Prepared remarks
Greetings, welcome to Surgery Partners Second Quarter 2026 Earnings Call. Please note, this conference is being recorded. I will now turn the conference over to Dave Doherty, Chief Financial Officer. Thank you. You may begin.
Good morning, and thank you for joining Surgery Partners' Second Quarter 2026 Earnings Call. I'm joined today by Eric Evans, our Chief Executive Officer; and Justin Oppenheimer, our Chief Operating Officer. During this call, we will make forward-looking statements. There are risk factors that could cause future results to be materially different from these statements as described in this morning's press release and in the reports we file with the SEC. The company does not undertake any duty to update these forward-looking statements. In addition, we will reference certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. We have reconciled these measures to the applicable GAAP measures in this morning's press release and in the supplemental materials posted to our Investor Relations website. With that, I will turn the call over to Eric Evans. Eric?
Thank you, Dave, and good morning, everyone. Before discussing our quarterly results, I want to address a significant portfolio optimization milestone we announced last month. As we noted, we have signed definitive agreements in escrow for the sale of our interest in the Idaho Falls market, Mountain View Hospital and Idaho Falls Community Hospital to our partner, Intermountain Health. We have had a successful and long-standing partnership with Intermountain, not only in Idaho, but also in 15 ASCs across Utah and Montana that remain in our portfolio. The Idaho Falls facilities have built an exceptional reputation as preferred providers and leaders in delivering high-quality, affordable care for the Idaho Falls region. At the same time, they have evolved in ways that today extend well beyond our core short-stay surgical focus to include more traditional acute care services such as obstetrics, neonatology, pediatrics and other nonsurgical service lines.
We are confident these facilities will continue to grow and serve the health care needs of this community with the strength of Intermountain's partnership. This pending transaction is the most impactful part of our strategic review process to date and represents the vast majority of planned portfolio optimization. Our objectives in this process were to further sharpen our focus on our core short-stay surgical facility portfolio to simplify our operations, drive growth and strengthen our balance sheet, and we believe we have been successful in achieving this. To help investors evaluate the company on a comparable basis, in the supplemental financial information we posted on our Investor Relations website this morning, we provide key financial and nonfinancial metrics about this market to help illustrate the change in our business mix, assuming this transaction closes. Dave will speak to the transaction financials in greater detail shortly.
We believe this additional information will make it easier for investors to evaluate the growth profile, margin profile and capital structure of the company following the anticipated closing of the transaction. Upon closing, we will update our forward guidance. Turning now to our second quarter results. We delivered results that were ahead of our expectations for both revenue and adjusted EBITDA, giving us the confidence to reaffirm our full year guidance. Net revenue was approximately $849 million, up 2.7% year-over-year and adjusted EBITDA was approximately $125 million. Adjusted EBITDA margin was 14.7%. On a year-to-date basis, net revenue was approximately $1.66 billion, up 3.6% and adjusted EBITDA was approximately $228 million. As we have consistently reiterated, same facility revenue is one of the clearest indicators of the underlying performance of our platform because it captures case volume, acuity and rate.
In the second quarter, same-facility net revenue increased 5% over last year with 4.8% related to rate, which reflects the continued benefit of our focus on higher acuity procedures. On a year-to-date basis, same-facility revenue increased 4.9% with same-facility cases increasing 0.8% and net revenue per case increasing 4%. We performed approximately 168,000 surgical cases in the second quarter driven by orthopedic and vascular procedures, reflecting the continued robust growth in both acuity and joint-related surgeries. Payer mix also contributed to quarterly performance. As expected, commercial mix moderated compared to the prior year period on both a quarterly and year-to-date basis, while government mix moved correspondingly higher. This dynamic was primarily isolated to our larger surgical hospitals and was consistent with the assumption embedded in our full year guidance. Importantly, we view this as an expected revenue mix item rather than a change in the underlying patient demand environment.
