The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited consolidated financial
statements and related notes included elsewhere in this Annual Report. This
discussion contains forward-looking statements that involve risks and
uncertainties. For additional information regarding certain of the risks and
uncertainties that affect our business and the industry in which we operate,
please see Item 1A. "Risk Factors" and Item 9A. "Controls and Procedures" found
elsewhere in this report. Unless the context otherwise indicates, the terms
"Surgery Partners," "we," "us," "our" or the "Company," as used herein, refer to
Surgery Partners, Inc. and its subsidiaries. Unless the context implies
otherwise, the term "affiliates" means direct and indirect subsidiaries of
Surgery Partners, Inc., and partnerships and joint ventures in which such
subsidiaries are partners. The terms "facilities" or "hospitals" refer to
entities owned and operated by affiliates of Surgery Partners, Inc. and the term
"employees" refers to employees of affiliates of Surgery Partners, Inc.

Executive Overview



As of December 31, 2021, we owned or operated, primarily in partnership with
physicians, a portfolio of 126 surgical facilities comprised of 108 ASCs and 18
surgical hospitals across 31 states. We owned a majority interest in 88 of the
surgical facilities and consolidated 109 of these facilities for financial
reporting purposes.

Total revenues for 2021 increased 19.6% to $2.2 billion from $1.9 billion in
2020. Days adjusted same-facility revenues for 2021 increased 18.1% from 2020,
with a 0.5% increase in revenue per case and a 17.6% increase in same-facility
cases. Additionally, for 2021, Adjusted EBITDA increased 32.3% to $339.6
million compared to $256.6 million for 2020. The increase in days adjusted
same-facility revenues and Adjusted EBITDA is primarily attributable to the
Company's recovery from the negative impacts of the COVID-19 pandemic that the
Company began experiencing in the first quarter of 2020 and acquisitions
completed in 2021 and 2020. For 2021, the net loss attributable to common
stockholders was $81.2 million compared to $155.6 million for 2020. A
reconciliation of non-GAAP financial measures appears below under "Certain
Non-GAAP Measures."

We continue to focus on improving our same-facility performance, selectively
acquiring established facilities and developing new facilities. During 2021, we
acquired controlling interests in eight surgical facilities, including a
surgical hospital, and two physician practices for aggregate cash consideration
of $285.8 million, net of cash acquired. Two of the surgical facilities were in
existing markets and were merged into existing facilities. The cash
consideration was funded through available resources.

During 2021, we sold our interests in three surgery centers, one physician practice and certain other assets for combined net cash proceeds of $6.0 million.



We had cash and cash equivalents of $389.9 million and $203.0 million of
borrowing capacity under our revolving credit facility at December 31, 2021.
Operating cash flows were $87.1 million in 2021, a decrease of $159.8 million
compared to the prior year, primarily attributable to Medicare accelerated
payments and other funds received under the CARES Act and actions taken to
significantly reduce operating expenses and defer non-essential capital
expenditures during 2020 and the repayment of Medicare accelerated payments in
2021. Net operating cash outflows, including operating cash flows less
distributions to non-controlling interests, were $43.9 million for 2021.

Impact of COVID-19



The COVID-19 pandemic has significantly affected our facilities, employees,
patients, communities, business operations and financial performance, as well as
the U.S. economy and financial markets. The COVID-19 pandemic materially
impacted our financial performance for the year ended December 31, 2020, and
continued to impact our financial performance during the year ended December,
31, 2021. The impact of the COVID-19 pandemic on our surgical facilities varies
based on the market in which the facility operates, the type of surgical
facility and the procedures typically performed. Although we cannot provide any
certainty regarding the length and severity of the impact of the COVID-19
pandemic, which is difficult to predict and is dependent on factors beyond our
control, we saw improvement in surgical case volumes as states re-opened and
allowed for non-emergent procedures. We cannot predict if or when utilization
may return to pre-pandemic levels.

Executive Order



On July 9, 2021, President Biden issued an executive order that is intended to
promote competition in the U.S. economy. Among other things, the executive order
encourages the Federal Trade Commission ("FTC") to ban or limit non-compete
agreements, encourages the DOJ and the FTC to review and revise their merger
guidelines to ensure that patients are not harmed by healthcare mergers, and
instructs HHS to support existing price transparency rules and implement the
legislation that was recently adopted to address surprise billing. We cannot
predict how, if at all, the various initiatives set forth in the executive order
will be implemented by the regulatory agencies involved or the impact that the
executive order will have on operations.

