing requirements that must be satisfied prior to receiving payment for services rendered. Reimbursement is typically conditioned on our documenting medical 16 Table of Contents necessity and correctly applying diagnosis codes. Incorrect or incomplete documentation and billing information could result in non-payment for services rendered.
These different payors typically have different billing requirements that must be satisfied prior to receiving payment for services rendered. Reimbursement is typically conditioned on our documenting medical necessity and correctly applying diagnosis codes. Incorrect or incomplete documentation and billing information could result in non-payment for services rendered.
From time to time, we may guarantee our pro-rata share of the third-party debts and other obligations of our non-wholly owned non-consolidated partnerships and limited liability companies in which we own an interest in an amount proportionate to our pro rata share of the equity interests issued by such entity.
From time to time, we may guarantee our pro-rata share of the third-party debts and other obligations of our non-wholly owned non-consolidated partnerships and LLCs in which we own an interest in an amount proportionate to our pro rata share of the equity interests issued by such entity.
To the extent our patient assistance programs or other discount policies are found to be inconsistent with applicable laws, we may be required to restructure or discontinue such programs, or be subject to other significant penalties. All payors are increasingly conducting post-payment audits.
To the extent our patient assistance programs or other discount policies are found to 23 Table of Contents be inconsistent with applicable laws, we may be required to restructure or discontinue such programs, or be subject to other significant penalties. All payors are increasingly conducting post-payment audits.
We depend upon private and governmental third-party sources of payment for the services provided by physicians in our physician network and to patients in our surgical facilities, including surgical hospitals. We derived approximately 41% of our revenue from government payors, including Medicare and Medicaid programs in 2024 and 42% in both 2023 and 2022.
We depend upon private and governmental third-party sources of payment for the services provided by physicians in our physician network and to patients in our surgical facilities, including surgical hospitals. We derived approximately 43%, 41% and 42% of our revenue from government payors, including Medicare and Medicaid programs in 2025, 2024 and 2023, respectively.
The primary collection risks with respect to our patient receivables relate to patient accounts for which the primary third-party payor has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and co-payments) remain outstanding.
The primary collection risks with respect to our patient receivables relate to patient accounts for which the 16 Table of Contents primary third-party payor has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and co-payments) remain outstanding.
Governance Risks Our largest stockholder has significant influence over us, including influence over decisions that require the approval of stockholders, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control. As of December 31, 2024, affiliates of Bain Capital owned approximately 39.3% of our outstanding common stock.
Governance Risks Our largest stockholder has significant influence over us, including influence over decisions that require the approval of stockholders, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control. As of December 31, 2025, affiliates of Bain Capital owned approximately 38.6% of our outstanding common stock.
Financial and Accounting Risks We have a history of net losses and may not achieve or sustain profitability in the future. We had net losses attributable to Surgery Partners, Inc. of $168.1 million, $11.9 million and $54.6 million, in 2024, 2023 and 2022, respectively.
Financial and Accounting Risks We have a history of net losses and may not achieve or sustain profitability in the future. We had net losses attributable to Surgery Partners, Inc. of $77.9 million, $168.1 million and $11.9 million, in 2025, 2024 and 2023, respectively.
As of December 31, 2024, we and our subsidiaries had approximately $3.4 billion aggregate principal amount of indebtedness outstanding, which includes approximately $1.4 billion principal amount of senior secured term loans (the "Term Loan") outstanding and $800.0 million senior unsecured notes due 2032 (the "2032 Unsecured Notes").
As of December 31, 2025, we and our subsidiaries had approximately $3.7 billion aggregate principal amount of indebtedness outstanding, which includes approximately $1.4 billion principal amount of senior secured term loans (the "Term Loan") outstanding and $1,225.0 million senior unsecured notes due 2032 (the "2032 Unsecured Notes").
We attempt to structure our relationship with physicians who refer to our hospitals to meet an exception to the Stark Law where required, but the regulations implementing the exceptions are detailed and complex, and we cannot guarantee that every relationship 22 Table of Contents complies fully with the Stark Law.
We attempt to structure our relationship with physicians who refer to our surgical hospitals to meet an exception to the Stark Law where required, but the regulations implementing the exceptions are detailed and complex, and we cannot guarantee that every relationship complies fully with the Stark Law.
We generally hold our ownership interests in facilities through LPs, GPs, LLCs or limited liability partnerships ("LLPs") in which we maintain an ownership interest along with physicians and, in some cases, both physicians and health systems.
We generally hold our ownership interests in facilities through LPs, LLPs, GPs, and LLCs in which we maintain an ownership interest along with physicians and, in some cases, both physicians and health systems.
The effect of this structure is that we depend on the earnings of our subsidiaries, and the distribution or payment to us of a portion of these earnings to meet our obligations, including those under the Term Loans and Revolver and any of our other debt obligations.
The effect of this structure is that we depend on the earnings of our subsidiaries, and the distribution or payment to us of a portion of these earnings to meet our obligations, including those under the Senior Indebtedness and any of our other debt obligations.
Although most of our intercompany loans are secured by the assets of the partnership or limited liability company, the physicians and physician groups that own an interest in these partnerships and limited liability companies generally do not guarantee a pro rata amount of this debt or the other obligations of these partnerships and limited liability companies.
Although most of our intercompany loans are secured by the assets of the partnership or LLC, the physicians and physician groups that own an interest in these partnerships and LLCs generally do not guarantee a pro rata amount of this debt or the other obligations of these partnerships and LLCs.
As of December 31, 2024, we had U.S. federal net operating loss ("NOL") carryforwards of approximately $529.0 million and state NOL carryforwards of approximately $630.7 million, which may be limited annually due to certain change in ownership provisions of Section 382 of the Internal Revenue Code of 1986 ("Section 382"), as amended (the "Code").
As of December 31, 2025, we had U.S. federal net operating loss ("NOL") carryforwards of approximately $532.4 million and state NOL carryforwards of approximately $657.1 million, which may be limited annually due to certain change in ownership provisions of Section 382 of the Internal Revenue Code of 1986 ("Section 382"), as amended (the "Code").
As of December 31, 2024, we had $192.0 million of outstanding borrowings under our $703.8 million senior secured revolving credit facility (the "Revolver" and, together with the Term Loan, the "New Secured Credit Facilities" and, together with the 2032 Unsecured Notes, the "Senior Indebtedness").
As of December 31, 2025, we had no outstanding 17 Table of Contents borrowings under our $703.8 million senior secured revolving credit facility (the "Revolver" and, together with the Term Loan, the "Secured Credit Facilities" and, together with the 2032 Unsecured Notes, the "Senior Indebtedness").
Therefore, our business arrangements with our surgery centers, surgical hospitals and physician groups do not qualify for the expanded safe harbor protection from government review or prosecution under the Anti-Kickback Statute. Nevertheless, we believe that we are in compliance with the requirements of the Anti-Kickback Statute.
Therefore, our business arrangements with our surgery centers, surgical hospitals and physician groups do not qualify for the expanded safe harbor protection from government review or prosecution under the Anti-Kickback Statute.
If we fail to comply with physician self-referral laws as they are currently interpreted or may be interpreted in the future, or if other legislative restrictions are issued, we could incur substantial monetary penalties and a significant loss of revenue.
Nevertheless, we believe that we are in compliance with the requirements of the Anti-Kickback Statute. 22 Table of Contents If we fail to comply with physician self-referral laws as they are currently interpreted or may be interpreted in the future, or if other legislative restrictions are issued, we could incur substantial monetary penalties and a significant loss of revenue.
In addition, as of December 31, 2024, we had approximately $501.5 million available for additional borrowings under the Revolver (after giving effect to the $10.3 million aggregate principal amount of outstanding letters of credit issued under our Revolver at such time).
In addition, as of December 31, 2025, we had approximately $692.8 million available for additional borrowings under the Revolver (after giving effect to the $11.0 million aggregate principal amount of outstanding letters of credit issued under our Revolver at such time).
Our business depends, among other things, upon the efforts and success of affiliated physicians who provide medical services at our surgical facilities and the strength of our relationships with these physicians.
Our business depends, among other things, upon the efforts and success of affiliated physicians who provide medical services at our surgical facilities and the strength of our relationships with these physicians. Most physicians are not employees of our surgical facilities and are not contractually required to use our facilities.
Legal and Regulatory Risks • If we fail to comply with or otherwise incur liabilities under the numerous federal and state laws and regulations relating to the operation of our facilities, we could incur significant penalties or other costs or be required to make significant changes to our operations. • Our surgical facilities do not satisfy the requirements for any of the safe harbors under the federal Anti-Kickback Statute.