Our focus remains on driving acute clinical quality and appropriate reimbursement across the portfolio. Physician recruiting is another important contributor to that same facility growth profile. In the second quarter, 191 new physicians began using our facilities, bringing our year-to-date recruits to 330. The mix of new recruits continues to be broad-based across our specialties, including orthopedics, ophthalmology, GI, pain and other service lines and the initial revenue contribution from the 2026 cohort increased nearly 16% compared to last year's cohort. As we have discussed in prior periods, these recruiting cohorts compound over time as physicians build volumes in our facilities, and we believe our recruiting capabilities, physician relationships and differentiated operating platform remain key contributors to sustainable growth. Beyond same-facility performance, we are pursuing growth through targeted de novo development and M&A activity.
At quarter end, we had 6 de novo facilities under construction and an additional 7 facilities in the pipeline. These projects are an important long-term growth opportunity and are anchored by high-quality health systems and physician groups in attractive markets. Our approach to M&A continues to be disciplined as we evaluate opportunities against their strategic fit, return and growth potential and impact on our balance sheet objectives. While we maintain and continue to pursue a strong pipeline of opportunities, we have completed an immaterial amount of acquisitions year-to-date. A significant focus this year has admittedly been on optimizing our existing portfolio, divesting assets that no longer align with our short-stay surgical strategic direction and sharpening our focus on core growth. While we do anticipate closing additional acquisitions before year-end, we will clearly not reach our $200 million average annual M&A investment target in 2026.
That said, we remain confident that our M&A strategy is appropriate given how fragmented the ASC industry remains, our unique position as the only scaled fully independent ASC management company and our track record of successful integrations and physician partner value creation that has and will continue to make us a partner of choice. That foundation, combined with a stronger portfolio and balance sheet keeps us well positioned as the right opportunities emerge. Before turning the call back to Dave, I want to thank our colleagues, physicians, partners and operators across the company. We are excited about our growth trajectory, the value of our physician partnerships and the significant long-term opportunity we have to expand access to high-quality, high-value surgical care provided in the optimal setting. The pending Idaho Falls transaction represents an important step on that journey, and our first half results reinforce our confidence in our full year outlook and long-term strategy. With that, I'll turn it to Dave.
Thanks, Eric. As Eric mentioned, our second quarter net revenue was approximately $849 million, up 2.7% year-over-year. Adjusted EBITDA was approximately $125 million compared to approximately $129 million in the prior year period and in line with our expectations. Adjusted EBITDA margin was 14.7%. For the first half of the year, net revenue was approximately $1.66 billion, up 3.6% year-over-year and adjusted EBITDA was approximately $228 million, down 2.3% year-over-year. Year-to-date adjusted EBITDA margin was 13.7% compared to 14.5% in the prior year period. Looking at the quarter in more detail. Revenue growth was driven primarily by higher acuity cases, bringing strong net revenue per case partially offset by the anticipated increase in our government payer mix. Same facility revenue increased 5% in the quarter with case growth of 0.3% and net revenue per case growth of 4.8%. For the year-to-date, same facility revenue has increased 4.9%, with cases increasing 0.8% and net revenue per case increasing 4%.
Our commercial payer mix was approximately 49% of net revenue in the second quarter, approximately 350 basis points lower than last year, with a correspondingly higher mix of government payments driven by shifts within our larger surgical hospitals and case growth that skewed slightly toward higher government-paid cases. Turning to expenses. Salaries and wages were approximately 29.8% of revenue in the second quarter, improving sequentially from 30.5% in the first quarter, though higher than 28.5% in the prior year quarter, due primarily to the change in payer mix we've noted. Supplies were 26.7% of revenue, also improving sequentially from 27.2% last quarter, though higher than 26.0% reported in the second quarter of 2025. Professional fees and medical-related expenses were 12.1% of revenue, improving from 12.5% sequentially and 12.4% in the prior year quarter. Other operating expenses were 6.1% of revenue compared to 7.3% in the first quarter and 6.7% in the prior year quarter.