Revenues



Our revenues consist of patient service revenues and other service revenues.
Patient service revenues consist of revenue from our Surgical Facility Services
and Ancillary Services segments. Specifically, patient service revenues include
fees for surgical or diagnostic

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procedures performed at surgical facilities that we consolidate for financial
reporting purposes, as well as for patient visits to our physician practices,
anesthesia services, pharmacy services and diagnostic screens ordered by our
physicians. Other service revenues include management and administrative service
fees derived from our non-consolidated facilities that we account for under the
equity method, management of surgical facilities and physician practices in
which we do not own an interest and management services we provide to physician
practices for which we are not required to provide capital or additional assets.
For the years ended December 31, 2020 and 2019, other service revenues also
includes optical service revenues, which consisted of handling charges billed to
the members of our optical products purchasing organization, which was sold on
December 31, 2020.

The following table summarizes revenues by service type as a percentage of total
revenues:

                                                        Year Ended December 31,
                                                    2021                2020         2019

Patient service revenues:


       Surgical facilities revenues                        95.7  %      

95.3 % 94.1 %


       Ancillary services revenues                          3.0  %      

3.4 % 4.3 %


       Total patient service revenues                      98.7  %      

98.7 % 98.4 %


       Other service revenues                               1.3  %      

1.3  %       1.6  %
       Total revenues                                     100.0  %     100.0  %     100.0  %


Payor Mix

The following table sets forth by type of payor the percentage of our patient
service revenues generated at the surgical facilities that we consolidate for
financial reporting purposes:

                                                     Year Ended December 31,
                                                 2021                2020         2019

          Private insurance payors                      50.6  %      53.9  %      53.8  %
          Government payors                             43.3  %      38.6  %      38.9  %
          Self-pay payors                                2.8  %       3.2  %       2.6  %
          Other payors (1)                               3.3  %       4.3  %       4.7  %
          Total                                        100.0  %     100.0  %     100.0  %

(1)Other is comprised of anesthesia service agreements, auto liability, letters of protection and other payor types.

Surgical Case Mix



We primarily operate multi-specialty surgical facilities where physicians
perform a variety of procedures in various specialties. We believe this
diversification helps to protect us from adverse pricing and utilization trends
in any individual procedure type and results in greater consistency in our case
volume.

The following table sets forth the percentage of cases in each specialty performed at the surgical facilities that we consolidate for financial reporting purposes for the periods indicated:



                                                          Year Ended December 31,
                                                      2021                2020         2019

      Orthopedics and pain management                        35.7  %     

39.3  %      38.3  %
      Ophthalmology                                          26.3  %      25.3  %      24.8  %
      Gastrointestinal                                       22.3  %      19.4  %      20.9  %
      General surgery                                         3.0  %       3.1  %       3.2  %
      Other                                                  12.7  %      12.9  %      12.8  %
      Total                                                 100.0  %     100.0  %     100.0  %


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Segment Information



Our business is currently comprised of two segments: (1) Surgical Facility
Services and (2) Ancillary Services. On December 31, 2020, we sold the remaining
assets of the Optical Services segment. For more information about the
components of each segment, please see Part I, Item 1. Business-Operations
included elsewhere in this Annual Report. The "All other" line item below
primarily consists of amounts attributable to the Company's corporate general
and administrative functions.

The following tables present financial information for each reportable segment
(in millions):

                                                                   Year Ended December 31,
                                                             2021           2020           2019
 Revenues:
 Surgical Facility Services                               $ 2,157.8      $ 1,793.4      $ 1,748.2
 Ancillary Services                                            67.3           63.6           79.4
 Optical Services                                                 -            3.1            3.8
 Total revenues                                           $ 2,225.1      $ 1,860.1      $ 1,831.4

 Adjusted EBITDA:
 Surgical Facility Services                               $   422.0      $   339.3      $   328.9
 Ancillary Services                                             1.7           (3.4)           2.6
 Optical Services                                                 -            1.4            1.4
 All other                                                    (84.1)         (80.7)         (74.3)
 Total Adjusted EBITDA (1)                                $   339.6      $   256.6      $   258.6

 Supplemental Information:

Cash purchases of property and equipment, net:


 Surgical Facility Services                               $    55.0      $    38.7      $    65.9
 Ancillary Services                                             0.5            0.4            1.1
 All other                                                      2.1            3.8            6.6

Total cash purchases of property and equipment, net $ 57.6 $

42.9 $ 73.6




(1)For a reconciliation of Adjusted EBITDA to income before income taxes as
reflected in the audited consolidated statements of operations see "Certain
Non-GAAP Measures" below.