Legal and Regulatory Risks • We cannot predict the effect that changes in healthcare laws, regulations, policies and government programs may have on our business, financial condition or results of operations. • If we fail to comply with or otherwise incur liabilities under the numerous federal and state laws and regulations relating to the operation of our facilities, we could incur significant penalties or other costs or be required to make significant changes to our operations. • Our surgical facilities do not satisfy the requirements for any of the safe harbors under the federal Anti-Kickback Statute.
After giving effect to the $10.3 million principal amount of outstanding letters of credit issued under our Revolver, we had $501.5 million of unused commitments available to be borrowed under the Revolver.
After giving effect to the $11.0 million principal amount of outstanding letters of credit issued under our Revolver, we had $692.8 million of unused commitments available to be borrowed under the Revolver.
The Company has $434.3 million of federal NOL carryforwards that will begin to expire in 2030 and will completely expire in 2037. The remaining federal NOL carryforwards, which were generated after 2017, do not expire. Our state NOL carryforwards will expire between 2025 and 2043.
The Company has $424.6 million of federal NOL carryforwards that will begin to expire in 2031 and will completely expire in 2037. The remaining federal NOL carryforwards, which were generated after 2017, do not expire. Our state NOL carryforwards will expire between 2026 and 2045.
We make significant loans to, and are generally liable for debts and other obligations of, the partnerships and limited liability companies that own and operate some of our surgical facilities. We own and operate our surgical facilities through limited partnerships and limited liability companies.
We make significant loans to, and are generally liable for debts and other obligations of, the partnerships and limited liability companies that own and operate some of our surgical facilities. For some of our surgical facilities, indebtedness at the partnership, or LLC level is funded through intercompany loans that we provide.
Our amended and restated certificate of incorporation designates courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
As a result of these features, our stockholders may lose their ability to sell their stock for a price in excess of the prevailing market price, and efforts by stockholders to change the direction or management of the Company may be unsuccessful. 25 Table of Contents Our amended and restated certificate of incorporation designates courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
If we fail to comply with applicable laws and regulations, we could subject ourselves to administrative, civil or criminal penalties, cease and desist orders, forfeiture of amounts owed and recoupment of amounts paid to us by governmental or commercial payors, loss of licenses necessary to operate and disqualification from Medicare, Medicaid and other government-sponsored health care programs.
If we fail to comply with applicable laws and regulations, we could subject ourselves to administrative, civil or criminal penalties, cease and desist orders, forfeiture of amounts owed and recoupment of amounts paid to us by governmental or commercial payors, loss of licenses necessary to operate and disqualification from Medicare, Medicaid and other government-sponsored health care programs. 21 Table of Contents Many of these laws and regulations have not been fully interpreted by regulatory authorities or the courts, and their provisions are sometimes open to a variety of interpretations.
Our interest rate swap agreements and interest rate 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 swap and cap agreements represent balances used to calculate the exchange of cash flows and are not our assets or liabilities.
Our interest rate swap agreements and interest rate cap agreements involve the exchange of fixed and variable rate interest payments between two parties, based on common notional principal amounts and maturity dates.
If we are not able to achieve, sustain or increase profitability, our business will be adversely affected and our stock price may decline. 17 Table of Contents Our leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our outstanding indebtedness.
Our leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our outstanding indebtedness.
All of these factors could contribute to future net losses and, if we are unable to meet these risks and challenges as we encounter them, our business may suffer.
All of these factors could contribute to future net losses and, if we are unable to meet these risks and challenges as we encounter them, our business may suffer. If we are not able to achieve, sustain or increase profitability, our business will be adversely affected and our stock price may decline.
Even procedures normally thought to be 13 Table of Contents non-elective may be delayed or may not be performed if the patient cannot afford the procedure due to a lack of insurance or money to pay their portion of our facilities’ fee.
Even procedures normally thought to be non-elective may be delayed or may not be performed if the patient cannot afford the procedure due to a lack of insurance or money to pay their portion of our facilities’ fee. It is difficult to predict the degree to which our business will continue to be impacted by economic conditions in the future.
It is difficult to predict the degree to which our business will continue to be impacted by economic conditions in the future. As we operate in multiple markets, each with a different competitive landscape, shifts within our payor mix or case mix may not be uniform across all of our affiliated facilities.
As we operate in multiple markets, each with a different competitive landscape, shifts within our payor mix or case mix may not be uniform across all of our affiliated facilities. Rather, these shifts may be concentrated within certain markets due to local competitive factors.
Both state and federal laws are subject to modification or enhancement of privacy protection at any time. For example, HHS issued a Notice of Proposed Rulemaking on January 6, 2025, which proposes changes to the HIPAA security regulations aimed at enhancing cybersecurity protections in the healthcare sector.
For example, HHS issued a Notice of Proposed Rulemaking on January 6, 2025, which proposes changes to the HIPAA security regulations aimed at enhancing cybersecurity protections in the healthcare sector; however, as of December 31, 2025, HHS had yet to publish a final rule formalizing the January 2025 proposals.
Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. We may be limited in our ability to utilize, or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability.
We may be limited in our ability to utilize, or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability.
We cannot predict the effect that health care reform and other changes in government programs may have on our business, financial condition or results of operations.
If we fail to comply with HIPAA or similar state laws, we could incur substantial civil monetary or criminal penalties. Legal and Regulatory Risks We cannot predict the effect that changes in healthcare laws, regulations, policies and government programs may have on our business, financial condition or results of operations.
Removed
Rather, these shifts may be concentrated within certain markets due to local competitive factors.
Added
At December 31, 2025, our intercompany loans totaled $44.2 million. Through these loans we may have a security interest in the partnership’s or LLC's assets, depending upon the terms thereof in each instance.
Removed
We generally do not enter into contracts with physicians who use our surgical facilities, other than partnership and operating agreements with physicians who own interests in our surgical facilities, agreements for anesthesiology services and medical director agreements. Most physicians are not employees of our surgical facilities and are not contractually required to use our facilities.
Added
The notional amounts of the swap and cap agreements represent balances used to calculate the exchange of cash flows and are not our assets or liabilities. 19 Table of Contents Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
Removed
Local physicians, physician groups and health care systems also own an interest many of these partnerships and limited liability companies. For some of our surgical facilities, indebtedness at the partnership level is funded through intercompany loans that we provide. At December 31, 2024, our intercompany loans totaled $35.7 million.
Added
Both state and federal laws are subject to modification or enhancement of privacy protection at any time.
Removed
Additionally, at December 31, 2024, our global intercompany note, which we use to transfer debt balances between our subsidiaries, had a zero balance.
Added
Over the past several years, various laws and regulations lengthened the enrollment period, expanded income eligibility, and reduced premium caps for subsidies for individuals purchasing Affordable Care Act coverage through state and federal marketplaces. However, several of these provisions – notably, those relating to premium caps for subsidies – expired on December 31, 2025.
Removed
If we fail to comply with HIPAA or similar state laws, we could incur substantial civil monetary or criminal penalties.
Added
The failure of Congress to renew these subsidies through legislative action is widely anticipated to result in significant increases in premiums, potentially leading to decreased enrollment and a corresponding rise in the number of uninsured individuals or a shift of individuals from commercial coverage to government program coverage in 2026.
Removed
Many of these laws and regulations have not been fully interpreted by regulatory authorities or the courts, and their provisions are sometimes open to a variety of interpretations.
Added
As a direct effect of these changes, the Company may experience decreased patient volumes, reduced revenues and an increase in uncompensated care, which would adversely affect the Company’s results of operations and cash flows.
Removed
The Affordable Care Act has changed and continues to change how health care services are covered, delivered and reimbursed through, among other things, expanded coverage of uninsured individuals, reduced growth in Medicare program spending and the establishment and expansion of programs tying reimbursement to quality and clinical integration.
Added
We cannot predict whether or how the Congress may further extend (or decline to extend) or modify provisions of or relating to the Affordable Care Act or other laws affecting the healthcare industry generally, nor can we predict how the current administration will influence, promulgate or implement rules, regulations or executive orders that affect the healthcare industry directly or indirectly (including, for example, through changes resulting from the provisions of the OBBBA).
Removed
The Affordable Care Act also reforms certain aspects of health insurance, quality of care and fraud and abuse enforcement. The Affordable Care Act continues to be the subject of legal and legislative challenges.
Added
We may also experience potential impacts on our business, in ways we cannot anticipate, from healthcare-related policy changes at the state level.
Removed
Depending on how the Affordable Care Act continues to be interpreted, implemented or changed, it could have a material adverse effect on our business, prospects, results of operations and financial condition.
