Surgery Partners, Inc. (SGRY) Earnings Call Transcript & Summary

Good afternoon. My name is Lisa Gill and I am the Health Care Services Analyst at JPMorgan. It is with great pleasure to introduce our last presentation of the day. So you guys saved the best for the last today, Surgery Partners. With us from Surgery Partners is Chairman, Wayne DeVeydt; CEO, Eric Evans; and CFO, Dave Doherty. Wayne is going to walk through the presentation. And then, Eric, Dave and I along with Wayne, we'll go through some Q&A. So let me turn it over to you, Wayne.

Thanks, Lisa. Thank you for having us and thank you all for joining. We really appreciate the time slot during the National Championship Football game and so more questioning why many of you are here right now. But we promise to be judicious with our time and get through this quickly for all of you. First of all, I want to thank you for being here. And just to do a quick highlight. I'm going to walk through just a real brief introduction on -- if I can get this to work. Thank you. Just a little bit of background on who Surgery Partners is. So for those of you that are not familiar with the story, I'll give a very high-level overview of who our company is. Too then is, I'll walk through some investment highlights, kind of starting with what's the TAM we operate in, why are we aligned with that TAM in the right way and where we've taken the organization. And then finally, I'll give some financial highlights. Kind of looking at the last 5 years, what have we actually done and delivered and then where do we think we're taking the company as we move forward. Let me start with just a brief introduction. For those of you that are not familiar with us, we are the leading pure-play surgery center operator in the United States. We are the only pure-play surgery center operator. We don't run and operate acute care hospitals. That's not our business. We focus exclusively on surgery centers. You'll hear us refer to owning hospitals, but they are surgical hospitals. They specialize in doing specific procedures. We operate in 32 states, a very diversified footprint. You'll see we have over 145 facilities that we operate in today. And we continue to add to that number each year through the acquisition model that we will talk about briefly, over 4,800 physicians, surgeons that partner with us. When you think about this, you should know that of the partnering, we are not generally an employer of physicians. So as you look at that around 200 of those are employed. The rest are truly partners with us, in many cases, owners with us and do procedures in our facilities. And we support over 600,000-plus patients. And we have a strong track record of execution. And I'll get into some details on this. But what I want you to see on this slide is this team came together in early 2018. So we were part of a new team, being capital, came in as our largest shareholder and then brought in a new management team. I started as CEO, moved into the chair role after a few years in. Eric got the benefit of becoming CEO in February of 2020, exceptional timing for me. And then, of course, as you can see, we've executed through that. But the company has really done quite well even with COVID, even in the current inflationary environment. And as you'll see, we've grown EBITDA at 18% CAGR. And we've improved margins by almost 300 basis points in that same window of time. So I'll walk through a little bit about how we've done that and where we've taken it. And then finally, we really have this foundation that drives real high visibility into long-term sustainable growth. And we will talk about each one of these in a minute. But at the end of the day, the product that we offer, the service we offer that matters most is we are a preferred patient experience. And we've got significant physician engagement. And when you can align those 2, all the rest of the items fall in place. Probably the big picture to take away from this is we are aligned around every major macro trend, which is how do you move to a lower-cost, high-quality setting that is preferred by patients and physicians. So let me walk through some investment highlights; 6 comments I'm going to highlight. I will take you through these very quickly. If you want the slide deck, you'll see that they flow and the top line is really the takeaway on each one of these slides. But let me start with just the TAM. When you look at the addressable market, the comment I want to emphasize relative to our business model is it's like a large funnel. CMS determines each year those procedures that can only be done in an inpatient setting. Over time, with advances in technology, proofs in patient experience and quality, they eventually determined that certain procedures no longer are done in an inpatient only setting, but can move to an HOPD setting and then ultimately, to a full outpatient setting in an ASC. So you'll see 2 numbers next to the ASC and the HOPD, you'll see $35 billion and you'll see $55 billion, but in essence, everything kind of flows into the ASCs over time. Today, the ASC represents a $35 billion TAM in a highly fragmented market and I'll show you that fragmentation in a few minutes. But in addition, there's over $55 billion being spent in HOPD environment. And then recently, over the last several years, where the government has now concluded that certain procedures can move to an outpatient setting and have removed them from the inpatient-only list, there's another $60 billion that is now moving out of the inpatient setting and beginning its migration to HOPD and ASC. So as you think about the TAM that we're operating in, it's one of the most sizable TAMs you're going to find in any industry that is out there. And we're positioned to capitalize on this TAM for a number of reasons. I won't go over every item on this slide. I'm going to highlight just 1 or 2 items for you. First of all, the right specialties, right? If you think about our book of business, we are heavily focused, over 50% of our revenue is focused on MSK, musculoskeletal. And so how are we positioned? And why is that relevant? Well, in the last several years, the government has allowed total hips and total knees to move to an outpatient setting. So what's our 3-year CAGR on total joints in our ASCs, 114% CAGR in the last 3 years, right? Those trends are not slowing down. We are in the early innings of this transition just starting. Just for a moment, talking about right markets. If you look at our book of business, and I'll show you slide in a minute, 85% of our cases are in MSK, GI and ophthalmology. Why is that relevant? Well, if you look at MSK, the vast majority in hips and knees are done at age 65, if you look at a bell curve of them. If you think about ophthalmology, right, you think about glaucoma and cataracts, right, aging population, GI is an aging population focused. So we are focused on that catcher's mitt as the consumer either comes through the commercial system, which is about 50% of our business. But if they move into the Medicare front role, we're also positioned very well for that with over 40% of our facilities in the 5 largest MA states in the country. I'll talk about partnerships with some slides you'll see