                                        December 31,
                                    2021           2020
Assets:
Surgical Facility Services       $ 5,552.8      $ 4,962.4
Ancillary Services                    47.5           35.0
All other                            517.3          415.8
Total assets                     $ 6,117.6      $ 5,413.2

Critical Accounting Policies



In preparing our consolidated financial statements in conformity with U.S.
Generally Accepted Accounting Principles ("GAAP"), we must use estimates and
assumptions that affect the reported amounts of assets and liabilities and
related disclosures and the reported amounts of revenue and expenses. In
general, our estimates are based on historical experience and various other
assumptions we believe are reasonable under the circumstances. We evaluate our
estimates on an ongoing basis and make changes to the estimates and related
disclosures as experience develops or new information becomes known. Actual
results could differ from those estimates.

We consider our critical accounting policies to be those that involve significant judgments and uncertainties, and may potentially result in materially different results under different assumptions and conditions.


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Revenue Recognition



Our patient service revenues are derived primarily from surgical procedures
performed at our ASCs and surgical hospitals, patient visits to physician
practices, anesthesia services provided to patients, pharmacy services and
diagnostic screens ordered by our physicians. The fees for such services are
billed either to the patient or a third-party payor, including Medicare and
Medicaid. We recognize patient service revenues, net of contractual allowances,
which we estimate based on existing contracts or the historical trend of our
cash collections and contractual write-offs.

Prior to its sale on December 31, 2020, our optical products purchasing
organization negotiated volume buying discounts with optical product
manufacturers. The buying discounts and any handling charges billed to the
members of the purchasing organization represented the revenues recognized for
financial reporting purposes. Revenue is recognized as orders are shipped to
members.

Other service revenues consist of management and administrative service fees
derived from non-consolidated surgical facilities that we account for under the
equity method, management of surgical facilities in which we do not own an
interest and management services we provide to physician networks for which we
are not required to provide capital or additional assets. The fees we derive
from these management arrangements are based on a predetermined percentage of
the revenues of each surgical facility and physician network. We recognize other
service revenues in the period in which services are rendered.

There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to revenue recognition during the years ended December 31, 2021, 2020 and 2019.

Accounts Receivable



Our patient service revenues and other receivables from third-party payors are
recorded net of estimated implicit price concessions which are estimated based
on the historical trend of our surgical hospitals' cash collections and
contractual write-offs, and for our surgical facilities in general, established
fee schedules, relationships with payors and procedure statistics. While changes
in estimated reimbursement from third-party payors remain a possibility, we
expect that any such changes would be minimal and, therefore, would not have a
material effect on our financial condition or results of operations.

Our collection policies and procedures are based on the type of payor, size of
claim and estimated collection percentage for each patient account. The
operating systems used to manage our patient accounts provide for an aging
schedule in 30-day increments, by payor, physician and patient. We analyze
accounts receivable at each of our surgical facilities to ensure the proper
collection and aged category. The operating systems generate reports that assist
in the collection efforts by prioritizing patient accounts. Collection efforts
include direct contact with insurance carriers or patients, written
correspondence and the use of legal or collection agency assistance, as
required. Our average days sales outstanding was 67 and 69 days for the years
ended December 31, 2021 and 2020, respectively.

We recognize that final reimbursement of outstanding accounts receivable is
subject to final approval by each third-party payor. However, because we have
contracts with our third-party payors and we verify the insurance coverage of
the patient before services are rendered, the amounts that are pending approval
from third-party payors are minimal. Amounts are classified outside of self-pay
if we have an agreement with the third-party payor or we have verified a
patient's coverage prior to services rendered. It is our policy to collect
co-payments and deductibles prior to providing services, where possible. It is
also our policy to verify a patient's insurance 72 hours prior to the patient's
procedure. Because our services are primarily non-emergency, our surgical
facilities have the ability to control these procedures.

There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to accounts receivable during the years ended December 31, 2021, 2020 and 2019.

Income Taxes



We use the asset and liability method to account for income taxes. Under this
method, deferred income tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. If a NOL and/or interest
limitation ("163(j)") carryforward exists, we make a determination as to whether
that NOL and/or 163(j) carryforward will be utilized in the future. A valuation
allowance will be established for certain NOL and 163(j) carryforwards and other
deferred tax assets where their recoverability is deemed to be uncertain. The
carrying value of the net deferred tax assets is based upon estimates and
assumptions related to our ability to generate sufficient future taxable income
in certain tax jurisdictions. If these estimates and related assumptions change
in the future, we will be required to adjust our deferred tax valuation
allowances.

As of December 31, 2021, we had unused federal NOL carryforwards of
approximately $573.0 million. Such losses expire in various amounts at varying
times beginning in 2029. Unless they expire, these NOL carryforwards may be used
to offset future taxable income and thereby reduce our income taxes otherwise
payable.