Added
Some federal and state changes, initiatives and requirements could, among other things, negatively impact our patient volumes, case mix and revenue mix, increase our operating costs, adversely affect the reimbursement we receive for our services, impact our competitive position or require us to expend resources to modify certain aspects of our operations, any of which could have an adverse effect on our financial condition, results of operations or cash flows.
Removed
As a result of these features, our stockholders may lose their ability to sell their stock for a price in excess of the prevailing market price, and efforts by stockholders to change the direction or management of the Company may be unsuccessful.
Added
Furthermore, we cannot predict the impact healthcare policy risks and uncertainties may have on the trading price of our common stock.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOn a quarterly basis, led by the Chief Information Security Officer (CISO) and Privacy Officer, the cybersecurity and privacy governance committee meets, which comprises of our executive and regional leadership teams. This governance committee assists in discussing existing or emerging threats, prioritizing roadmap items and/or budgetary considerations for project work.
Biggest changeAdditionally, we have a cybersecurity and privacy governance committee, consisting of our executive and regional leadership teams and led by our Chief Information Security Officer (CISO) and Privacy Officer, which meets on a quarterly basis. This committee assists in discussing existing or emerging threats, prioritizing roadmap items and/or budgetary considerations for project work.
Additionally, while we have insurance coverage in place that is designed to address certain aspects of cyber risks, such insurance coverage may be insufficient to cover all insured losses or all types of claims that may arise. Cybersecurity Governance Management is responsible for the day-to-day handling of risks facing our Company.
Additionally, while we have insurance coverage in place that is designed to address certain aspects of cybersecurity risks, such insurance coverage may be insufficient to cover all insured losses or all types of claims that may arise. Cybersecurity Governance Management is responsible for the day-to-day handling of risks facing our Company.
However, there can be no assurance that the controls and procedures in place to monitor and mitigate the risks of cyber threats will be successful or sufficient to avoid material losses or consequences in the future.
However, there can be no assurance that the controls and procedures in place to monitor and mitigate the risks of cybersecurity threats will be successful or sufficient to avoid material losses or consequences in the future.
Our cybersecurity team is led by our CISO, who has over 20 years of experience in the cybersecurity space and is a Certified Information Security Manager (CISM). On an annual basis, at a minimum, our CISO or Chief Information Officer (CIO) present necessary updates on our cybersecurity risks and any material cybersecurity incidents.
Our cybersecurity team is led by our CISO, who has over 20 years of experience in the cybersecurity space and is a Certified Information Security Manager (CISM). On an annual basis, at a minimum, our CISO or Chief Information Officer (CIO) present necessary updates on our cybersecurity risks and any material cybersecurity incidents to the Audit Committee of the Board.
At minimum, on an annual basis we measure ourselves against this framework and use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our strategic execution. We have also implemented a third-party risk assessment process for certain service providers, suppliers, and vendors, which is conducted during the procurement cycle.
At a minimum, on an annual basis we measure ourselves against this framework and use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our strategic execution.
We promote a company-wide culture of cybersecurity risk management intended to protect the confidentiality, integrity, and availability of our critical systems and the information contained therein.
In addition, all team members are required to participate in ongoing training and awareness programs that include periodic assessments to drive adoption and awareness of cybersecurity processes and controls. We promote a company-wide culture of cybersecurity risk management intended to protect the confidentiality, integrity, and availability of our critical systems and the information contained therein.
Removed
Critical vendors are assessed on an annual basis. In addition, all team members are required to participate in ongoing training and awareness programs that include periodic assessments to drive adoption and awareness of cybersecurity processes and controls.
Added
We also have implemented a third-party risk assessment process for certain service providers, suppliers, and vendors, which is conducted during the procurement cycle and, with respect to critical vendors on an annual basis.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is located in Brentwood, Tennessee, where we currently lease approximately 29,670 square feet of office space pursuant to an agreement with an initial term expiring December 31, 2027. Our surgical facilities typically are located on real estate leased by the partnership or limited liability company that operates the facility.
Biggest changeItem 2. Properties Our corporate headquarters is located in Brentwood, Tennessee, where we currently lease approximately 29,670 square feet of office space pursuant to an agreement with an initial term expiring January 30, 2027. Our surgical facilities typically are located on real estate leased by the partnership or limited liability company that operates the facility.
Of our 161 surgical facilities, 157 utilize leased real property. These leases generally have initial terms of 10 years, but range from 2 to 15 years. Most of the leases contain options to extend the lease period for up to 10 additional years. We generally guarantee the lease obligations of the partnerships and LLCs that own our surgical facilities.
Of our 176 surgical facilities, 173 utilize leased real property. These leases generally have initial terms of 10 years, but range from 2 to 15 years. Most of the leases contain options to extend the lease period for up to 10 additional years. We generally guarantee the lease obligations of the partnerships and LLCs that own our surgical facilities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph begins on December 31, 2019, and the comparison assumes $100 was invested in our common stock and in each of the indices on such date and assumes the reinvestment of dividends, if any. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Surgery Partners, Inc. $ 100.00 $ 185.31 $ 341.17 $ 177.96 $ 204.34 $ 135.23 Nasdaq Composite Index $ 100.00 $ 143.64 $ 174.36 $ 116.65 $ 167.30 $ 215.22 Dow Jones U.S.
Biggest changeThe graph begins on December 31, 2020, and the comparison assumes $100 was invested in our common stock and in each of the indices on such date and assumes the reinvestment of dividends, if any. 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Surgery Partners, Inc. $ 100.00 $ 184.11 $ 96.04 $ 110.27 $ 72.97 $ 53.26 Nasdaq Composite Index $ 100.00 $ 121.39 $ 81.21 $ 116.47 $ 149.83 $ 180.33 Dow Jones U.S.
The authorization does not have a specified expiration date, and the share repurchase program may be suspended, recommenced or discontinued at any time or from time to time without prior notice. The Company did not repurchase any shares of common stock during the three months ended December 31, 2024.
The authorization does not have a specified expiration date, and the share repurchase program may be suspended, recommenced or discontinued at any time or from time to time without prior notice. The Company did not repurchase any shares of common stock during the three months ended December 31, 2025.
In addition, our ability to pay dividends may be limited by covenants of our or our subsidiaries' existing or future indebtedness, including our existing credit facility. Additionally, because we are a holding company, we would depend on distributions from our subsidiaries to fund any potential dividends.
In addition, our ability to pay dividends may be limited by covenants of our or our subsidiaries' existing or future indebtedness, including our Secured Credit Facilities. Additionally, because we are a holding company, we would depend on distributions from our subsidiaries to fund any potential dividends.
At December 31, 2024, the Company continued to have authority to repurchase up to $46.0 million of shares of common stock under the share repurchase program. The authorization does not obligate us to repurchase any shares, and we do not intend to make further repurchases under this program. Item 6. [Reserved]
At December 31, 2025, the Company continued to have authority to repurchase up to $46.0 million of shares of common stock under the share repurchase program. The authorization does not obligate us to repurchase any shares, and we do not intend to make further repurchases under this program.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock trades under the symbol "SGRY" on the Nasdaq Global Select Market. Stockholders As of February 24, 2025, there were 193 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock trades under the symbol "SGRY" on the Nasdaq Global Select Market. Stockholders As of February 23, 2026, there were 201 holders of record of our common stock.
Health Care Providers Index $ 100.00 $ 111.94 $ 146.13 $ 147.85 $ 142.09 $ 127.80 This graph is furnished and not filed with the SEC, is not soliciting material under the Exchange Act and shall not be incorporated by reference into any such filings, irrespective of any general incorporation contained in such filing.
Health Care Providers Index $ 100.00 $ 130.55 $ 132.08 $ 126.93 $ 114.17 $ 103.28 This graph is furnished and not filed with the SEC, is not soliciting material under the Exchange Act and shall not be incorporated by reference into any such filings, irrespective of any general incorporation contained in such filing.