about that in a moment. And then in terms of right facilities, 70% of our facilities are multispecialty. Said differently, we can throw a broad, broad net when we're recruiting physicians into our facilities to fill where we have scheduling opportunities within our operating rooms. So what does that translate to? It translates to a bit of what I just talked about, which is we are aligned around demographics first and foremost, 85% of our procedures, but over 50% of our revenue is MSK. And if you look at actual -- what's our CAGR growth been, we showed you a pre-COVID number because we want to show you what we've done even with COVID and even the current environment. Cardiovascular, it starts on a small end. It's kind of using a hockey term, right? You skate not where the puck is up, but where the puck is going to be. That is the next massive growth for this industry. And you're going to see more and more procedures move into an outpatient setting. So we've had case volume growth in the last 3 years pre-COVID of 26%. You'll see GI of 7.5%, orthopedic of over 6.4%. So really compelled and built this model with an intentional focus on where the growth was going to be. How does that translate then? Well, one is we've targeted our investments for that. So in the last 5 years, we were not an MSK asset completely. In the last 5 years, we've now gotten to the point where over 80% of our facilities can do musculoskeletal procedures. And as we think about the next wave that will come with cardiovascular -- with cardio, you'll look at this and you'll see that over 60% of our facilities today are either doing them or we are positioned to have the potential to start doing them in the next year. And I'll show you some metrics on how this translates. But the important point is this, we've established a data-driven flywheel for every specialty in the country and it runs through the exact same flywheel process. So we start with what is the demographics? Is it a population that's aging? Is it a population that we believe is aligned with MSK, GI and ophthalmology? And if it meets those metrics, it goes to the second part of our flywheel then, which is we use our physician recruitment arm. Now I have to emphasize this point, I grew up on the payer side. Dave, our CFO, grew up on the payer side. Our experience had always been that there was this massive amount of data. But it was never being used in a way that you could really corner the market and understand how you could put it to work for you. So for us, when we go for physician recruiting, we know what physicians are in those markets where our ASCs are. We know how many procedures they do. We know how much is commercial versus Medicare versus Medicaid. So as you think about recruiting, we align around all those metrics first to decide where we spend our resources than going out to recruit doctors to do procedures in our facilities. To the extent that we acquire a facility, but it doesn't, for example, offer orthopedics, but we see there's a large recruitment pool out there, we'll be intentional buying a low multiple facility and then adding that specialty line in and then fast growing that. But this flywheel is very, very basic, but it's what we do on every specialty. And I'll show you how some of that translates to economics. If you go back to our CAGR back to 2012. Now again, to be fair, we came in, in 2018. But the vast majority of this growth has happened in the last 5 years. But I wanted to give you kind of a feel for where we've been on that. But more importantly, all of our focus has been on MSK. When we started this journey in 2018, we said this is where the puck is going to be. And you will see now we are doing 4x the case growth. I'll show you a stat in a minute though that shows you just since this team has been here kind of how we've been able to supercharge that growth and where we've been at. And I would also show you that our 3-year CAGR on volume, just pure volume is 4% since pre-COVID levels. So when folks ask, well, how much did COVID impact you? Or have you been able to grow through COVID, the answer is yes and we've grown disproportionate to our competitors. Part of the reason for that was when we started this journey 5 years ago is we had a hearty debate of what is the most valuable asset we have within our facilities. And clearly, it's our physicians. But the question was, but what are the right specialties we wanted to be in and where we wanted to focus our energy? And having formerly been a CFO and Dave being a CFO and our former CFO, we went through a process and said, "Look, what procedures drive the highest dollar contribution per minute because that we can measure?" And through that process, the conclusion was very simple. It was spine. It was orthopedic. It was cardio, right? So as we went through that process, we realized that we had to really create a pivot in our business model, how we recruited, how we did scheduling and how we started to fill our facilities to take full advantage of that and where we wanted to expand facilities where we had an opportunity to grow disproportionately. This is an example of one, but I'll show you consolidated examples in a minute. So what did our flywheel do with this team in the last 5 years? We have over 100,000 orthopedic procedures today, 11% CAGR through COVID. This is an absolute -- so this would be every ortho procedure you would think that would be out there. Our total joints were only -- which are only new to us by creating this large catcher's mitt for orthopedic procedures and in CMS opening the opportunity for us to do total joints in an outpatient setting, that has grown very disproportionate at 114%. And you'll see we added 70 new orthopedic physicians just through September of this past year. So this is a situation where we're going to continue to build this out. But I would say we're in the very early innings, maybe second inning, potentially top of the third inning of the opportunity we're going after, just on MSK. What I want to highlight, though, is you can have a great TAM and you can be positioned in the right ways. But the quality of what you offer matters most, right? What is your product that you offer? And one of the things we like when we're recruiting physicians to our facilities or we're convincing payers why we should get a good return for the value we bring to them is we do offer a superior experience and exceptional medical quality. It's hard to get data to measure ASCs on because in some cases, it's voluntary reporting, which is amazing to me, right? And so you have to go out and look at who actually reported and what does the data say, because that's where you can actually get real benchmarking. But you'll see when you look at average deficiencies per survey that are done, we're 25% fewer deficiencies. And when you compare our surgical hospitals to all other hospitals, we're 48% fewer deficiencies. And then you translate that to say, okay, well, that's a good indicator of medical quality. We have many other metrics we track. But then the question is, but how does that translate also to a patient experience? Now I want to be clear. Patients love an ASC setting because you get to go in that morning, you get to go home that