We recorded a valuation allowance against our deferred tax assets at
December 31, 2021 and 2020 totaling $113.0 million and $91.1 million,
respectively. The valuation allowance has been established for certain deferred
tax assets for which we believe it is more likely than not that the tax benefits
will not be realized, which are primarily Section 163(j) interest carryforwards
and certain state net operating losses and state credit carryforwards. If our
expectations for future operating results on a consolidated basis or at the
state jurisdiction level

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vary from actual results due to changes in health care regulations, general
economic conditions, or other factors, we may need to adjust the valuation
allowance, for all or a portion of our deferred tax assets. Our income tax
expense in future periods will be reduced or increased to the extent of
offsetting decreases or increases, respectively, in our valuation allowance in
the period when the change in circumstances occurs. These changes could have a
significant impact on our future earnings.

Section 382 of the Internal Revenue Code of 1986 ("Section 382"), as amended
(the "Code") imposes an annual limit on the ability of a corporation that
undergoes an "ownership change" to use its NOLs to reduce its tax liability. An
"ownership change" is generally defined as any change in ownership of more than
50.0% of a corporation's "stock" by its "5-percent shareholders" (as defined in
Section 382) over a rolling three-year period based upon each of those
shareholder's lowest percentage of stock owned during such period. As a result
of the Symbion acquisition in 2014, approximately $146.9 million in NOL
carryforwards are subject to an annual Section 382 base limitation of
$4.9 million, and, as a result of the NovaMed acquisition in 2011, approximately
$11.0 million in NOL carryforwards are subject to an annual Section 382 base
limitation of $4.9 million. As a result of the acquisition of NSH, approximately
$24.7 million in NOL carryforwards are subject to an annual Section 382 base
limitation of $2.8 million. The acquisition of shares of the Company by Bain
Capital in 2017 to become the controlling stockholder resulted in an ownership
change as defined in Section 382. As a result, approximately $448.0 million in
NOL carryforwards are subject to an annual Section 382 base limitation of
$14.2 million. At this time, we do not believe this limitation, when combined
with amounts allowable due to net unrecognized built in gains, will affect our
ability to use any NOLs before they expire. However, no such assurances can be
provided. If our ability to utilize our NOLs to offset taxable income generated
in the future is subject to this limitation, it could have an adverse effect on
our business, prospects, results of operations and financial condition.

There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to income taxes during the years ended December 31, 2021, 2020 and 2019.

Impairment of Goodwill

Goodwill represents the excess of the fair value of the consideration conveyed
in the acquisition over the fair value of net assets acquired. Goodwill is
reviewed for impairment at the reporting unit level, which is defined as one
level below an operating segment, on an annual basis or sooner if the indicators
of impairment arise. Our judgments regarding the existence of impairment
indicators are based on market conditions and operational performance of each
reporting unit. During 2021, the Company had identified two reporting units,
which include the following: 1) Surgical Facilities and 2) Ancillary Services.
Prior to 2021, the Company had a third reporting unit, Alliance, which was a
component of the Optical Services operating segment.

The Company tests its goodwill and indefinite-lived intangible assets for
impairment at least annually, as of October 1, or more frequently if certain
indicators arise. A detailed evaluation of potential impairment indicators was
performed, which specifically considered the volatility observed in the prices
of the Company's outstanding debt securities and common stock, as well as the
decline in surgical case volumes following the emergence of the COVID-19
pandemic, all of which improved in the second half of 2020 and throughout 2021
as states re-opened and allowed for non-emergent procedures.

As of October 1, 2021, all of the Company's goodwill was allocated to the Surgical Facilities reporting unit. As of the October 1, 2021 valuation, the fair value for the Surgical Facilities reporting unit was substantially in excess of its carrying value.



Subsequent to the date of our annual impairment test, the Company considered its
operating results for the fourth quarter of 2021, macroeconomic, industry and
market conditions, and other market indicators including its market
capitalization. Based on its evaluation of all such factors, the Company
concluded that an event had not occurred or circumstances had not changed that
would more likely than not reduce the fair value of its reporting units below
their carrying values.

In 2021 there were no non-cash impairment charges.

During the year ended December 31, 2020, as a result of its impairment testing, the Company recorded non-cash impairment charges of $28.6 million and $4.9 million related to the Ancillary Services and Alliance reporting units, respectively.



During the year ended December 31, 2019, as a result of its impairment testing,
the Company recorded non-cash impairment charges of $2.5 million related to the
Alliance reporting unit.

See Note 4. "Goodwill and Intangible Assets" to the consolidated financial statements elsewhere in this Annual Report for additional disclosure related to goodwill.