G&A expenses were 4.3% of revenue compared to 4.8% in the first quarter and 4.4% in the prior year quarter. Taken together, operating expenses improved meaningfully as a percentage of revenue compared to the first quarter, reflecting the expected seasonal step-up in revenue as well as continued operating discipline. Turning back to the balance sheet and cash flow. Interest payments were approximately $90 million in the second quarter compared to approximately $81 million in the prior year quarter. On a year-to-date basis, interest payments were approximately $134 million compared to approximately $126 million in the prior year period. Operating cash flow was approximately $59 million in the second quarter. We distributed $46 million to physician partners and had approximately $7 million of maintenance capital expenditures. On a year-to-date basis, operating cash flow was approximately $71 million.
We anticipate improvement in working capital at our facilities during the remainder of the year, consistent with the seasonal nature of our business. At quarter end, cash flow was approximately $217 million. Revolver borrowings were approximately $75 million and available revolver capacity was approximately $618 million. Credit agreement net debt leverage was approximately 4.4x compared to 4.3x at the end of the first quarter and 4.1x in the prior year quarter. Balance sheet-based net debt to EBITDA was approximately 5.1x, consistent with the first quarter. Before discussing our outlook, I want to spend a few minutes reviewing the financial implications of the expected Idaho Falls transaction and how we believe investors should think about Surgery Partners following closing. This transaction represents the largest step in our portfolio optimization strategy, and it reinforces our commitment to streamlining the business, sharpening our focus on our core short-stay surgical platform, improving the conversion of adjusted EBITDA to cash and supporting further deleveraging over time.
I would like to spend some time elaborating on how this transaction streamlines our remaining business. The anticipated transaction is expected to simplify the go-forward portfolio in several important ways. In the supplemental information released today and included on our website, we help illustrate the changes to our business, excluding the Idaho Falls facilities. Excluding these facilities, we expect the company to have a clear ASC and short-stay surgical profile, a significantly lower Medicaid mix, no obstetrics and neonatology services, meaningfully smaller exposure to ICU beds and emergency department visits and a majority reduction of our nonsurgical admissions. The transaction is also expected to eliminate our inpatient pediatric business and retail and compounding pharmacy services and will decrease our exposure to Medicaid and other state-based reimbursement program changes. We are immensely proud of the growth of the Idaho Falls facilities and the comprehensive service we offered to its community.
But as my comments illustrate, the market has become more complex than the rest of our portfolio. Another distinguishing fact about this market compared to the rest of our portfolio is the capital intensity of these facilities. Over the past three years, average annual capital expenditures for these facilities have been approximately $17 million, and the Idaho Falls facilities represented approximately 32% of the company's total finance lease obligations. When combined, these factors demonstrate that the capital required to manage these facilities is meaningfully different from the rest of our portfolio and more closely aligned with what you would expect to see in traditional acute care settings. After factoring these capital-related items, the distributions we have received from Idaho Falls have represented less than 50% of the facility's adjusted EBITDA. This capital intensity was a significant factor in our portfolio optimization review and supports our view that these facilities are better positioned under ownership with resources and scale to support their continued long-term growth.
Following the completion of this transaction, we believe the company will be easier to understand, more operationally focused and better aligned with the areas where we believe Surgery Partners has the strongest long-term growth opportunity. At closing, the total consideration we expect to receive is approximately $795 million of gross proceeds. From a transaction economics perspective, we recognize the transaction can be evaluated through multiple lenses. Based on the Idaho Falls facility's historical earnings contribution, the proceeds represent approximately 7x LTM adjusted EBITDA. However, we also believe it is important to evaluate the transaction based on the cash flow ultimately accrued to Surgery Partners, given the meaningful facility-level debt service and capital investment associated with these assets. On that basis, transaction proceeds represent approximately 17x the distributions we have received from the facilities on average over the past three years, which we believe better reflects the value realized for Surgery Partners shareholders.