night. It's very difficult, short of having poor clinical quality or not giving them the attention they need in that short visit that they're with you for, which is generally less than 8 hours. And so what you'll see is we have an exceptional Net Promoter Score. It's one of the strongest across any industry you look at. But it's one that you will generally see is really a factor of being an ASC. Many ASCs will have similar Net Promoter Scores, whether we own them or not. It's just a very attractive environment for patients and physicians. But we have refined ours at a level that's really made us an industry leader as it relates to that experience. And then finally, we align ourselves with our physician partners. And what I want you to see on this slide is there's really 3 buckets here. But the vast majority of our business is in this middle bucket. There isn't -- basically it's a 2-way venture. We own part of the facility and our surgeons own part of the facility. And so we have complete alignment around what we're trying to accomplish. In most cases, we are the majority owner. But if we are a minority owner, we still are the manager of the facility. So we get a management fee. We control all scheduling. We assist with all quality metrics. We do monthly reporting on quality to the Board of Directors, which includes our physician partners. And we basically create a consistent factor across the country for all ASCs. And so why is that unique? When we started this journey 5 years ago and I'll show you a fragmentation in a moment of this market, this market was so highly fragmented with such a sizable TAM that we thought if somebody could actually build a true platform asset and now a platform asset, we all hear these things. And we also hear about value-based care. I think I've been coming to this conference for 18 years now. And everybody's got the next value-based care catcher's mitt that they figured out, right? But the reality is, it's really simple what we do. And the idea was, but it's simple if we actually make the investments in the first couple of years to create a platform asset. So 94% of our facilities today are on an in-state platform around clinical management. 95% of our facilities are on a common clearing house for claims, common clearing house. When you look at each one of these, when you say, well, what's the delta? It's the companies we acquired in the last 12 months and we moved them on. But we're always acquiring another 20 companies a year or de novo. So we always have this kind of growth path. But the idea was we were going to build a sustainable platform. So as we grew the business, we could do a plug-and-play with any new acquisitions that came along the way. And so it's simple, it's turnkey. So as we kind of take this technology stack that we built, everybody goes to the same supply chain. Recruiting is done uniformly, whether it be for staff that we need for our facilities or whether it be how we recruit doctors, it's the same process. It's the same data analytics of how we report both at the facility level, at the consolidated level. It's the same revenue cycle. We have a centralized process for managed care in terms of how we negotiate with payers. So let me migrate to why was building that technology stack and platform so relevant. And I'll show you same-store in a minute, but this is why it's relevant. This is a really busy slide. But I want to focus you on really just one big thing. And you'll see above the large orange stack, total ASCs. There are over 6,000 ASCs that exist in the market today, over 6,000. And then you look at that and you say, well, how is that broken down? And the reality is, of that 6,000 and you look at all these different components, today 3% of them are corporation-owned and another 2% are hospital-owned of the 3,000 on the left there. And then the rest are just physician-owned, directly owned by physicians. And then when you look to the 2,600 that you see on the orange stack there, there's a combination of physician/hospital-owned. But then there's just physician/hospital-owned and then physician/corporation-owned. The point is if you were to take all of this and squeeze it together, you only have about 20% of the market consolidated of the 6,000, where there's somebody that still needs a partner and would benefit from scale. And so we have this kind of infinite pipeline of opportunity for M&A for individuals that are looking for a partner to actually move in and continue that next round of consolidation. We talk about in some ways it reminds us of our days 25 years ago when we started what is today Elevance or CVS. I mean this is the same journey that we're on. But we're doing it now from the provider side and we're taking that same playbook. And then on the far right here, these are the number of physician-owned hospitals. The Affordable Care Act stopped the ability to have any more physician-owned hospitals. But you'll see that only 8% are consolidated, but they're with us, because these large physician-owned hospitals love the opportunity to remain independent. But they need a partner to get that scale to really compete on a national level. So what have we done as a company during this period of time? Look, when we started this journey in '18, this company was not a pure-play surgery center operator. So we pruned over $100 million of our revenue in 2018. So we said it's not core to what we do. We also closed the lab because it wasn't core to what we do. We sold anesthesia assets and optical GPO. And then we doubled down all of those proceeds back into where we think the puck was going to be. And so what you'll see on here is through 2021, we deployed over $625 million in capital. Today, we announced again that in 2022, we deployed another $245 million of capital and we will deploy at least $200 million more for M&A in 2023. That is our floor that we target each year is $200 million. I want you to know that we've talked about our multiples, our average multiple being less than 8. We don't look at multiples on a pro forma basis. Like those synergies are ours and they're ours and our shareholders to go after. Pro forma for us, when we talk about a multiple, it's on a trailing 12 months of the EBITDA of the company. So we are in a very attractive model where there's a large pool of opportunity for consolidation at very attractive multiples. And then we generally take a turn or 2 off through the synergies that we bring with our turnkey model. So as you look at 2022, as I mentioned, we did over $245 million this year already. You'll see on the far right, so if you say, well, how is the pipeline? Where are things going? We have offers submitted on over $122 million already. Just from due diligence, we did last year opportunity. So we'll find out hopefully soon if we're the choice. We have almost $60 million of buy-up opportunities. What does this represent? These are facilities we own already. Facilities we like, facilities we manage. We have physician partners saying, hey, we're all having the same liquidity issues in this environment and I own 6% and would you be willing to buy 1% of mine? Well, we would love those transactions all day long because there's some things we know, we're confident in