Surgery Partners: valuing a healthcare-services business

Excel model available. Version 1.2 · Valuation date: 2026-09-04.

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Start with one piece of the business

Follow a surgical case from referral and scheduling to treatment, billing, and collection using public disclosures or appropriately authorised records. Identify the people, capacity, and payment arrangements that make the revenue possible.

Three things to work through

Volume and payment

Ask: Are results improving because more cases are performed, because the case mix changes, or because payment per case improves?

Find: Same-facility volumes, revenue per case, facility growth, and disclosed reimbursement or payer commentary.

Then decide: Separate volume from price and mix. Do not assume that higher revenue per case will continue without supporting evidence.

The people who sustain the work

Ask: What must stay in place for a facility to keep serving patients?

Find: Physician relationships, staffing needs, capacity, key agreements, and maintenance investment.

Then decide: Test operating continuity before counting a saving. Cost changes that disrupt capacity can reduce the revenue supporting the deal.

The cash the parent owns

Ask: Does the earnings measure include economic interests that belong to facility partners?

Find: Ownership disclosures, noncontrolling interests, adjusted EBITDA reconciliations, partner distributions, and debt schedules.

Then decide: Match the ownership covered by the valuation to the ownership covered by earnings and cash flow. Avoid deducting partner interests twice.

Where the valuation can go wrong

Noncontrolling interests are portions of consolidated businesses owned by other investors. Company-adjusted EBITDA, consolidated earnings, and cash attributable to the parent can cover different economics. Reconcile them before applying a peer multiple or building the equity bridge.

Apply Mike’s judgment

Protect the work that produces revenue while evaluating cost changes. Test lower volumes or reimbursement alongside cost pressure, including the cash needed for debt and essential investment.

Write down what must be true for the price to make sense. Test lower revenue and lower margins together, including financing and required investment. Keep buyer-created synergies separate from the business’s standalone value.

Open the workbook and try one change

1. Read Start Here, then open Valuation Summary to see the range of methods.
2. Review Assumptions and Sources & Adjustments. Separate reported figures from assumptions before changing the case.
3. Change one operating assumption, then test lower revenue and lower margins together. Follow the effect through Operating Forecast, DCF, and Sensitivities.
4. Read Checks after each change. Resolve a failed check or funding shortfall before relying on the result.

Start with NCI Reconciliation: facility partners own part of the economics. Follow adjusted earnings, partner income, and cash distributions separately. Then test the cash the parent can retain after investment and debt costs.

Compare the answers

Use Trading Comps and DCF to compare market pricing with the cash the business can generate. The Transactions and Sum-of-the-Parts sheets add perspectives where the inputs support them; read their assumptions before treating the outputs as evidence. Acquisition Returns is a buyer-affordability exercise, with its own financing and return assumptions.

Check enterprise value (the operating business) separately from equity value (what remains for shareholders after the relevant cash, debt, and other adjustments). If methods disagree, identify the assumption causing the gap before choosing a range.

Choose a valuation method

Copy this assumption note

• Assumption that matters: ___
• Evidence supporting it: ___
• What is still unknown: ___
• What changes in the downside: ___
• Effect on cash, price, or the handover: ___
• Next evidence to obtain and owner: ___

Carry the finding into the deal

Before You Buy: Follow the Work helps test the operating assumptions. After the Deal: Keep the Business Working helps assign the changes and protect continuity.