Brentwood, Tenn.-based Surgery Partners reported a record-breaking $3.1 billion in annual revenue, while Bain Capital’s bid to take the company private underscores private equity’s continued interest in the ASC market, according to a March 17 analysis from VMG Health.
Bain’s initial 2017 investment at $19 per share was one of many private equity plays that have shaped the ASC sector over the past decade. This trend is further highlighted by TPG’s recent investment in Compass Surgical Partners.
Here are 10 things to know about the deal:
1. In August 2017, Bain acquired a 54.19% stake in Surgery Partners for $502.7 million and fully acquired National Surgical Healthcare, another ASC portfolio company, for $760 million.
2. Surgery Partners absorbed NSH, expanding its presence to 32 states with 125 ASCs and surgical hospitals, around 60 physician practice locations and ancillary assets, including urgent care centers and diagnostic laboratories.
3. Bain initially focused on portfolio oversight, streamlining operations by divesting non-core assets such as unprofitable surgical hospitals and optometry centers. At the same time, Surgery Partners positioned itself for growth in musculoskeletal procedures, a major driver of outpatient migration.
4. By winter 2021, Surgery Partners raised $260 million in cash reserves, with plans to deploy up to $400 million that fiscal year. While it had invested $300 million over the previous three years, in 2024 alone, it deployed $400 million, accelerating its expansion efforts.
5. Surgery Partners evolved its strategy beyond acquisitions to de novo development and partnerships with major health systems, including Parkview Health, Intermountain Health, Methodist Health System and Ohio Health. It is also positioning itself for the migration of cardiovascular procedures to outpatient settings.
6. From 2017 to the third quarter in 2024, Surgery Partners’ adjusted revenue grew 13.1%, while EBITDA increased 17.5%. Despite market volatility, its stock returned 142.4%, compared to 156.1% for the S&P 500 and 129.6% for the S&P 500 Health Care Providers and Services Index.
7. Surgery Partners’ valuation is driven by cash flow, growth and risk, with Bain’s offer valuing the company at 12.7 times EBITDA — notably higher than typical healthcare services multiples. This premium reflects its strong growth trajectory, Bain’s strategic vision and the broader industry shift toward outpatient care, according to the report.
8. According to the report, analysts peg Surgery Partners’ EBITDA growth at 10.8%, 11.6% and 11.2% over each of the next three years, significantly outpacing peer growth rates of 4.7%, 5.3% and 5.7%, respectively. Additionally, its weighted average cost of capital is 82 basis points lower than competitors, signaling investor confidence in its ASC model and financial stability.
9. Private equity firms like Bain are drawn to Surgery Partners because it follows a proven strategy for success in the ASC market. The company buys ASCs at lower prices, improves their operations and then benefits from higher valuations as they grow, according to the report. Since there are over 11,500 ASCs nationwide, with many still independently owned, there are plenty of opportunities for future acquisitions.
10. ASCs are becoming a bigger part of the healthcare system because they offer cost-effective, high-quality care in a convenient outpatient setting. With insurers and health systems looking for ways to control costs, ASCs are well-positioned for continued growth. Regulatory changes, like the rollback of certificate of need laws and updates to reimbursement rules, are making it even easier for ASCs to expand. Given these factors, private equity firms are expected to keep investing in the space, and Surgery Partners could continue to grow through new acquisitions and partnerships.
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