Net cash proceeds will be determined at closing as the final amount will be impacted by closing levels of indebtedness, cash and working capital. These proceeds will be used primarily to pay down debt. We expect this transaction to reduce the consolidated debt on our balance sheet, reducing our balance sheet leverage by approximately 0.3 turns. On a historical basis, excluding the Idaho Falls facility, the company would have generated revenue in the second quarter of approximately $660 million and adjusted EBITDA of approximately $98 million. For the first half of 2026, excluding Idaho Falls, revenue would have been roughly $1.29 billion and adjusted EBITDA would have been approximately $173 million. We believe these ex-Idaho Falls metrics are important because they provide a better view of the future growth profile of the company, particularly as we continue to focus on higher acuity outpatient procedures, physician recruitment, de novo development, health system partnerships and disciplined capital allocation.
Turning to our outlook. We are reaffirming our previously issued full year 2026 guidance for revenue of $3.35 billion to $3.45 billion and adjusted EBITDA of at least $530 million. This excludes any financial impact from the Idaho Falls transaction. As we've noted, the transaction has not yet closed and remains subject to customary closing conditions, including the requisite physician member and physician governing board approvals. Given this fact, we believe the cleanest approach is to reaffirm our existing guidance at this time and provide updated guidance as soon as the transaction closes, which we expect to occur in the near term. Following the anticipated closing of the Idaho Falls transaction, we expect to provide updated guidance and additional detail regarding the company's go-forward financial profile. We will continue to prioritize disciplined capital allocation with a focus on deleveraging, high-return organic growth, de novo development and strategic acquisitions that fit our return threshold.
In summary, we delivered second quarter results ahead of our expectations, continue to generate same facility revenue growth, reaffirmed our full year 2026 guidance in advance, and announced a significant portfolio optimization transaction that we believe strengthens the go-forward profile of the business. We expect to provide updated guidance promptly following the closing of the Idaho Falls transaction. With that, I will turn the call back to the operator for questions.
Questions and answers
Our first question is from Brian Tanquilut with Jefferies.
Maybe, Eric, I'll start just on the core business. It looks like volumes are holding up okay here and really good revenue per procedure performance. Curious what you're seeing in the market. I know there's a lot of concern about broader surgical volumes. Can you share insights on that and how you're expecting the strategy with acute or higher acuity procedures to continue to progress?
Appreciate the question. We're really pleased with the acuity growth in our volume. As we mentioned in our prepared remarks, we're seeing strong acuity growth across total joints. We're also seeing it in spine in a big way within the MSK bucket and in vascular procedures. We continue to point everyone toward the same-store net revenue growth number because it is the right way to think about the business. The total case number is something the industry typically watches and we expect that to be higher over time. We are actively pursuing and prioritizing high acuity procedures and feel quite good about the year so far; it's very aligned with our expectations.
Got it. And then maybe just to click on the Idaho Falls discussion a little bit. As we think about the go-forward strategy, should we expect more divestitures or any other surgical hospitals that you would consider partnering with or maybe divesting? And then, Dave, any other color on tax liability, leases and things we need to consider? Is the $795 million the right kind of net number? I know you already gave the impact on leverage.
I appreciate the question, Brian. On portfolio optimization, this is by far the biggest part of what we planned to do and the most impactful. As we show in our supplemental information, the transaction dramatically simplifies the business and makes us a pure-play short-stay surgical company. We really like the surgical hospital business; many perform very well and focus on high-value elective surgery. From an optimization standpoint, you'll continue to see thoughtful partnerships like last year's Bryan, Texas partnership with Baylor that advance our goals of optimization, deleveraging, expediting free cash flow growth and simplifying the business. But this is the largest step, and you shouldn't expect many additional major divestitures beyond opportunistic partnerships. I'll let Dave dive in a little on the tax and transaction mechanics.
On the tax piece, Brian, we're protected with the state and federal NOLs that we carry into this transaction, so there will be no tax leakage on this transaction and we're still protected on future earnings by some portion of the NOL. There won't be a tax cash payment for the foreseeable future. On the transaction mechanics and calculating cash proceeds, the $795 million total consideration will be used partially to pay down debt on the balance sheet. Net cash proceeds will be determined at closing after you look at net indebtedness of the facilities as well as working capital and a couple of other matters. In our financial supplement released this morning, you'll see the Idaho Falls facilities carry about one-third of the company's total noncorporate debt — about $350 million of consolidated debt on the books, and roughly three-quarters of that is our proportionate share based on our ownership. I hope that helps.
