OREANDA-NEWS. Surgical Care Affiliates, Inc., a leading provider of surgical services, today announced results for the second quarter and six-months ended June 30, 2016. 

For the three-months ended June 30, 2016, SCA’s net operating revenue was $299.9 million, an increase of 18.2% over the prior year second quarter. For the second quarter of 2016, net income attributable to SCA grew 25.1% to $5.7 million and adjusted EBITDA less NCI grew 10.9% to $47.7 million. 

The Company reiterates the 2016 adjusted EBITDA less NCI growth guidance range of 13% to 16% provided in January 2016.

“We are pleased with our clinical, strategic and financial performance. Patient care is our first priority, and our success is driven by our outstanding physicians and teammates, who continue to achieve strong clinical quality and patient satisfaction results,” said Andrew Hayek, Chairman and Chief Executive Officer. “From a strategic standpoint, we continue to partner with health plans, medical groups and health systems, and our development pipeline remains strong. We are grateful to our physicians and teammates across the country who are dedicated to outstanding patient care and to building our SCA community.”

Transactions Update

During the second quarter of 2016, the Company acquired nine new facilities, four of which are consolidated, two of which are nonconsolidated and three of which are managed-only facilities. One of the nine facilities acquired was absorbed into an existing facility and ceased operations at its old location.  In addition, the Company exited one managed-only facility. Since the end of the second quarter, the Company has added two new facilities, one of which is consolidated and one of which is nonconsolidated.  SCA’s total facility count as of August 2, 2016 is 203.

Strategy Update

SCA continues to partner with health plans, medical groups and health systems to improve surgical delivery.  SCA’s health plan relationships are designed to optimize surgical services, improving both the quality of care and the patient experience, while reducing the total cost of care.  In the second quarter of 2016, SCA entered into three additional strategic partnerships with health plans, which represents another significant step forward in the execution of the Company’s health plan strategy. SCA now has several health plan partnerships that include value-based incentive payments and are similar in many respects to the health plan partnerships the Company announced last year and earlier this year.

SCA’s health system relationships continue to present opportunities to co-invest in surgical networks. In the second quarter, the Company was pleased to add its first facility in the greater Chicago area in partnership with Advocate Health Care. The DuPage Medical Group is also a partner in this center. 

Second Quarter 2016 Results

GAAP net operating revenues, which excludes revenues from facilities in which SCA owns a noncontrolling interest, increased 18.2% in the second quarter of 2016 to $299.9 million from $253.7 million in the prior year period. This increase was driven both organically, mainly through higher acuity case mix and increased volumes, and inorganically through additions of new facilities. On a same site basis, GAAP net patient revenue for the second quarter of 2016 increased 3.3% compared to the prior year period. 

Systemwide net operating revenues, which includes revenues from all facilities in which SCA has an ownership interest and management fee revenues from managed-only facilities, increased 17.3% in the second quarter of 2016 as compared to the prior year period. This increase was driven both organically, mainly through higher acuity case mix and increased volumes, and inorganically through additions of new facilities. On a same site basis, systemwide net patient revenue for the second quarter of 2016 increased 8.1% compared to the prior year period. Same site systemwide case volume increased 4.1% compared to the prior year period. Management believes systemwide growth metrics are the most important to understand the true financial performance of the Company because they include all facilities in the Company’s portfolio. 

Net income attributable to SCA, which includes certain non-cash and non-recurring expenses, was $5.7 million for the second quarter of 2016, up 25.1% from $4.6 million in the second quarter of 2015.

Adjusted EBITDA less NCI, which adds back certain non-cash and non-recurring expenses, increased 10.9% for the second quarter of 2016 to $47.7 million from $43.0 million in the same period of the prior year.

Adjusted net income, which adjusts for items that are non-cash or non-recurring in nature, was $19.1 million for the second quarter of 2016, compared to $19.9 million for the same period of the prior year.

SCA’s net cash provided by operating activities was $77.4 million for the second quarter of 2016, slightly down from $78.1 million or 0.9% from the second quarter of 2015.  For the first six months of 2016, net cash provided by operating activities was $138.9 million, up 19.0% from the prior year period. Adjusted operating cash flow less distributions to noncontrolling interests was $41.4 million for the second quarter, up 5.2% from $39.4 million in the second quarter of 2015.  For the first six months of 2016, adjusted operating cash flow less distributions to noncontrolling interests was $62.7 million, up 27.6% from the same period of the prior year.

Full Year 2016 Guidance

For 2016, the Company reiterates the guidance it initially provided in January 2016. The Company continues to expect adjusted EBITDA less NCI growth in 2016 to be in the range of 13% to 16%.