Bain Capital Bids to Take Surgery Partners Private in Outpatient Care Push

Bain Capital offered to acquire the remaining shares it doesn’t already own in surgical facilities operator Surgery Partners. The non-binding proposal is a 27 percent premium to Friday’s closing price.

TPG and UnitedHealth Group’s Optum unit were also interested in the asset, Bloomberg reported last year. And, according to a letter sent Monday to the Board, Bain Capital said it decided to engage only after Surgery Partners’ “thorough strategic review involving deep engagement from multiple financial and strategic parties” failed to result in a deal.

The company went public in 2015 and merged with National Surgical Healthcare in 2017, at which point Bain acquired H.I.G. Capital’s 39 percent stake in Surgery Partners.

Thematically, investments targeting the shift from inpatient to lower-cost outpatient settings have been popular for some time.

Ambulatory surgery centers—the bulk of Surgery Partners’ business—have been a key part of that trend and could see a second life as recent tailwinds drive renewed interest.

Most deals in the space focused on specialties that were early outpatient adopters, like GI, ophthalmology, and plastics. Now, there’s potential opportunity in historically “core” hospital specialties like cardiovascular, orthopedics, and spine.

In an ASC market growing at 6 to 8 percent per year, these emerging specialties could unlock growth closer to the low double-digits.

L.E.K. ASC Insights Study (2024)

Driving that growth is a solid combination of both procedure volume increases (new facilities, plus greater surgeon and patient comfort with the ASC setting) and mix-shift toward higher value procedures (both specialty-driven and with new ASC codes for higher complexity procedures).

Surgery Partners is leaning into the trend.

In Q3, MSK-related procedures posted 21 percent year-over-year growth. “More importantly, total joint cases in our ASCs are growing even faster, with just over 50 percent increase in case volume in the quarter,” said CEO Eric Evans on November’s earnings call.

“We do not see this growth slowing in the mid-to-long term as hip, knee, and shoulder surgeries continue to transition into the ASC setting. That shift in site of care is in the early innings.”

In part, Surgery Partners’ execution is a result of its physician recruitment strategy.

New hires are more likely to be in the target specialties, and the company’s 2024 class is its largest yet. That provides an immediate benefit, but also some degree of future compounding — surgeons typically double case volumes by their second year, according to CFO Wayne DeVeydt, who says “growth continues through year three and four.”

On top of the company’s 147 ASCs, Surgery Partners also has a roster of 19 surgical hospitals. Evans is quick to stress, however, that “these are not acute-care assets.”

Unlike traditional acute-care facilities, which can be plagued with reimbursement issues and challenging patient demographics, Surgery Partners’ hospitals have a median daily census of five patients and near-zero emergency room visits.

“They’re high-margin, elective-focused platforms for complex procedures like joint replacements and spine surgeries,” says Evans. The strategic rationale: the hospitals function as ASC extensions that let surgeons remain in the platform’s network for even their most intensive cases (“the basis of an ecosystem,” Evans adds).

As a next step, a Special Committee of independent directors of the Board will evaluate the Bain Capital Proposal. The relatively low premium could invite competing bids, though some of the more likely suitors may have already engaged and decided to pass.