Added
On February 26, 2026, our Board of Directors authorized a share repurchase program of up to $200.0 million. The share repurchase program authorized on February 26, 2026 replaced the previous program. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAdjusted EBITDA is a key measure used by our management to assess operating performance, make business decisions and allocate resources. 37 Table of Contents The following table reconciles Adjusted EBITDA to income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited): Three Months Ended December 31, 2024 2023 2022 Consolidated Statements of Operations Data: Income before income taxes $ 147.1 $ 135.0 $ 110.3 Plus (minus): Net income attributable to non-controlling interests (180.6) (147.2) (141.6) Depreciation and amortization 152.6 118.1 114.8 Interest expense, net 201.7 193.0 234.9 Equity-based compensation expense 33.3 17.7 18.4 Transaction, integration and acquisition costs (1) 108.0 64.9 48.6 Net loss on disposals, consolidations and deconsolidations 40.6 14.4 11.1 Litigation settlements and regulatory change impact (2) 3.1 17.5 (24.7) Loss on debt extinguishment 5.1 15.5 14.9 Undesignated derivative activity (3) — 0.6 (8.0) Other (4) (2.7) 8.6 1.5 Adjusted EBITDA $ 508.2 $ 438.1 $ 380.2 (1) This amount includes transaction and integration costs of $100.1 million, $61.7 million and $47.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Biggest changeThe following table reconciles Adjusted EBITDA to income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited): Year Ended December 31, 2025 2024 2023 Consolidated Statements of Operations Data: Income before income taxes $ 116.9 $ 147.1 $ 135.0 Plus (minus): Net income attributable to non-controlling interests (176.8) (180.6) (147.2) Depreciation and amortization 176.0 152.6 118.1 Interest expense, net 272.6 201.7 193.0 Equity-based compensation expense 14.8 33.3 17.7 Transaction, integration and acquisition costs (1) 73.9 100.1 61.7 De novo start-up costs 6.7 7.9 3.2 Net loss on disposals, consolidations and deconsolidations 30.4 40.6 14.4 Litigation settlements and regulatory change impact (2) 10.4 3.1 17.5 Loss on debt extinguishment 1.3 5.1 15.5 Undesignated derivative activity (3) — — 0.6 Other (4) — (2.7) 8.6 Adjusted EBITDA $ 526.2 $ 508.2 $ 438.1 (1) This amount includes diligence, transaction and integration costs related to acquisitions (both completed and in the pipeline) and divested facilities (collectively "M&A costs") of $55.2 million, $76.4 million and $49.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Based on its evaluation of all such factors, the Company concluded that no event had occurred and no circumstances had changed that would more likely than not reduce the fair value of its reporting units below their carrying values. In 2024, 2023 and 2022, there were no non-cash impairment charges. See Note 4.
Based on its evaluation of all such factors, the Company concluded that no event had occurred and no circumstances had changed that would more likely than not reduce the fair value of its reporting units below their carrying values. In 2025, 2024 and 2023, there were no non-cash impairment charges. See Note 4.
The following table sets forth the percentage of cases in each specialty performed at the surgical facilities that we consolidate for financial reporting purposes for the periods indicated: Year Ended December 31, 2024 2023 2022 Orthopedics and pain management 40.2 % 36.1 % 36.4 % Ophthalmology 23.3 % 24.4 % 24.3 % Gastrointestinal 22.6 % 23.7 % 22.9 % General surgery 2.3 % 2.6 % 3.0 % Other 11.6 % 13.2 % 13.4 % Total 100.0 % 100.0 % 100.0 % 31 Table of Contents Segment Information Our business is comprised of one reportable segment, Surgical Facilities.
The following table sets forth the percentage of cases in each specialty performed at the surgical facilities that we consolidate for financial reporting purposes for the periods indicated: Year Ended December 31, 2025 2024 2023 Orthopedics and pain management 40.7 % 40.2 % 36.1 % Ophthalmology 21.7 % 23.3 % 24.4 % Gastrointestinal 24.4 % 22.6 % 23.7 % General surgery 1.9 % 2.3 % 2.6 % Other 11.3 % 11.6 % 13.2 % Total 100.0 % 100.0 % 100.0 % 31 Table of Contents Segment Information Our business is comprised of one reportable segment, Surgical Facilities.
As of the October 1, 2024 valuation, the estimated fair values of the reporting units were substantially in excess of their carrying values. Subsequent to the date of our annual impairment test, the Company considered its operating results for the fourth quarter of 2024, macroeconomic, industry and market conditions, and other market indicators including its market capitalization.
As of the October 1, 2025 valuation, the estimated fair values of the reporting units were substantially in excess of their carrying values. Subsequent to the date of our annual impairment test, the Company considered its operating results for the fourth quarter of 2025, macroeconomic, industry and market conditions, and other market indicators including its market capitalization.
"Income Taxes" for additional information related to the Company's effective tax rates for the years ended December 31, 2024 and December 31, 2023, including why these rates differed from the U.S. federal statutory rate of 21%. Net Income Attributable to Non-Controlling Interests.
"Income Taxes" for additional information related to the Company's effective tax rates for the years ended December 31, 2025 and December 31, 2024, including why these rates differed from the U.S. federal statutory rate of 21%. Net Income Attributable to Non-Controlling Interests.
There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to revenue recognition during the years ended December 31, 2024, 2023 and 2022.
There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to revenue recognition during the years ended December 31, 2025, 2024 and 2023.
The fees we derive from these management arrangements are based on a predetermined percentage of the revenues of each surgical facility and physician network. We recognize other service revenues in the period in which services are rendered.
The fees we derive from these management arrangements are generally based on a predetermined percentage of the revenues of each surgical facility and physician network. We recognize other service revenues in the period in which services are rendered and billed.
The 2024 Refinancing Term Loans amortize in equal quarterly installments of 0.25% of the aggregate original principal amount of the 2024 Refinancing Term Loans. Voluntary prepayments of the 2024 Refinancing Term Loans are permitted, in whole or in part, with prior notice, without premium or penalty.
The 2025 Refinancing Term Loans amortize in equal quarterly installments of 0.25% of the aggregate original principal amount of the 2025 Refinancing Term Loans. Voluntary prepayments of the 2025 Refinancing Term Loans are permitted, in whole or in part, with prior notice, without premium or penalty.
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, management services we provide to physician practices for which we are not required to provide capital or additional assets and other non-patient services.
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 30 Table of Contents surgical facilities and physician practices in which we do not own an interest, management services we provide to physician practices for which we are not required to provide capital or additional assets and other non-patient services.
Our income tax expense and/or other comprehensive income 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.
Our income tax expense and/or other comprehensive income in future periods will be 33 Table of Contents 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.
During 2024, the Company had identified two reporting units, American Group and National Group. The Company tests its goodwill for impairment at least annually, as of October 1, or more frequently if certain indicators arise. A detailed evaluation of potential impairment indicators was performed, which specifically considered recent increases in interest rates, inflation risk and market volatility.
During 2025, the Company has identified two reporting units, American Group and National Group. The Company tests its goodwill for impairment at least annually, as of October 1, or more frequently if certain indicators arise. A detailed evaluation of potential impairment indicators was performed, which specifically considered recent increases in interest rates, inflation risk and market volatility.
During the years ended December 31, 2024, 2023 and 2022, the Company made no federal income tax payments due to utilization of its NOL carryforwards.
During the years ended December 31, 2025, 2024 and 2023, the Company made no federal income tax payments due to utilization of its NOL carryforwards.
The following table summarizes revenues by service type as a percentage of total revenues: Year Ended December 31, 2024 2023 2022 Patient service revenues 98.1 % 98.4 % 98.5 % Other service revenues 1.9 % 1.6 % 1.5 % Total revenues 100.0 % 100.0 % 100.0 % 30 Table of Contents Payor Mix The following table sets forth by type of payor the percentage of our patient service revenues generated at the surgical facilities that we consolidate for financial reporting purposes: Year Ended December 31, 2024 2023 2022 Private insurance payors 53.5 % 52.5 % 51.5 % Government payors 41.1 % 41.8 % 42.3 % Self-pay payors 2.7 % 2.5 % 2.6 % Other payors (1) 2.7 % 3.2 % 3.6 % Total 100.0 % 100.0 % 100.0 % (1) Comprised of automobile liability, letters of protection and other payor types.
The following table summarizes revenues by service type as a percentage of total revenues: Year Ended December 31, 2025 2024 2023 Patient service revenues: Patient service revenues 97.5 % 98.1 % 98.4 % Other service revenues 2.5 % 1.9 % 1.6 % Total revenues 100.0 % 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 that we consolidate for financial reporting purposes: Year Ended December 31, 2025 2024 2023 Private insurance payors 52.3 % 53.5 % 52.5 % Government payors 42.8 % 41.1 % 41.8 % Self-pay payors 2.7 % 2.7 % 2.5 % Other payors (1) 2.2 % 2.7 % 3.2 % Total 100.0 % 100.0 % 100.0 % (1) Comprised of automobile liability, letters of protection and other payor types.
Section 382 of the Internal Revenue Code of 1986 ("Section 382"), as amended (the "Code") imposes an annual limit on the ability of a corporation that undergoes an "ownership change" to use its NOLs to reduce its tax liability. Approximately $404.0 million in NOL carryforwards are subject to annual Section 382 base limitations.