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Results of Operations

The following tables summarize certain results from the statements of operations for the periods indicated (dollars in millions):



                                                                           Year Ended December 31,
                                                                  2021               2020               2019

Revenues                                                      $ 2,225.1          $ 1,860.1          $ 1,831.4
Operating expenses:
Cost of revenues                                                1,733.7            1,480.3            1,407.6
General and administrative expenses                               104.0               97.1               88.6
Depreciation and amortization                                      98.8               94.8               76.5
Income from equity investments                                    (11.3)             (10.8)             (10.2)
Loss (gain) on disposals, net                                       2.2                5.7               (4.4)
Transaction and integration costs                                  39.8               23.2               19.0
Impairment charges                                                    -               33.5                7.9
Grant funds                                                       (37.9)             (46.2)                 -
Loss on debt extinguishment                                         9.1                  -               11.7
Litigation settlement                                                 -                1.2                0.2
Other income                                                      (15.5)              (1.7)              (1.4)
Total operating expenses                                        1,922.9            1,677.1            1,595.5
Operating income                                                  302.2              183.0              235.9
Tax receivable agreement expense                                      -                  -               (2.4)
Interest expense, net                                            (221.0)            (201.8)            (178.9)
Income (loss) before income taxes                                  81.2              (18.8)              54.6
Income tax expense (benefit)                                       10.5              (20.1)               9.5
Net income                                                         70.7                1.3               45.1
Less: Net income attributable to non-controlling
interests                                                        (141.6)            (117.4)            (119.9)
Net loss attributable to Surgery Partners, Inc.               $   (70.9)

$ (116.1) $ (74.8)

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020



Overview. During 2021, our revenues increased 19.6% to $2.2 billion compared to
$1.9 billion in 2020. We incurred a net loss attributable to Surgery Partners,
Inc. of $70.9 million in 2021, compared to $116.1 million in 2020. The increase
in revenues was primarily attributable to increases in surgical case volumes as
the Company recovered from the COVID-19 pandemic that began in the first quarter
of 2020 and acquisitions completed in 2021 and 2020.

Revenues. Revenues for 2021 and 2020 were as follows (dollars in millions):



                                                  Year Ended December 31,
                                                    2021               2020

              Patient service revenues      $     2,195.0           $ 1,836.1
              Other service revenues                 30.1                24.0
              Total revenues                $     2,225.1           $ 1,860.1


Patient service revenues increased 19.5% to $2.2 billion in 2021 compared to
$1.8 billion in 2020. The increase was driven by a 17.6% increase in days
adjusted same-facility case volume, a 0.5% increase in same-facility revenue per
case and acquisitions completed in 2021 and 2020. The increase in same-facility
revenues was primarily driven by case count recovery from the impacts of the
COVID-19 pandemic that the Company began experiencing in the first quarter of
2020.

Cost of Revenues. Cost of revenues were $1.7 billion in 2021 compared to $1.5
billion in 2020. The increase was primarily driven by case count recovery from
the impacts of the COVID-19 pandemic that the Company began experiencing in the
first quarter of 2020 and acquisitions completed in 2021 and 2020. As a
percentage of revenues, cost of revenues was 77.9% and 79.6% for 2021 and 2020,
respectively, as lower acuity procedures with lower cost of sales returned from
COVID-19 pandemic-related lows experienced in 2020.

General and Administrative Expenses. General and administrative expenses were
$104.0 million and $97.1 million in 2021 and 2020, respectively. As a percentage
of revenues, general and administrative expenses were 4.7% in 2021 compared to
5.2% in 2020. The decrease

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as a percentage of revenues is primarily the result of increased revenues driven by the recovery in surgical case volume from the impacts of the COVID-19 pandemic that the Company began experiencing in the first quarter of 2020.



Depreciation and Amortization. Depreciation and amortization was $98.8 million
and $94.8 million in 2021 and 2020, respectively. The increase is primarily due
to acquisitions completed in 2021 and 2020. As a percentage of revenues,
depreciation and amortization expenses were 4.4% in 2021 and 5.1% in 2020.

Loss (gain) on Disposals, Net. The net loss on disposals was $2.2 million in
2021, including a $4.0 million net gain on the sale of three surgery centers, a
physician practice and certain other assets, offset by a net loss of $6.2
million related to disposals of other long-lived assets. The net loss on
disposals was $5.7 million in 2020, including a $2.5 million net gain on the
sale of three surgical facilities, certain assets related to the Company's
anesthesia business, certain imaging assets, the Company's optical products
purchasing organization and the closure of a diagnostic laboratory, offset by a
net loss of $8.2 million primarily related to disposals of other long-lived
assets.

