Image by Joshua Woroniecki from PixabaySurgery Partners (Nasdaq: SGRY) ended 2025 confronting problems that its leaders insist are temporary.
Even so, the end-of-2025 challenges serve as a reminder to ambulatory surgery center (ASC) operators how quickly payer dynamics and physician transitions can disrupt even a scaled platform.
“The year closed out against a challenging backdrop, with several headwinds impacting our business in ways we didn’t anticipate,” Surgery Partners CEO Eric Evans said during a Tuesday morning earnings call. “While some of the pressures we outlined were outside of our control, how we respond is entirely within it.”
Broadly, that theme – unexpected disruption and operational resolve – took over the company’s fourth-quarter earnings call.
In summary, Evans described 2025 as “a tale of two halves” where momentum in the first half of the year gave way to “significant headwinds” in the second half. That culminated in a “fourth quarter performance that fell short of our revised expectations,” he said.
Company revenues for the fourth quarter of 2025 increased 2.4% to $885 million compared to $864.4 million for the fourth quarter of 2024. Same-facility revenues for Q4 2025 increased 3.5% compared to the same period a year ago, with a 2.1% increase in revenue per case and a 1.3% increase in same-facility cases.
Full year revenues for 2025 increased 6.2% to $3.3 billion compared to $3.1 billion for the 2024 period. Same-facility revenues for the full year 2025 increased 4.9% compared to the prior year, with a 1.4% increase in revenue per case and a 3.4% increase in same-facility cases.
“Our earnings shortfall was concentrated in just three surgical hospital markets,” Evans said on the call.
“The balance of our portfolio performed in line with expectations, and these issues were not systemic across the enterprise,” he continued.
Payer mix, physician transitions and anesthesia pressure
Surgery Partners had already lowered guidance during its third-quarter call, citing delayed capital deployment and softer case growth. But as the fourth quarter unfolded, the pressures became clearer, company leaders explained.
Commercial mix declined meaningfully in the back half of the year. For the full year, commercial mix was down about 120 basis points, Evans said. In the fourth quarter alone, the decline was roughly 370 basis points.
“It was largely seen in our surgical hospital markets and was more concentrated in a handful of our larger facilities,” he said.
Three distinct market dynamics drove the miss.
In one market, competitors shifted strategy around Medicare Advantage patients, altering referral flows and effectively prioritizing commercial volume.
“In one of those markets, we have a couple of major competitors only that have either canceled or pushed away MA patients,” Evans said.
That shift “allowed them to really improve their ability to cater to commercial patients in a way they hadn’t historically.”
Evans acknowledged the company did not immediately adjust.
“We found ourselves probably a little bit flat-footed on reacting to that,” he said.
In a second market, growth was robust, but skewed heavily toward government payers.
“We had fantastic growth; it was almost all in government patients,” Evans said.
Meanwhile, physician behavior impacted payer trends as well. Historically, new physician cohorts had mirrored Surgery Partners’ broader payer mix. In 2025, that shifted.
“This year, we did see the difference between retiring and exiting physicians and new physicians, that payer mix difference was a little bit more pronounced,” he said
In a third, more rural market, physician departures compounded the issue.
“We also, in that particular market, had a couple of physicians unexpectedly out,” Evans said.
“And in the rural market with big service lines … that market access for some of our critical service lines, larger service lines like cardiology do make a difference,” he added.
These challenges were magnified by cost pressures, particularly around anesthesia.
“One of the things that happens when you have this kind of mix change, as you invariably get pressure on anesthesia coverage,” Evans said.
Fourth-quarter salaries and wages rose to 28.7% of revenue, nearly 100 basis points higher year over year, while supply costs increased 120 basis points to 27% of revenue.
“In total, it really is the surgical hospitals that saw the pressure,” Evans said. “Our ASC business was very much in line with history,” Evans said.
Structural tailwinds remain
Despite the challenges, Evans repeatedly returned to the company’s core thesis: that ambulatory surgery remains one of the most compelling value propositions in U.S. health care.
“We are in a space where we create a ton of value. Maybe one of the true value-based care creators within the fee-for-service system,” he said. “Patients, physicians and payers prefer us.”
Similar to other large ASC players, the shift to higher-acuity care and more complex procedures is a driving force.
Total joints grew 15% in the fourth quarter and 19% for the year, and Surgery Partners performed more than 270,000 musculoskeletal procedures in 2025, according to supplemental materials provided by the company.
The ASC organization is investing in technology to support its focus on higher-acuity, complex procedures Surgery Partners ended the year with 74 surgical robots in service, including six added in 2025
It recruited nearly 700 physicians during the year.
On the policy front, Evans cited the elimination of Medicare’s inpatient-only list as a long-term catalyst.
“It allows the doctor to make the decision,” he said. “It allows Medicare to benefit from the savings of technology without having to wait years just based on the bureaucracy of a list.”
While cardiology transitions may take longer due to state-level restrictions, “there’s no doubt that cardiology is a place. … I do believe there’s tremendous opportunities for savings,” he said.
M&A, de novos and capital allocation
Growth via acquisitions and development continues to be central to Surgery Partners’ strategy.
In 2025, Surgery Partners deployed $182 million toward acquisitions, modestly below its $200 million-plus target.
It also opened eight de novo facilities during the year, including four in the fourth quarter, bringing the total opened since 2022 to 27
“Investing in the development of de novo facilities represent a relatively new and expanding component of our long-term growth,” Evans said.
For 2026, the company expects to deploy at least $200 million toward M&A.
“M&A remains a critical component of our growth strategy,” Evans said.
The company guided to 2026 revenue between $3.35 billion and $3.45 billion and adjusted EBITDA of at least $530 million.
Overall, Surgery Partners’ leaders described 2026 as a year of disciplined execution.
“We remain disciplined and confident in our ability to improve the business and return to the consistent and predictable growth the market has come to expect from us,” CFO David Doherty said on the call.