Section 382 of the Internal Revenue Code of 1986 ("Section 382"), as amended (the "Code") imposes an annual limit on the ability of a corporation that undergoes an "ownership change" to use its NOLs to reduce its tax liability. Approximately $394.3 million in NOL carryforwards are subject to annual Section 382 base limitations.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 " and is hereby incorporated herein by reference. Liquidity and Capital Resources Cash and cash equivalents were $269.5 million at December 31, 2024 compared to $195.9 million at December 31, 2023.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 " and is hereby incorporated herein by reference. Liquidity and Capital Resources Cash and cash equivalents were $239.9 million at December 31, 2025 compared to $269.5 million at December 31, 2024.
The 2024 Refinancing Term Loans shall bear interest at a rate per annum equal to (x) the forward-looking term rate based on Term SOFR plus 2.75% per annum or (y) an alternate base rate (which will be the highest of (i) the prime rate plus 0.5% per annum above the federal funds effective rate and (ii) Term SOFR plus 1.00% per annum (which shall not be less than 1.00%) plus 1.75% per annum.
The 2025 Refinancing Loans shall bear interest at a rate per annum equal to (x) the forward-looking term rate based on SOFR plus 2.50% per annum or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5% per annum and (iii) Term SOFR plus 1.00% per annum (which shall not be less than 1.00%)) plus 1.50% per annum.
Accounts Receivable Our patient service revenues and other receivables from third-party payors are recorded net of contractual allowances and implicit price concessions, which are estimated based on established fee schedules, relationships with payors, procedure statistics and other objective information including the historical trend of cash collections and contractual write-offs.
Accounts Receivable Accounts receivable from third-party payors are recorded net of contractual allowances and implicit price concessions, which are estimated based on established fee schedules, relationships with payors, procedure statistics and other objective information including the historical trend of cash collections and contractual write-offs.
Capital Resources Net working capital was approximately $495.0 million at December 31, 2024 compared to $372.0 million at December 31, 2023. 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.
Capital Resources Net working capital was approximately $535.2 million at December 31, 2025 compared to $495.0 million at December 31, 2024. 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.
The increase was primarily driven by an 8.0% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed during the year ended December 31, 2024. The increase in days adjusted same-facility revenues was attributable to a 3.9% increase in same-facility case volumes and a 4.0% increase in same-facility revenue per case. Cost of Revenues.
The increase was primarily driven by an 4.9% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed during the year ended December 31, 2025. The increase in days adjusted same-facility revenues was attributable to a 3.4% increase in same-facility case volumes and a 1.4% increase in same-facility revenue per case. Cost of Revenues.
We used the applicable annual interest rate as of December 31, 2024 of 7.09%, based on SOFR plus the applicable margin, for our $1.4 billion outstanding Term Loan to estimate interest payments on this variable rate debt instrument. (2) This reflects our future operating lease payments. We enter into operating leases in the normal course of business.
We used the applicable annual interest rate as of December 31, 2025 of 6.22%, based on SOFR plus the applicable margin, for our $1.4 billion outstanding Term Loan to estimate interest payments on this variable rate debt instrument. (2) This reflects our future operating lease payments. We enter into operating leases in the normal course of business.
In certain cases, we may not reduce the valuation allowance by the amount of the deferred tax liabilities depending on the nature and timing of future taxable income attributable to deferred tax liabilities. We recorded a valuation allowance against our deferred tax assets at December 31, 2024 and 2023 totaling $284.7 million and $150.1 million, respectively.
In certain cases, we may not reduce the valuation allowance by the amount of the deferred tax liabilities depending on the nature and timing of future taxable income attributable to deferred tax liabilities. We recorded a valuation allowance against our deferred tax assets at December 31, 2025 and 2024 totaling $317.9 million and $284.7 million, respectively.
The primary source of our operating cash flows is the collection of accounts receivable from private insurance companies, federal and state agencies (under the Medicare and Medicaid programs) and individuals. Our cash flows provided by operating activities was $300.1 million for the year ended December 31, 2024 compared to $293.8 million for the year ended December 31, 2023.
The primary source of our operating cash flows is the collection of accounts receivable from private insurance companies, federal and state agencies (under the Medicare and Medicaid programs) and individuals. Our cash flows provided by operating activities was $274.3 million for the year ended December 31, 2025 compared to $300.1 million for the year ended December 31, 2024.
Cost of revenues was $2,368.7 million for the year ended December 31, 2024 compared to $2,095.8 million for the year ended December 31, 2023. The increase was primarily driven by increased performance of high acuity procedures and acquisitions completed during the year ended December 31, 2024.
Cost of revenues was $2,543.7 million for the year ended December 31, 2025 compared to $2,368.7 million for the year ended December 31, 2024. The increase was primarily driven by increased performance of high acuity procedures and acquisitions completed during the year ended December 31, 2025.
As a percentage of revenues, net income attributable to non-controlling interests was 5.8% and 5.4% for the years ended December 31, 2024 and 2023, respectively.
As a percentage of revenues, net income attributable to non-controlling interests was 5.3% and 5.8% for the years ended December 31, 2025 and 2024, respectively.
(2) This amount includes a net litigation settlements (gain) loss of $0.8 million, $10.6 million and $29.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. This amount also includes other litigation costs of $3.9 million, $2.5 million and $4.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.
(2) This amount includes a net litigation settlements loss (gain) of $7.3 million, $(0.8) million and $10.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. This amount also includes other litigation costs of $3.1 million, $3.9 million and $2.5 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company made income tax payments of $1.6 million, $1.4 million and $1.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. In each of these periods the income tax payments related to states in which the Company does not have a NOL to 33 Table of Contents offset taxable income.
The Company made income tax payments of $1.2 million, $1.6 million and $1.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. In each of these periods the income tax payments related to states in which the Company does not have a NOL to offset taxable income.
Comparison of Operating Results for the Year Ended December 31, 2023 to the Year Ended December 31, 2022 Our discussion regarding the comparison of the year ended December 31, 2023 compared to the year ended December 31, 2022 was previously disclosed beginning on page 42 in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed on February 26, 2024, under "Item 7.
Comparison of Operating Results for the Year Ended December 31, 2024 to the Year Ended December 31, 2023 Our discussion regarding the comparison of the year ended December 31, 2024 compared to the year ended December 31, 2023 was previously disclosed beginning on page 35 in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed on March 7, 2025, under "Item 7.
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.
Income Taxes We use 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.
Discussion of the operating, investing and financing activities for the year ended December 31, 2023 was previously disclosed beginning on page 43 in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed on February 26, 2024, under "Item 7.
Discussion of the operating, investing and financing activities for the year ended December 31, 2024 was previously disclosed beginning on page 36 in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed on March 7, 2025, under "Item 7.
The following tables present financial information for the reportable segment (in millions): Year Ended December 31, 2024 2023 2022 Revenues: Surgical Facilities $ 3,114.3 $ 2,743.3 $ 2,539.3 Total revenues $ 3,114.3 $ 2,743.3 $ 2,539.3 Adjusted EBITDA: Surgical Facilities $ 610.0 $ 534.3 $ 461.9 All Other (101.8) (96.2) (81.7) Total Adjusted EBITDA (1) $ 508.2 $ 438.1 $ 380.2 Depreciation and amortization: Surgical Facilities $ 138.9 $ 110.8 $ 105.4 All other 13.7 7.3 9.4 Total depreciation and amortization expense $ 152.6 $ 118.1 $ 114.8 Supplemental Information: Cash purchases of property and equipment, net: Surgical Facilities $ 86.6 $ 88.7 $ 75.4 All Other 3.8 0.1 5.2 Total cash purchases of property and equipment, net $ 90.4 $ 88.8 $ 80.6 (1) For a reconciliation of Adjusted EBITDA to income before income taxes as reflected in the audited consolidated statements of operations see "Certain Non-GAAP Measures" below.
The following tables present financial information for the reportable segment (in millions): Year Ended December 31, 2025 2024 2023 Revenues: Surgical Facilities $ 3,308.7 $ 3,114.3 $ 2,743.3 Total revenues $ 3,308.7 $ 3,114.3 $ 2,743.3 Adjusted EBITDA: Surgical Facilities $ 626.7 $ 610.0 $ 534.3 All Other (100.5) (101.8) (96.2) Total Adjusted EBITDA (1) $ 526.2 $ 508.2 $ 438.1 Depreciation and amortization: Surgical Facilities $ 164.8 $ 138.9 $ 110.8 All other 11.2 13.7 7.3 Total depreciation and amortization expense $ 176.0 $ 152.6 $ 118.1 Supplemental Information: Cash purchases of property and equipment, net: Surgical Facilities $ 77.9 $ 86.6 $ 88.7 All Other 0.8 3.8 0.1 Total cash purchases of property and equipment, net $ 78.7 $ 90.4 $ 88.8 (1) For a reconciliation of Adjusted EBITDA to income before income taxes as reflected in the audited consolidated statements of operations see "Certain Non-GAAP Measures" below.