and we run them already. And then we have another 10 already under LOI, where we've already gone through the process. We've gone through the bid. We've already been selected. And I would tell you, our pipeline of what we don't list up here is already north of $200 million that we're already chasing and we got inbound opportunities on. So I don't see any concern that we will do another $200 million in 2023. I want to emphasize this a lot though, we have a very purpose-built veteran management team. This team averages more than 25 years of experience. And it is not built as a provider and it is not built as a payer. This team brings unique experience. As I mentioned, my teeth were cut for almost 2 decades on the payer side. Dave's teeth were cut on the payer side. Eric grew up on the provider side. If you go through this entire team, that's what you will find. And so you have a unique setting, whereby you're bringing very different ideas of how the payers think and how the provider thinks. And from that perspective, we recognize where first dollar starts and it starts on the payer side. And so we spend a lot of energy aligning with the payers. We think being Switzerland and being a low-cost, high-value, high-quality is really the place to be in and that's where we want to continue to play. And then finally, we recently announced a follow-on offering and raised almost $900 million. And in this environment, we're very pleased with that outcome, especially with the pricing that we received. And we took another 2 turns of leverage off. It was very clear to us from our shareholders that many folks wanted to see our leverage continue to come down. I want to be very clear. I like leverage. I'm okay with leverage, but we recognize the market doesn't like it right now. And so this was a really effective way for us to delever the company further. We'll generate over $140 million of free cash flow this year in 2023. I want to be clear, free cash flow is after we pay everybody, including our partners' minority interest. This is what we get to put to work for M&A. We have over $0.5 billion on our balance sheet today between what we have in consolidated cash and undrawn revolver of $350 million. So the reality is we have no concern deploying $200 million. And by 2025, we'll have over $200-plus million, of free cash flow that we're just generating through ongoing operations. So let me talk about some financial highlights. So how does that really translate to? What have we actually delivered in that window of time? These numbers do not have carve-outs for COVID. They do not have carve-outs for vacations. They do not have carve-outs for bad weather. These are our numbers. So we've grown revenue at a 13.5% CAGR since 2017. Again, the team came in, in '18. EBITDA, you've seen already was north of 18% CAGR during that window with margins improving by almost 300 basis points. This slide has a lot going on, but it's really simple. And if you walk away with one thing, I want you to understand the simplicity of this business model, how do you grow at mid-teens rate. We believe that you should grow top line north of 6% by just doing 2% to 3% in volume each year and 2% to 3% on rate and that's top line on a same-store basis. I'm not talking about M&A. I'm just talking about same-store basis. Our lowest growth rate has been in this high inflation and COVID environment. And through 9/30, we were at 6.6%. So we have high confidence in our ability to continue to do the 4% to 6% that we think we can contribute to EBITDA through both a combination of 2% to 3% volume, 2% to 3% in rate. The margin expansion component is also another 3% to 5% of EBITDA growth that we believe we should achieve each year. This is all very simple and it's all line of sight. Every time we buy a company, we know what the procurement savings are. Every time we buy a company, we know what the rev cycle are. But every time we buy a company, we also hit a new level of scale that allows us to leverage across the rest of our book. So our purchasing power gets even stronger. And so what we do every year as we go through an analysis of where do we overlay on our new acquisitions procurement, but how can we leverage that to get better rates than for the rest of our 145 facilities. So it's very simple in what we do. And then finally, on the capital deployment, super simple. $200 million a year, assume an 8 multiple, use a midyear convention, it's just math. So all you have to do is confirm that we are able to deploy $200 million a year, which we've done consistently at, at least an 8 multiple, at, at least a midyear convention. The math of this is simple. And the far left is basically 4% to 6%. The middle is 3% to 5% and the far right is 4% to 5%, and that's EBITDA growth. That's how we tackle it. And so what does that translate it to? As we said, we've been at about an 18.3% CAGR. We really think we're a mid-teens grower from this point forward. So look, people always ask, what's mid-teens meaning to me? It's pretty simple. It's more of the 13.5%, 14%, 15%, 16% range. Could we do 17% potentially? But you should know that the Board believes in the quality of this asset that we align our management team with our shareholders. And so half their compensation is around performance and performing shares specifically. And they have to hit mid-teen targets of at least 14% CAGR over a 3-year window to just earn that base component of their compensation. If they do 15%, they earn a little bit more. If they do 16%, they earn a little bit more. But the concept is we want management aligned with our shareholders. And they should be compensated and rewarded appropriately when they drive this type of differentiated growth. So finally, I'll just conclude on this slide and then we'll move to Q&A. The way I'd look at our organization as you think about just investment highlights is, look, it's a very sizable TAM that is growing exponentially just because of the shift of the inpatient to the outpatient setting. You look again for us this year as well, right, 6.5% industry-leading same-store facility growth and over 80% of our facilities are positioned for the MSK and where it's going. When we talk about superior clinical quality, I showed you the deficiency one, but I also want to give you another example. CMS does do star ratings each year, right? 95% of our surgical hospitals are rated 4 or 5 stars by CMS, 95%, right? We know how to run these things and do them in a manner that meets even the government's highest standards of what it's qualified to get a 4 or 5-star rating. We've shown the ability to scale our model and to deploy capital. We will remain disciplined. We do not like platform assets because we don't have to do large platform acquisitions. The way we're going after this is allowing these to be highly accretive at very attractive multiples. I'll never say never to that. But we're very focused on being disciplined in our approach and we're data-driven in all of our decision-making. And you should know that based on our current growth trajectory that we've shown our Board, we'll be mid-3x leverage by 2025. We'll actually hit the 3s this year based on our current growth trajectory. With that, I'll turn it over for questions.