Our next question is from Joanna Gajuk with Bank of America.
So on the payer mix, you said it was anticipated that the government mix would increase. Are you referring to the surgical hospital exposure and not ASCs? On the ASC side, have you seen procedures move into ASCs because of changes to the inpatient-only list? Can you flesh out the types of procedures you're seeing from that?
Joanna, thanks for the question. I'll turn this over to Justin to give some detail on what we're seeing in operations from a payer mix perspective.
Thanks, Eric, and thanks, Joanna, for the question. On payer mix, as mentioned in the opening remarks, mix for the first six months came in as planned. The moderation in payer mix was slightly more on the hospital side than on the ASC side. Regarding your second question, we have started seeing cases and continue to see cases come off the inpatient-only list move into ASCs. That's part of what's driving the acuity we're seeing, especially more complex procedures in orthopedics, cardiovascular and spine.
If I may follow up, the mix deterioration on the surgical hospital side — is that related to people losing insurance on exchanges or something else? You said you expected it, so I want to clarify exactly what was happening with payer mix in surgical hospitals.
It's largely just what we are seeing across the industry: a shift in where procedures are being performed, which affects revenue and payer mix. To clarify, our exposure to exchange/HIX business is relatively small; our exposure there is much smaller than broader acute care hospital operators because we're a short-stay surgical facility provider without large emergency department or uninsured exposure. That makes our risk smaller, and with the divestiture of Idaho Falls, our risk is even smaller.
To reiterate, with the pending transaction, we will have a very small emergency business and very little HIX exposure — over half of that exposure goes away with the sale. We're simplifying the business; our Medicaid mix post-transaction would be less than 2%. Going forward, our primary risk in an economic downturn would be volume, not exposure to uninsured or underinsured patients.
Our next question is from Matthew Gillmor with KeyBanc.
Two quick confirmations on Idaho Falls. First, in terms of net proceeds, should we think of the $795 million and then deduct finance leases and other debt to get net proceeds to you? Second, can you confirm the transaction includes some of the related operations in that market, not just the hospital facilities themselves?
Yes, Matt. Your math conceptually is right, but be careful when looking at the debt in our supplement — that's consolidated debt and will come off our balance sheet. What affects net capital is our proportionate share, which is roughly three-quarters of that amount. Cash proceeds will also be impacted by cash on the books at closing and working capital, which is why we can't give an exact net cash number until closing. This transaction represents the entirety of the Idaho Falls market, including the ASCs, physician practices and other ancillary businesses owned by Mountain View Hospital.
And on the ASC rate proposal for 2027, it seemed in line with what you normally expect, though MSK may have gotten a bit more. Any perspective on how that proposal lined up with your expectations?
We were pleased with how Medicare continues to value the ASC space. Regardless of administration, there has been broad support for ASCs because they create a lot of value. We're glad to see attention on higher-acuity places where we create the most value. The initial proposal was in line with our expectations and we expect continued strong support for ASCs.
Our next question is from Benjamin Rossi with JPMorgan.
With some of the Idaho Falls operating changes, you mentioned that Idaho Falls includes business lines like ED, ICU and other noncore services. How should we think about how this divestiture reduces exposure to acute care volatility and headwinds versus your core ambulatory short-stay model? And on the expense side, how will the shift in service mix and payer mix impact your consolidated expense profile? Will this allow cost reductions in hospital-based areas like pro fees for emergency medicine or radiology?
Good question. As highlighted in our supplemental documents, the transaction greatly simplifies our business and dramatically reduces exposure to traditional acute care. About three-quarters of our total nonsurgical admissions were in this market and the majority of our ICU beds were concentrated there. The market was furthest from a pure short-stay surgery profile and faced pressures such as Medicaid and infusion site-of-care shifts. This transaction reduces those exposures, which is a significant positive for the company. Dave can add color on expense profile changes.