It is our policy to collect co-payments and deductibles prior to providing services, where possible. It is also our policy to verify a patient’s insurance 72 hours prior to the patient’s procedure. Because our services are primarily non-emergency, our surgical facilities have the ability to control these procedures.
It is our policy to collect co-payments and deductibles prior to providing services, where possible. It is also our policy to verify a patient’s insurance 72 hours prior to the patient’s procedure. Because our services are primarily non-emergency, our surgical facilities have the ability to control the procedures for which third-party reimbursement is sought and obtained.
As a percentage of revenues, cost of revenues was 76.1% and 76.4% for the years ended December 31, 2024 and 2023, respectively. General and Administrative Expenses. General and administrative expenses were $138.7 million and $120.9 million for the years ended December 31, 2024 and 2023, respectively.
As a percentage of revenues, cost of revenues was 76.9% and 76.1% for the years ended December 31, 2025 and 2024, respectively. General and Administrative Expenses. General and administrative expenses were $118.2 million and $138.7 million for the years ended December 31, 2025 and 2024, respectively.
"Goodwill and Intangible Assets" to the consolidated financial statements elsewhere in this Annual Report for additional disclosure related to goodwill. 34 Table of Contents Results of Operations Comparison of Operating Results for the Year Ended December 31, 2024 to the Year Ended December 31, 2023 The following tables summarize certain results from the statements of operations for the periods indicated (in millions): Year Ended December 31, 2024 2023 2022 Revenues $ 3,114.3 $ 2,743.3 $ 2,539.3 Operating expenses: Cost of revenues 2,368.7 2,095.8 1,964.4 General and administrative expenses 138.7 120.9 102.2 Depreciation and amortization 152.6 118.1 114.8 Transaction and integration costs 100.1 61.7 47.5 Net loss on disposals, consolidations and deconsolidations 40.6 14.4 11.1 Equity in earnings of unconsolidated affiliates (19.5) (14.2) (12.5) Litigation settlements (0.8) 10.6 (29.3) Loss on debt extinguishment 5.1 15.5 14.9 Other income (20.0) (7.5) (19.0) 2,765.5 2,415.3 2,194.1 Operating income 348.8 328.0 345.2 Interest expense, net (201.7) (193.0) (234.9) Income before income taxes 147.1 135.0 110.3 Income tax (expense) benefit (134.6) 0.3 (23.3) Net income 12.5 135.3 87.0 Less: Net income attributable to non-controlling interests (180.6) (147.2) (141.6) Net loss attributable to Surgery Partners, Inc. $ (168.1) $ (11.9) $ (54.6) Revenues.
"Goodwill and Intangible Assets" to the consolidated financial statements elsewhere in this Annual Report for additional disclosure related to goodwill. 34 Table of Contents Results of Operations Comparison of Operating Results for the Year Ended December 31, 2025 to the Year Ended December 31, 2024 The following tables summarize certain results from the statements of operations for the periods indicated (in millions): Year Ended December 31, 2025 2024 2023 Revenues $ 3,308.7 $ 3,114.3 $ 2,743.3 Operating expenses: Cost of revenues 2,543.7 2,368.7 2,095.8 General and administrative expenses 118.2 138.7 120.9 Depreciation and amortization 176.0 152.6 118.1 Transaction and integration costs 73.9 100.1 61.7 Net loss on disposals, consolidations and deconsolidations 30.4 40.6 14.4 Equity in earnings of unconsolidated affiliates (22.9) (19.5) (14.2) Litigation settlements 7.3 (0.8) 10.6 Loss on debt extinguishment 1.3 5.1 15.5 Other income (8.7) (20.0) (7.5) 2,919.2 2,765.5 2,415.3 Operating income 389.5 348.8 328.0 Interest expense, net (272.6) (201.7) (193.0) Income before income taxes 116.9 147.1 135.0 Income tax (expense) benefit (18.0) (134.6) 0.3 Net income 98.9 12.5 135.3 Less: Net income attributable to non-controlling interests (176.8) (180.6) (147.2) Net loss attributable to Surgery Partners, Inc. $ (77.9) $ (168.1) $ (11.9) Revenues.
The $262.9 million increase was primarily driven by an aggregate net increase of $250.2 million in payments for acquisitions (net of cash acquired) and purchases of equity method investments and a $23.2 million decrease in proceeds from sales of facilities.
The $241.9 million decrease was primarily driven by an aggregate net decrease of $205.1 million in payments for acquisitions (net of cash acquired) and purchases of equity method investments and a $43.9 million increase in proceeds from sales of facilities.
Income tax expense was $134.6 million for the year ended December 31, 2024 compared to income tax benefit of $0.3 million for the year ended December 31, 2023.
Income tax expense was $18.0 million for the year ended December 31, 2025 compared to income tax expense of $134.6 million for the year ended December 31, 2024.
Executive Overview As of December 31, 2024, we owned or operated, primarily in partnership with physicians, a portfolio of 161 surgical facilities comprised of 142 ASCs and 19 surgical hospitals across 31 states. We owned a majority interest in 83 of the surgical facilities and consolidated 118 of these facilities for financial reporting purposes.
Executive Overview As of December 31, 2025, we owned or operated, primarily in partnership with physicians, a portfolio of 176 surgical facilities comprised of 157 ASCs and 19 surgical hospitals across 30 states. We owned a majority interest in 90 of the surgical facilities and consolidated 121 of these facilities for financial reporting purposes.
Net cash provided by financing activities for the year ended December 31, 2024 was $262.0 million compared to net cash used of $155.2 million for the year ended December 31, 2023.
Net cash used in financing activities for the year ended December 31, 2025 was $57.3 million compared to net cash provided by financing activities of $262.0 million for the year ended December 31, 2024.
Total revenues for 2024 increased 13.5% to $3.1 billion from $2.7 billion in 2023. The increase in revenues was attributable to same-facility revenue growth and acquisitions completed in 2024. Days adjusted same-facility revenues for 2024 increased 8.0% from 2023, with a 4.0% increase in revenue per case and a 3.9% increase in same-facility cases.
Total revenues for 2025 increased 6.2% to $3.3 billion from $3.1 billion in 2024. The increase in revenues was attributable to same-facility revenue growth and the net impact from acquisitions and divestitures completed in 2025. Days adjusted same-facility revenues for 2025 increased 4.9% from 2024, with a 1.4% increase in revenue per case and a 3.4% increase in same-facility cases.
Certain Non-GAAP Measures Adjusted EBITDA is not a measurement 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 this non-GAAP metric are significant components in understanding and evaluating our financial performance.
Certain Non-GAAP Measures Adjusted EBITDA is not a measurement 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.
Additionally, for 2024, Adjusted EBITDA increased 16.0% to $508.2 million compared to $438.1 million for 2023. The increase in Adjusted EBITDA was primarily attributable to revenue growth, continued cost management initiatives and acquisitions completed in 2024 and 2023. For 2024, net loss attributable to Surgery Partners, Inc. was $168.1 million compared to $11.9 million for 2023.
Additionally, for 2025, net loss attributable to Surgery Partners, Inc. was $77.9 million compared to $168.1 million for 2024. For 2025, Adjusted EBITDA increased 3.5% to $526.2 million compared to $508.2 million for 2024. The increase in Adjusted EBITDA was primarily attributable to revenue growth, continued cost management initiatives and acquisitions completed since the prior year.
December 31, 2024 2023 Assets: Surgical Facilities $ 7,466.3 $ 6,383.7 All Other 423.7 493.0 Total assets $ 7,890.0 $ 6,876.7 Critical Accounting Policies In preparing our consolidated financial statements in conformity with U.S.
December 31, 2025 2024 Assets: Surgical Facilities $ 7,643.9 $ 7,466.3 All Other 475.8 423.7 Total assets $ 8,119.7 $ 7,890.0 Critical Accounting Policies In preparing our consolidated financial statements in conformity with U.S.
Additionally, the year ended December 31, 2023, includes $4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection.
Additionally, the year ended December 31, 2023, includes $4.4 million related to the impact of changes in Florida law regarding the use of letters of protection. (3) This amount includes fair value changes of undesignated derivatives for the year ended December 31, 2023.
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.
We use Credit Agreement EBITDA as a measure of liquidity and to determine our compliance under certain covenants pursuant to our Secured Credit Facilities. Credit Agreement EBITDA is determined on a trailing twelve-month basis. We have included it because we believe it provides investors with additional information about our ability to incur and service debt and make capital expenditures.