Transaction and Integration Costs. We incurred $39.8 million of transaction and integration costs in 2021 compared to $23.2 million in 2020. The increase primarily relates to costs for ongoing development initiatives and the integration of acquisitions we completed in 2021 and 2020.



Impairment Charges. In 2020 we recorded non-cash impairment charges of $28.6
million and $4.9 million for goodwill assigned to the Ancillary Services and
Alliance reporting units, respectively. See Note 4. "Goodwill and Intangibles"
to our consolidated financial statements included elsewhere in this report for
further discussion. There were no impairment charges in 2021.

Grant Funds. During 2021, the Company received approximately $27.0 million of
additional grants from HHS. Based on guidance from HHS and other authorities,
the Company updated its estimate of the amount of grant funds received that
qualify for recognition, resulting in the recognition of $37.9 million during
2021. Grant funds recognized were $46.2 million in 2020. For further discussion,
see Note 1. "Organization and Summary of Accounting Polices - COVID-19 Pandemic"
to our consolidated financial statements included elsewhere in this report.

Loss on Debt Extinguishment. The net loss on debt extinguishment was $9.1 million for 2021. See Note 5. "Long-Term Debt" to our consolidated financial statements included elsewhere in this report.



Interest Expense, Net. Interest expense, net, was $221.0 million in 2021
compared to $201.8 million in 2020. The increase primarily relates to the 2020
Incremental Term Loans, which were fully drawn on April 22, 2020 and the
issuance of additional 2027 Unsecured Notes in the amount of $115.0 million
effective July 30, 2020. As a percentage of revenues, interest expense, net was
9.9% in 2021 compared to 10.8% in 2020.

Income Tax Expense (Benefit).  The income tax expense was $10.5 million and
income tax benefit was $20.1 million in 2021 and 2020, respectively. The
effective tax rate was 12.9% for 2021 compared to 106.9% in 2020. The decrease
from 2020 primarily relates to discrete items occurring in 2020. In 2020, the
Company's effective tax rate was impacted by (i) the release of federal and
state valuation allowances on the Company's Internal Revenue Code Section 163(j)
interest carryforwards as a result of the increase in deductible interest
expense allowed under the CARES Act; (ii) the release of federal and state
valuation allowances on the Company's deferred tax assets related to debt
financing costs as a result of the finalization of the Internal Revenue Code
Section 163(j) interest regulations, for which the deductions of such debt
financing costs that are incurred in years 2021 and forward are not considered
interest expense for income tax purposes; and (iii) the Settlement Agreement, as
discussed in Note 14. "Commitments and Contingencies" to our consolidated
financial statements included elsewhere in this Annual Report, which provided
that a portion of the final settlement amount was "restitution" for income tax
purposes. For 2021, the effective tax rate is primarily impacted by income tax
benefits related to (i) the 2021 vesting of certain restricted stock awards, and
(ii) certain 2021 entity divestitures.

Net Income Attributable to Non-Controlling Interests. Net income attributable to non-controlling interests was $141.6 million and $117.4 million in 2021 and 2020, respectively. As a percentage of revenues, net income attributable to non-controlling interests was 6.4% in 2021 and 6.3% for 2020.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019



Our discussion regarding the comparison of the year ended December 31, 2020
compared to the year ended December 31, 2019 was previously disclosed beginning
on page 47 in our Annual Report on Form 10-K for the year ended December 31,
2020, which was filed on March 10, 2021, under "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations - Results of
Operations - Year Ended December 31, 2020 Compared to Year Ended December 31,
2019" and is hereby incorporated herein by reference.

Liquidity and Capital Resources

Operating Activities



The primary source of our operating cash flow is the collection of accounts
receivable from federal and state agencies (under the Medicare and Medicaid
programs), private insurance companies and individuals. Cash flow provided by
operating activities was $87.1 million and $246.9 million in 2021 and 2020,
respectively. The decrease is primarily due to the final DOJ settlement payment
in the second quarter of 2021, receipts of government grants and Medicare
advance payments provided through the CARES Act, as well as actions taken

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to significantly reduce cash operating expenses and defer non-essential expenditures during 2020 and the repayment of Medicare advance payments during 2021.



Investing Activities

Net cash used in investing activities in 2021 was $331.7 million, which included
$57.6 million related to purchases of property and equipment. We paid $285.8
million in cash for acquisitions (net of cash acquired) which included a
controlling interest in eight surgical facilities, including a surgical
hospital, and two physician practices. Additionally, we received cash proceeds
of $6.0 million related to the sale of interests in three surgery centers, a
physician practice and certain other assets. Further, we received cash proceeds
of $5.4 million related to the sale of interests in a non-consolidated surgical
facility accounted for as an equity method investment.