On the expense profile, you'll see notable change predominantly in professional fees and medical fees as nonsurgical procedures and higher expense profiles are removed. The impact will be more muted elsewhere in the P&L. We'll provide more detail when we update guidance ex-Idaho Falls.
Follow-up on OR capacity and throughput: are there capacity constraints from OR staffing, anesthesia coverage or block availability that could impact volumes in 3Q and 4Q? When comparing ASCs and surgical hospitals, are there notable differences in OR dynamics?
There are no notable differences between our surgical hospitals and ASCs on capacity — they operate very similarly. Looking into the back half of the year, we're not seeing staffing shortages or anesthesia issues that would constrain capacity. All our facilities still have some capacity to grow, so we don't foresee barriers from that standpoint.
I'll add that we run a weekday-heavy business and have flexibility to open evenings and weekends when needed. We continually assess facilities and add capacity where run rates increase. Smaller facilities, especially after divesting markets like Idaho Falls, are easier to pivot and add procedures or capacity than large, complex markets.
Our next question is from Sarah James with Cantor Fitzgerald.
I wanted to circle back to the commercial mix pressure. Was any of this related to the physician churn you noted in Q4, where there was more Medicare mix away from commercial? Has that improved in those markets? I think you referred to Market 3. Also, is Idaho Falls the main source of this mix pressure given it's a large surgical hospital?
There is certainly some of last year's experience in our guidance; that moderation is being lapped and has been moderating as expected. We watch new recruit mix closely — sometimes higher acuity can start with slightly higher Medicare. We're competing well in the commercial space and expect to continue to do so. So yes, some of last year's exposures are in the numbers, but they are moderating and the underlying business mix looks healthy. Regarding Idaho Falls, it had a different payer mix than the rest of the company, and its ER exposure means mix can vary. However, other surgical hospitals had unique challenges last year and those are recovering on pace with expectations this year.
Just to confirm on Idaho Falls: yes, it did have a different payer mix that influenced company-wide metrics.
On site neutrality, our ethos remains that patients should be treated in the right site of care. Post-transaction we'll be more of a pure-play short-stay surgical company. We believe the government's direction and payer trends align with our model; over time, as care moves out of traditional acute settings, we expect to pick up additional business given our footprint and value proposition, including at our short-stay surgical hospitals.
Our next question is from Andrew Mok with Barclays.
You called out SW&B as a percentage of revenue increasing due to payer mix, but the expense itself was up about 7% year-over-year. Can you provide more color on underlying drivers and how we should think about wage inflation going forward? Also, as you shift toward higher acuity procedures, does that require a more specialized and higher-cost surgeon mix?
On salaries, wages and benefits, we haven't seen abnormal per-unit labor cost pressures — labor has been well controlled. Higher acuity and longer procedures can require additional labor and that's reflected in the numbers, but we are not seeing the need for premium labor. We remain a preferred site of care, which supports operating leverage. Higher acuity cases can have higher implant costs and can affect per-minute margins, but overall they drive higher earnings and we remain excited to grow in those areas.
Follow-up: you shared deliberate actions last year to address commercial mix. That number is still moving negatively in Q2; can you update us on initiatives and progress?
For those markets we called out last year, we have been focused on partnering with physicians to position our facilities to compete and take commercial share, leveraging our value position versus traditional acute players. In the three markets we highlighted, we have action plans in place and are on pace or ahead of where we expected to be. Initiatives include tighter partnerships through the referral chain and active management of local market dynamics. While there will be natural government-driven demand growth given population aging, our base is highly elective and highly commercial, and we expect to maintain and grow commercial share over time.
Our next question is from A.J. Rice with UBS.
You mentioned that your acquisition activity moderated while focused on this transaction. How quickly can you get the pipeline back up and running, what does the pipeline look like now, and thoughts on returning to a normal year of acquisitions in 2027?
We have had an immaterial amount of transactions so far this year, which is unusual for us, though we are often weighted to the fourth quarter. We still have an active pipeline and feel good about our position in a fragmented market. We expect to close some deals before year-end, but not at the $200 million level this year. Our belief in the opportunity and strategy for M&A hasn't changed; we will remain disciplined and focus on high-return opportunities. De novo development is also a priority: we have six underway and seven in the pipeline. Those take time but are an important part of our growth approach.