The 2024 Refinancing Term Loans replace or refinance in full all of the existing term loans outstanding under the Credit Agreement (as in effect immediately prior to the Amendment), all as further set forth in the Amendment. The 2024 Refinancing Term Loans mature on December 19, 2030.
The 2025 Refinancing Term Loans replace or refinance in full all of the existing term loans outstanding under the Credit Agreement (as in effect immediately prior to the Second Amendment), and refinance in full all of the existing revolving credit commitments and outstanding revolving loans under the Credit Agreement (as in effect immediately prior to the Second Amendment), all as further set forth in the Second Amendment.
(2) Represents impact of acquisitions as if each acquisition had occurred on January 1, 2024. 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 New Credit Facilities.
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 Secured Credit Facilities.
During 2024, we acquired a controlling interest in eight surgical facilities and several physician practices for aggregate cash consideration of $378.8 million, net of cash acquired, and non-cash consideration of $1.1 million. We had cash and cash equivalents of $269.5 million and $501.5 million of borrowing capacity under the Revolver as of December 31, 2024.
During 2025, we acquired a controlling interest in twelve surgical facilities and several physician practices and other ancillary businesses for aggregate cash consideration of $162.1 million, net of cash acquired. We had cash and cash equivalents of $239.9 million and $692.8 million of borrowing capacity under the Revolver as of December 31, 2025.
The following table sets forth revenues (in millions): Year Ended December 31, 2024 2023 Patient service revenues $ 3,054.4 $ 2,700.4 Other service revenues 59.9 42.9 Total revenues $ 3,114.3 $ 2,743.3 Patient service revenues increased 13.1% to $3,054.4 million for the year ended December 31, 2024 compared to $2,700.4 million for the year ended December 31, 2023.
The following table sets forth revenues (in millions): Year Ended December 31, 2025 2024 Patient service revenues $ 3,226.3 $ 3,054.4 Other service revenues 82.4 59.9 Total revenues $ 3,308.7 $ 3,114.3 Patient service revenues increased 5.6% to $3,226.3 million for the year ended December 31, 2025 compared to $3,054.4 million for the year ended December 31, 2024.
These adjustments do not relate to our historical financial performance and instead relate to estimates compiled by management and calculated in conformance with the definition of "Consolidated EBITDA" used in the credit agreements governing our credit facilities. 38 Table of Contents 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 December 31, 2024 Cash flows from operating activities $ 300.1 Plus (minus): Non-cash interest expense, net (6.5) Non-cash lease expense (38.9) Deferred income taxes (131.5) Equity in earnings of unconsolidated affiliates, net of distributions received 2.0 Changes in operating assets and liabilities, net of acquisitions and divestitures 118.9 Income tax expense 134.6 Net income attributable to non-controlling interests (180.6) Interest expense, net 201.7 Transaction, integration and acquisition costs 108.0 Litigation settlements and other litigation costs 3.1 Other (1) (2.7) Acquisitions and synergies (2) 58.4 Credit Agreement EBITDA $ 566.6 (1) This amount includes estimates for the impact of a cyber event, losses from divested business and hurricane-related impacts.
These adjustments do not relate to our historical financial performance and instead relate to estimates compiled by management and calculated in conformance with the definition of "Consolidated EBITDA" used in the credit agreements governing our credit facilities. 38 Table of Contents 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 December 31, 2025 Cash flows from operating activities $ 274.3 Plus (minus): Non-cash interest expense, net (9.6) Non-cash lease expense (37.8) Deferred income taxes (16.7) Equity in earnings of unconsolidated affiliates, net of distributions received 0.8 Changes in operating assets and liabilities, net of acquisitions and divestitures 110.4 Income tax expense 18.0 Net income attributable to non-controlling interests (176.8) Interest expense, net 272.6 Transaction, integration and acquisition costs 73.9 De novo start-up costs 6.7 Litigation settlements and other litigation costs 10.4 Acquisitions and synergies (1) 52.0 Credit Agreement EBITDA $ 578.2 (1) Represents impact of acquisitions as if each acquisition had occurred on January 1, 2025.
The net loss on disposals, consolidations and deconsolidations for the years ended December 31, 2024 and 2023 includes activity discussed in Note 2. "Acquisitions, Disposals and Deconsolidations" of the accompanying notes to the consolidated financial statements. The remaining net loss in both periods was primarily attributable to sales and disposals of other assets. Interest Expense, Net.
The costs for both periods primarily related to ongoing development initiatives and the integration of acquisitions. Net Loss on Disposals, Consolidations and Deconsolidations. The net loss on disposals, consolidations and deconsolidations for the years ended December 31, 2025 and 2024 includes activity discussed in Note 2. "Acquisitions, Disposals and Deconsolidations" of the accompanying notes to the consolidated financial statements.
There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to accounts receivable during the years ended December 31, 2024, 2023 and 2022. Income Taxes We use the asset and liability method to account for income taxes.
Our average days sales outstanding was 60 and 61 days for the years ended December 31, 2025 and 2024, respectively. There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to accounts receivable during the years ended December 31, 2025, 2024 and 2023.
The $6.3 million increase was primarily driven by operational growth, partially offset by increased spend on acquisition and integration related costs and the timing of routine working capital. Net cash used in investing activities for the year ended December 31, 2024 was $488.5 million compared to $225.6 million for the year ended December 31, 2023.
The $25.8 million decrease was primarily driven by operational growth and the timing of routine working capital. Net cash used in investing activities for the year ended December 31, 2025 was $246.6 million compared to $488.5 million for the year ended December 31, 2024.
This increase was primarily due to accelerate depreciation recorded on certain long-lived assets as a result of the Company's portfolio management activities. As a percentage of revenues, depreciation and amortization expenses were 4.9% and 4.3% for the years ended December 31, 2024 and 2023, respectively. 35 Table of Contents Transaction and Integration Costs.
Depreciation and amortization expenses were $176.0 million and $152.6 million for the years ended December 31, 2025 and 2024, respectively. This increase was primarily due to accelerated depreciation recorded on certain long-lived assets as a result of the Company's portfolio management activities.
Material Cash Requirements The following table summarizes our material cash requirements by period as of December 31, 2024 (in millions): Payments Due by Period Total Less than 1 year 1-3 years 4-5 years More than 5 years Long-term debt obligations, including interest (1) $ 5,208.2 $ 327.2 $ 592.1 $ 546.8 $ 3,742.1 Operating lease obligations, including interest (2) 409.7 59.1 105.2 75.7 169.7 Total contractual obligations $ 5,617.9 $ 386.3 $ 697.3 $ 622.5 $ 3,911.8 (1) Included in long-term debt obligations are principal and interest owed on our outstanding debt obligations.
Material Cash Requirements The following table summarizes our material cash requirements by period as of December 31, 2025 (in millions): Payments Due by Period Total Less than 1 year 1-3 years 4-5 years More than 5 years Long-term debt obligations, including interest (1) $ 5,738.2 $ 349.2 $ 651.2 $ 1,911.1 $ 2,826.7 Operating lease obligations, including interest (2) 471.6 64.9 103.7 77.0 226.0 Total contractual obligations $ 6,209.8 $ 414.1 $ 754.9 $ 1,988.1 $ 3,052.7 (1) Included in long-term debt obligations are principal and interest owed on our outstanding debt obligations.
As a percentage of revenues, general and administrative expenses were 4.5% and 4.4% for the years ended December 31, 2024 and 2023, respectively. Depreciation and Amortization. Depreciation and amortization expenses were $152.6 million and $118.1 million for the years ended December 31, 2024 and 2023, respectively.
As a percentage of revenues, general and administrative expenses were 3.6% and 4.5% for the years ended December 31, 2025 and 2024, respectively. The decrease in general and administrative expenses as a percentage of revenues was due to a decrease in executive incentive compensation during the year ended December 31, 2025. Depreciation and Amortization.
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 may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA as a measure of financial performance.
Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used by our management to assess operating performance, make business decisions and allocate resources.
Revenues Our revenues consist of patient service revenues and other service revenues. Patient service revenues consist of revenue from our Surgical Facilities reportable segment.
The Company’s tax provision for the year ended December 31, 2025, incorporates the effects of these tax law changes. Revenues Our revenues consist of patient service revenues and other service revenues. Patient service revenues consist of revenue from our Surgical Facilities reportable segment.
We recognize patient service 32 Table of Contents revenues, net of contractual allowances and implicit price concessions, which we estimate based on existing contracts or the historical trend of our cash collections and contractual write-offs. Contractual allowances are recorded at the time of payment and the time of billing for surgical hospitals and ASCs, respectively.