Net cash used in investing activities in 2020 was $88.4 million, which included
$42.9 million related to purchases of property and equipment. We paid $104.6
million in cash for acquisitions (net of cash acquired), which included a
controlling interest in three surgical facilities, including a surgical
hospital, a controlling interest in five surgical facilities in existing markets
that were merged into existing facilities and a physician practice.
Additionally, we received cash proceeds of $58.5 million related to the sale of
interests in three surgery centers, certain assets related to our anesthesia
business, certain imaging assets and an optical products purchasing organization

Financing Activities



Net cash provided by financing activities in 2021 was $316.3 million. During the
year ended December 31, 2021, we made distributions to non-controlling interest
holders of $131.0 million and payments related to ownership transactions with
consolidated affiliates of $28.4 million. Further, we made repayments on our
long-term debt of $343.2 million and paid debt issuance costs of $11.7 million,
which were partially offset by borrowings of $299.4 million. We also received
net proceeds of $554.2 million from two equity offerings during the year and
paid a cash dividend of $5.1 million related to the Series A Preferred Stock. On
May 17, 2021, we issued 22.609 million shares of our common stock, $0.01 par
value per share, to Bain Capital, as a result of the conversion of all
outstanding shares of our Series A Preferred Stock at a conversion price of
$19.00 per share. As a result of such conversion, we currently have no shares of
Series A Preferred Stock issued or outstanding.

Net cash provided by financing activities in 2020 was $66.7 million. During the
year ended December 31, 2020, we made distributions to non-controlling interest
holders of $109.6 million and payments related to ownership transactions with
consolidated affiliates of $27.4 million. Further, we made repayments on our
long-term debt of $216.3 million, which was offset by borrowings of $429.4
million. In connection with the 2020 Incremental Term Loans, which were fully
drawn on April 22, 2020, and the issuance of additional 2027 Unsecured Notes in
the amount of $115.0 million effective July 30, 2020, we paid debt issuance
costs of $8.5 million.

Discussion of the operating, investing and financing activities for the year
ended December 31, 2019 was previously disclosed beginning on page 49 in our
Annual Report on Form 10-K for the year ended December 31, 2020, which was filed
on March 10, 2021, under "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
and is hereby incorporated herein by reference.

Debt

As of December 31, 2021, the carrying value of our total indebtedness was $2.939 billion, which includes unamortized fair value discount of $3.0 million and unamortized deferred financing costs and issuance discount of $16.5 million.

Term Loan and Revolving Credit Facility



As of December 31, 2021, we had term loan borrowings with a carrying value of
$1.531 billion, consisting of outstanding aggregate principal of $1.534 billion
and unamortized fair value discount of $3.0 million (the "Term Loan"). The Term
Loan matures on August 31, 2026 (or, if at least $185 million of the Borrower's
6.750% senior unsecured notes due 2025 shall have not either been repaid,
repurchased or redeemed or refinanced with indebtedness having a maturity date
not earlier than 91 days after August 31, 2026 by no later than April 1, 2025,
then April 1, 2025) and amortizes in equal quarterly installments of 0.25% of
the aggregate original principal amount.

We have a revolving credit facility providing for revolving borrowings of up to
$210.0 million (the "Revolver" and, together with the Term Loan, the "Senior
Secured Credit Facilities"). The Revolver will mature on February 1, 2026. As of
December 31, 2021, our availability on the Revolver was $203.0 million
(including outstanding letters of credit of $7.0 million).

The Revolver may be utilized for working capital, capital expenditures and
general corporate purposes. Subject to certain conditions and requirements set
forth in the credit agreement, we may request one or more additional incremental
term loan facilities or one or more increases in the commitments on the
Revolver.

The Senior Secured Credit Facilities bear interest at a rate per annum equal to
(x) LIBOR plus a margin of 3.75% per annum (LIBOR with respect to the Term Loan
shall be subject to a floor of 0.75%) or (y) an alternate base rate (which will
be the highest of (i) the prime rate, (ii) 0.5% per annum above the federal
funds effective rate and (iii) one-month LIBOR plus 1.00% per annum (the
alternate base rate with respect to the Term Loan shall be subject to a floor of
1.75%)) plus a margin of 2.75% per annum. In addition, we are required to pay a
commitment fee of 0.50% per annum in respect of unused commitments under the
Revolver.

See Note 5. "Long-Term Debt" to our consolidated financial statements included
elsewhere in this report for a further discussion of the Senior Secured Credit
Facilities.
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Senior Unsecured Notes



We have $545.0 million aggregate principal amount of senior unsecured notes due
April 15, 2027, which bear interest at the rate of 10.000% per year, payable
semi-annually on April 15 and October 15 of each year.

