Image by kp yamu Jayanath from PixabaySurgery Partners Inc. (Nasdaq: SGRY) has experienced a swirl of negative headlines in the past year: an unsuccessful private-equity takeover bid, unexpected headwinds that drove an earnings shortfall, an activist investor’s push for a company overhaul, and a lawsuit accusing the surgical facility operator of fraudulent billing practices.
However, executives at the Tennessee-based company had largely positive news to report when discussing first-quarter 2026 earnings on May 5.
“We are encouraged by our start to the year, with first-quarter performance broadly in line with our internal expectations – reflecting improved stability across the portfolio and initial signs of recovery in areas that were pressured towards the end of 2025,” Surgery Partners CEO Eric Evans said.
Surgery Partners owns 200 outpatient surgical facilities, which includes approximately 175 ambulatory surgery centers (ASCs), 19 surgical hospitals, plus ancillary services like diagnostic labs and anesthesia.
The healthcare company reported a $35.9 million loss in the first quarter, or a 3-cent-per-share loss. But that result beat the Wall Street consensus estimate, which was a 12-cent-per-share loss. Adjusted earnings before interest, taxes, depreciation and amortization was $102.3 million, down from adjusted EBITDA of $103.9 in the first quarter of 2025.
The company’s $810.9 million in revenue for Q1 2026 also beat the $797.32 million consensus estimate. Surgery Partners reaffirmed its full-year 2026 revenue guidance of $3.35 billion to $3.45 billion and its adjusted EBITDA guidance of at least $530 million.
Evans acknowledged that Surgery Partners “ended last year with a select number of clearly identified, addressable headwinds, particularly within a small subset of our surgical hospital portfolio.”
As he described on the company’s March call to discuss full-year and fourth-quarter 2025 earnings, those headwinds included the fact that commercial mix declined meaningfully in the back half of the year – a shift Evans said Surgery Partners was “a little flat-footed” in addressing.
The New York-based investing firm Ortelius Advisors took a more critical position, arguing in a March open letter that in the light of its struggles, Surgery Partners should divest its surgical hospitals and become a “pure-play ambulatory surgery centers business.”
Amid that backdrop, Evans said on May 5 that the company entered 2026 with a focus on restoring operating consistency and positioning the business for sustainable growth.
“We believe our first quarter results reflect early progress we have made, and position us well to meet or exceed our 2026 objectives at a high level,” he said.
Favorable MSK trends
Evans said Surgery Partners is continuing to pursue a two-pronged organic growth strategy, which is centered on expanding surgical case volumes while also strategically shifting toward higher-acuity procedures.
“To this end, we continue to see favorable trends in our musculoskeletal service line, with total joints performed in our ASCs growing 14.6% year over year,” he said.
Surgery Partners’ investment so far in 73 surgical robots also helps support its goal of ensuring higher-acuity procedures can be performed safely and efficiently in the outpatient setting, Evans said.
Additionally, the company recruited approximately 140 physicians in the first quarter, with many focusing on high-priority specialities like orthopedics, ophthalmology and gastroenterology.
Storm woes and payer-mix pressure
But not every result in the quarter was where Surgery Partners would like it to be.
Evans said winter storms in the first two months of the year – which proved to be a headwind for other publicly traded healthcare companies that own ASCs – led to case losses or referrals in several higher-volume but lower-acuity markets.
Later in the call, the CEO specified that the specialties affected were mostly “GI and eyes.”
Surgery Partners also saw “modest payer mix pressure” in the first quarter, but that trend is moderating compared to the second half of 2025, Evans said. In response, the company is continuing its efforts to both recover and grow its commercial market share, reduce its expenses, and improve the profitability of its Medicare cases.
“Importantly, regarding the three [underperforming] surgical hospital markets we discussed on our fourth quarter call, they are executing their plan through the first quarter, and I’m confident that our new leadership teams that are in place will continue to drive progress,” Evans said.
Evans also addressed an analyst question about Surgery Partners’ reaction to some major health insurers’ recent efforts to scale back their prior authorization requirements – which have long been a thorn in the side of providers.
“We are certainly all on board and in favor of all the work the payers are talking about with all the prior authorization,” Evans said. But he also remarked that “one of the great things about our model is we are aligned with payers and saving the system money. So this idea of payers making it harder to get approval in the wrong setting of care is a great thing for us.”
A ‘slow start’ for M&A
On the M&A front, Surgery Partners deployed about $4 million on acquisitions in the quarter, and the company estimates those investments will contribute approximately $7 million of revenue in 2026.
Evans said the company is still hoping to spend about $200 million on M&A this year. In response to an analyst’s question later in the call, the CEO admitted that “it’s been a slow start” on the M&A so far – but he also pointed out that the timing on deals can be fickle.
Evans also told analysts that Surgery Partners remains committed to its previously communicated “portfolio optimization” efforts, which involve divesting larger, capital-intensive hospital assets to free up cash flow and reduce debt.
“There’s one market that’s in the very advanced stages there – we’re targeting mid-year – [but] we’ll see; obviously, nothing’s done until it’s signed,” he said. “And then there are a couple of other markets that we’re going to be exploring.”
During the first quarter, Surgery Partners also opened one de novo facility, bringing its total openings to nine over the last 12 months. Evans noted that the company’s de novo ASCs are heavily weighted toward musculoskeletal cases, which aligns with Surgery Partners’ long-term strategy to expand its higher acuity capabilities in attractive markets.