Great. Thanks very much and thanks for all the detail, Wayne. That was great. A lot of talk in the marketplace recently and we write a lot about flu, COVID, RSV. I know that it can have some impact when we think about utilization trends, especially when we think about ambulatory surgery type of procedures. Can you talk about the utilization trends you saw in the fourth quarter, particularly like going through this blue peak in late November into December? And any notable cancellation types of rates that we saw?

Yes, Lisa. First of all, thank you all for joining us. I guess the non-football fans are hopefully getting you to the game here in a second. So early on during COVID, we saw a significant disruption for long periods of time when people got sick. I'll be honest, fourth quarter, we saw no disruption. You talk about the tripledemic. When I say no disruption, nothing that couldn't be rescheduled or put back in place within a week. So we've gotten much better at handling disruptions. We certainly -- I think we've learned a lot about how to treat patients in this environment safely over the last few years. And even with RSV, flu, COVID, it really was not -- it was a nonfactor for us. As you all know, we reiterated our fourth quarter and full year guidance this morning. We feel really good about where we sit going into next year. And ultimately, what we've learned during the COVID period is going to serve us well as we continue to kind of work through these kind of interesting disruptions.

There's also this question, not so much around pent-up demand that we're going to have multiple procedures done, but rather the acuity level of the patient. So maybe they should have had something musculoskeletal done last year and now it's a little bit worse and that's going to be a longer surgery. Are you seeing those kinds of things for 2023?