We recognize patient service 32 Table of Contents revenues, net of contractual adjustments and implicit price concessions. Contractual adjustments and implicit price concessions are estimated based on contractual agreements, discount policies and historical experience of cash collections and historical write-offs.
The increase in income tax (expense) benefit was primarily driven by an increase in the valuation allowance as a result of the Company being in a cumulative three-year pre-tax loss position at December 31, 2024. The effective tax rate was 91.5% and (0.2)% for the years ended December 31, 2024 and 2023, respectively. See Note 9.
The Company continued to be in a three year pre-tax loss position at December 31, 2025 and adjusted the existing valuation allowance on its net operating loss carry-forward and Section 163(j) carry-forward. The effective tax rate was 15.4% and 91.5% for the years ended December 31, 2025 and 2024, respectively. See Note 9.
Interest expense, net was $201.7 million for the year ended December 31, 2024 compared to $193.0 million for the year ended December 31, 2023. As a percentage of revenues, interest expense, net was 6.5% and 7.0% for the years ended December 31, 2024 and 2023, respectively. Income Tax (Expense) Benefit .
As a percentage of revenues, interest expense, net was 8.2% and 6.5% for the years ended December 31, 2025 and 2024, respectively. The increase in interest expense was primarily driven by the maturity of prior interest rate swaps in March 2025 and increased interest related to the incremental senior unsecured notes raised in 2024. Income Tax (Expense) Benefit .
We incurred $100.1 million of transaction and integration costs for the year ended December 31, 2024 compared to $61.7 million for the year ended December 31, 2023. The costs for both periods primarily related to ongoing development initiatives and the integration of acquisitions. Net Loss on Disposals, Consolidations and Deconsolidations.
The remaining net loss in both periods was primarily attributable to sales and disposals of other assets. Interest Expense, Net. Interest expense, net was $272.6 million for the year ended December 31, 2025 compared to $201.7 million for the year ended December 31, 2024.
Our average days sales outstanding was 61 and 60 days for the years ended December 31, 2024 and 2023, respectively. We recognize that final reimbursement of outstanding accounts receivable is subject to final approval by each third-party payor.
Changes in estimated contractual adjustments and implicit price concessions are recorded in the period of change, with final adjustments, if any, typically at the time of payment. We recognize that final reimbursement of outstanding accounts receivable is subject to final approval by each third-party payor.
The increase of $417.2 million was primarily driven by net proceeds received from the issuance and sale of $800.0 million in senior unsecured notes, partially offset by the redemption of all the Existing Notes (as discussed in the following section).
The decrease of $319.3 million was primarily driven by the difference in the amount of net proceeds received from the issuance and sale of $425.0 million and $800.0 million in senior unsecured notes for the years ended December 31, 2025 and 2024, respectively. The remaining decrease was due to an increase in distributions to non-controlling interest holders of $55.5 million.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and is hereby incorporated herein by reference. Debt On April 10, 2024, we completed the issuance and sale of $800.0 million in aggregate principal amount of senior unsecured notes due 2032 (the "2032 Notes").
On December 16, 2025, we completed the issuance and sale of $425.0 million in aggregate principal amount of senior unsecured notes due 2032 at 101.00% of the principal amount. The notes were issued as part of the same series as the existing 2032 Unsecured Notes originally issued in April 2024, and have the same terms.
Removed
Contractual allowances are recorded at the time of payment and the time of billing for surgical hospitals and ambulatory surgical centers, respectively. While changes in estimated reimbursement from third-party payors remain a possibility, we expect that any such changes would be minimal and, therefore, would not have a material effect on our financial condition or results of operations.
Added
Recent Legislation On July 4, 2025, Congress passed the One Big Beautiful Bill Act (the “OBBBA”), which introduced significant changes to federally funded healthcare programs, including Medicaid, Medicare, and the Affordable Care Act.
Removed
The remaining increase was due to net borrowings on the Revolver used to fund acquisitions completed during the year ended December 31, 2024.
Added
While such changes are projected to reduce overall healthcare spending and increase regulatory burdens in certain jurisdictions in which the Company operates, they are not expected to materially impact the Company's financial statements. The OBBBA also makes permanent key elements of the Tax Cuts and Jobs Act including, among others, 100% bonus depreciation and the business interest expense limitations.
Removed
The 2032 Notes bear interest at an annual rate of 7.250% per year, payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2024.
Added
The estimated contractual adjustments are recognized at the time of services being performed, with ASCs typically based on contractual agreements and surgical hospitals typically based on historical experience of cash collections and write-offs. Changes in estimated contractual adjustments are recorded in the period of change, with final adjustments, if any, typically at the time of payment.
Removed
Proceeds from sale of the 2032 Notes were used (i) to redeem all of the outstanding 2025 Notes and 2027 Notes, (ii) to pay accrued interest on the Existing Notes through, but not including, April 25, 2024, (iii) to pay related fees and expenses in connection with the offering of the 2032 Notes and redemption of the Existing Notes, and (iv) for general corporate purposes, including to fund future acquisitions. 36 Table of Contents On June 20, 2024, the Company entered into the Amendment to the Credit Agreement (as define below), to provide for a new tranche of term loans under the Credit Agreement in an aggregate principal amount of $1.4 billion.
Added
Contractual adjustments and implicit price concessions are estimated based on contractual agreements, discount policies and historical experience of cash collections and historical write-offs. The estimated contractual adjustments and implicit price concessions are recognized at the time of services being performed, with ASCs generally based on contractual agreements and surgical hospitals generally based on historical experience of cash collections and write-offs.
Removed
The $100.1 million for the year ended December 31, 2024, includes approximately $10.7 million of costs associated with evaluating strategic alternatives. This amount further includes start-up costs related to de novo surgical facilities of $7.9 million, $3.2 million and $1.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Added
As a percentage of revenues, depreciation and amortization expenses were 5.3% and 4.9% for the years ended December 31, 2025 and 2024, respectively. 35 Table of Contents Transaction and Integration Costs. We incurred $73.9 million of transaction and integration costs for the year ended December 31, 2025 compared to $100.1 million for the year ended December 31, 2024.
Removed
(3) This amount includes the reclassification of $7.5 million of unrealized gains out of accumulated OCI into income related to the de-designation of a portion of one of the Company's interest rate caps for the year ended December 31, 2022. This amount further includes fair value changes of undesignated derivatives for the years ended December 31, 2024, 2023 and 2022.
Added
The decrease in income tax expense was primarily driven by 2024 being the initial year the Company was in a cumulative three-year pre-tax loss position and thereby recorded a valuation allowance against its net operating loss carry-forward.
Removed
For the year ended December 31, 2022, this amount includes losses incurred, net of insurance proceeds received, related to certain surgical facilities that were closed following Hurricane Ian. We use Credit Agreement EBITDA as a measure of liquidity and to determine our compliance under certain covenants pursuant to our New Credit Facilities.
Added
Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and is hereby incorporated herein by reference. 36 Table of Contents Debt On August 13, 2025, the Company entered into the Second Amendment to the Credit Agreement (as defined below), which provides for a new tranche of term loans in an aggregate principal amount of $1.4 billion.
Removed
Inflation Inflation and changing prices have not significantly affected our operating results or the markets in which we operate.
Added
The 2025 Refinancing Term Loans mature on December 19, 2030 and the refinanced revolving credit commitments and refinanced revolving loans mature on December 19, 2028.
Added
The items excluded from this non- 37 Table of Contents GAAP metric 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest change"Derivatives and Hedging Activities" to our consolidated financial statements for the year ended December 31, 2024 included elsewhere herein. Item 8. Financial Statements and Supplementary Data Information with respect to this Item is contained in our consolidated financial statements beginning on Page F-1 of this Annual Report.
Biggest change"Derivatives and Hedging Activities" to our consolidated financial statements for the year ended December 31, 2025 included elsewhere herein. Item 8. Financial Statements and Supplementary Data Information with respect to this Item is contained in our consolidated financial statements beginning on Page F-1 of this Annual Report. Item 9.
Based on our indebtedness and the effectiveness of our interest rate swap and cap agreements at December 31, 2024, we do not expect changes in interest rates to have a material effect on our net earnings or cash flows in 2025. For more information regarding our interest rate swap and cap agreements, please refer to Note 7.
Based on our indebtedness and the effectiveness of our interest rate swap and cap agreements at December 31, 2025, we do not expect changes in interest rates to have a material effect on our net earnings or cash flows in 2026. For more information regarding our interest rate swap and cap agreements, please refer to Note 7.
Added
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.

Other SGRY 10-K year-over-year comparisons