You previously mentioned cost efficiency programs across technology, anesthesia, purchase standardization, OR utilization and staffing efficiency. Any update on initiatives and progress?
Cost management and margin improvement remain key strategic priorities. We're very focused on continuing to grow margin, and Justin's leadership as COO will accelerate work here. Justin, I'll let you add more detail.
Cost management is one of our key operating pillars this year. Three levers we're executing on are labor, supplies and eliminating systematic inefficiencies across the business. We're starting to see results: SW&B, supplies and G&A all moved down as a percent of revenue from Q1 to Q2. There's more to unlock and this remains a priority for the team.
Our next question is from Whit Mayo with Leerink Partners.
I haven't heard a lot of detail on physician recruiting contribution year-to-date. Any numbers you can share would be helpful.
We've added 191 physicians in Q2, bringing year-to-date recruits to 330. That cohort's initial net revenue contribution is up 16% versus last year. Recruiting has been a major focus and these cohorts tend to compound over multiple years as physicians ramp. We're at or above where we expected to be and will continue to update on progress.
Did you share how much MSK or joint procedures were up year-over-year in the quarter on a same-store basis?
We didn't provide a precise same-store percentage for joints in the prepared remarks, but total joints remain an outsized grower and a multi-year opportunity. We are also seeing strong double-digit growth in other areas such as vascular and spine. Spine is moving out of hospitals and cases coming off the inpatient-only list are enabling more complex procedures in our settings. Joints still have a long runway since the majority are still performed in traditional acute settings.
Our next question is from Brian Hendrix with RBC Capital Markets.
Regarding the roughly one-quarter of acute-type services that remain in the portfolio after Idaho Falls, how much of those are congruent or complementary with your remaining surgical hospitals? Is there a place for those capabilities, or should we think of that remaining portion as fair game for further portfolio optimization?
That remaining one-quarter is not highly concentrated. We will be opportunistic in further simplification if it makes strategic sense. Most of our surgical hospitals that have EDs do very few ED referrals; many EDs exist due to state requirements and largely function as diversionary EDs. Post-sale, over 95% of our business will be short-stay surgical cases and the mix is much closer to an ASC model, so any remaining acute exposure is limited and would be evaluated opportunistically.
To add, the ER as a referral pattern largely applied to the Idaho Falls market. In most of our surgical hospitals, referral patterns resemble ASCs, coming from independent physician offices where physicians often have ownership interests in the hospital.
Follow-up on cardiac growth: you mentioned double-digit growth in cardiac and other areas outside MSK. Is this indicating greater adoption in ASC cardiac procedures or is it more limited?
Most of the growth we're seeing is vascular-based rather than broad cardiology. Cardiovascular opportunity is meaningful but typically slower to develop due to state structure and facility requirements. We're seeing progress initially in vascular, EP and CRM where procedures are less cath-lab intensive, and over time there is broader upside in cardiology, but it's more of a slow burn compared to MSK.
Our final question comes from Ryan Langston with TD Cowen.
Can you give a sense of the split of case growth and revenue per case growth between ambulatory and surgical hospitals? Any trends to call out between the two?
Those businesses are reported together and, broadly, they look very similar in trends. There's nothing materially different to call out between ambulatory and surgical hospital trends in the current period, especially as we move toward a more focused short-stay surgery portfolio with the Idaho Falls sale. Overall, the go-forward portfolio is focused on fast-growth short-stay surgery across the platform.
On physician recruiting, can you remind us how long it typically takes a physician to reach a normal run rate at your centers?
Typically, a recruited physician will double their business in year two as they ramp, which makes sense for a midyear conversion. There is a period where physicians become familiar with the facility and our clinical capabilities before they bring their full book. We see rapid progress over the first couple of years and often double-digit growth into the third year; timing varies by specialty and prior ambulatory experience. With that, I think that was our last question today. I want to thank you again for joining us for today's call, and have a great rest of the day.
Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.