Yes. So I would say, for us, we have fully recovered. So we don't think there's a pent-up demand. If you look at our same-store growth even through COVID, it was 2.1% over the last 3 years since 2019. All in, it was 4%. So we've seen that 2% to 3% case growth we expected. And actually, in MSK, we've seen way higher than that. So we didn't ever see the drop off in MSK or those higher-acuity procedures. We think that's going to continue. But as far as pent-up demand, we actually have been able to grow right through it and don't necessarily think that's part of the story.

I know you haven't given 2023 guidance yet. But as we think about 2023, are there things that you'd want to call out from either a headwind or a tailwind perspective as we're thinking about modeling?

So maybe let me start and address what I was amazed that you reaffirmed guidance how many people say, "You didn't tell us 2023." So may be clear, we are going to grow double-digit in 2023. We are simply waiting to have our Board meeting in a few weeks to show them the final plan and then decide where we want to start our growth trajectory. We have a core value. I cannot emphasize as a point enough that is we will meet and exceed expectations. And when we gave guidance for 2022, none of us saw all the headwinds we dealt with this year. But I want you to know we still raised guidance and met our commitments for the year and reaffirmed this morning. So the only thing we're trying to figure out is where do we want to start the number at and then decide how we grow from there into the year. But we have a lot of confidence going into 2023. The business model, again, is a simple business model and the chassis and the way it works is quite simple. So I would just start with that. Dave, if you want to highlight anything more? Because I know -- I can't tell you how many meetings we had today where the first question was…

I can imagine.

You didn't give guidance, like you're going to get it soon. And so -- but I want you to know we will be announcing double-digit growth as our starting point. We're just trying to decide where we're at. And we're still targeting getting to mid-teens. That's what we always shoot for and management team is intended to do that.

Yes. Why don't I -- I'll hit the headwinds. And I'll let my boss talk about some of the tailwinds, because tailwinds I think are huge. But first off, some of the headwinds that we see here that you can clearly articulate and we can calculate and obviously, we have done so and that's how we're comfortable saying we're going to get to these double-digits are on the government side, right? So the government reimbursement, much like everybody in our industry did have an impact on our results for the past couple of years. Some of those things are going away, right? We talked about sequestration. We've obviously seen the grants kind of come down. So those are predictable, quantifiable headwinds that we have to overcome. Some of the things that I think we're waiting to kind of see some good proof-points for us on the inflationary impacts on the supply side.

That was going to be one of my questions, right?

I feel really good about that. Obviously, you can see the track record that we had in 2022. We built strong management control processes in place. We think they're starting to kind of abate for us. We're going to let some more facts kind of develop before we can kind of let that settle down. But those are some of the bigger kind of headwinds that we're facing.