We have $370.0 million aggregate principal amount of senior unsecured notes due July 1, 2025, which bear interest at the rate of 6.750% per year, payable semi-annually on January 1 and July 1 of each year.

See Note 5. "Long-Term Debt" to our consolidated financial statements included elsewhere in this report for a further discussion of the senior unsecured notes.

Other Debt



We and certain of our subsidiaries have other debt consisting of outstanding
bank indebtedness of $145.0 million, which is collateralized by the real estate
and equipment owned by the surgical facilities to which the loans were made, and
right-of-use finance lease obligations of $364.6 million for which we are liable
to various vendors for several property and equipment leases classified as
finance leases.

Material Cash Requirements

The following table summarizes our material cash requirements by period as of December 31, 2021 (in millions):



                                                                              Payments Due by Period
                                                               Less than 1                                                More than 5
                                               Total               year             1-3 years          4-5 years             years

Long-term debt obligations, including
interest (1)                                $ 4,035.3          $   244.1

$ 470.9 $ 2,214.9 $ 1,105.4 Operating lease obligations, including interest (2)

                          532.3               71.5               133.0              109.1               218.7
Tax receivable agreement (3)                     22.0               20.2                 1.8                  -                   -
Total contractual obligations               $ 4,589.6          $   335.8

$ 605.7 $ 2,324.0 $ 1,324.1




(1)Included in long-term debt obligations are principal and interest owed on our
outstanding debt obligations. These amounts exclude our unamortized fair value
adjustments related non-cash amortization for the Term Loan. These obligations
are explained further in Note 5. "Long-Term Debt" to our consolidated financial
statements included elsewhere in this Annual Report. We used the applicable
annual interest rate as of December 31, 2021 of 4.50%, based on LIBOR plus the
applicable margin, for our $1.5 billion outstanding Term Loan to estimate
interest payments on this variable rate debt instrument.

(2)This reflects our future operating lease payments. We enter into operating
leases in the normal course of business. Substantially all of our operating
lease agreements have fixed payment terms based on the passage of time. Some
lease agreements provide us with the option to renew the lease. Our future
operating lease obligations would change if we exercised these renewal options
and if we entered into additional operating lease agreements. These obligations
are explained further in Note 6. "Leases" to our consolidated financial
statements included elsewhere in this Annual Report. Operating lease obligations
do not include common area maintenance, insurance or tax payments for which we
are also obligated to pay.

(3)This reflects payments made pursuant to the terms of the TRA, as described
further in Note 14 to the consolidated financial statements included elsewhere
in this report.

In addition to the cash requirements above, pursuant to the CARES Act, repayment
of certain advanced payments and other deferrals received as part of relief
during 2020 began in 2021. We received approximately $120 million of accelerated
payments during the year ended December 31, 2020. During the year ended
December 31, 2021, approximately $60 million was repaid. See Note 1.
"Organization and Summary of Accounting Policies" to our consolidated financial
statements included elsewhere in this report, for further discussion on the
repayment terms related to certain relief previously received by us. In addition
to the continued repayment of the advanced payments received under the CARES
Act, we anticipate additional cash outflows during 2022 for the repayment of the
remaining payroll taxes deferred in 2020 pursuant to the CARES Act (see Note 1.
"Organization and Summary of Accounting Policies" for further discussion of the
amounts deferred and repayment terms).

Capital Resources

In addition to cash flows from operations, available cash and capacity on our Revolver, other sources of capital available to the Company include funds received under the CARES Act and continued access to the capital markets.



As previously noted in Note 9. "Earning Per Share" to our consolidated financial
statements included elsewhere in this report, in 2021, we completed two public
offerings pursuant to which the Company sold 15,525,000 shares of common stock,
resulting in net proceeds of $554.2 million.

As noted in Note 1. "Organization and Summary of Accounting Policies" to our
consolidated financial statements included elsewhere in this report, the Company
received approximately $27 million of the grant funds distributed under the
CARES Act and other governmental assistance programs during the year ended
December 31, 2021, which are not required to be repaid, subject to certain terms
and conditions.


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Summary



The COVID-19 pandemic has resulted in, and may continue to result in,
significant disruptions of financial and capital markets, which could reduce our
ability to access capital and negatively affect our liquidity in the future.
Additionally, while we have received grants and accelerated payments under the
CARES Act and other government assistance programs and may receive additional
amounts in the future, there is no assurance regarding the extent to which
anticipated negative impacts arising from the COVID-19 pandemic will be offset
by amounts and benefits received under the CARES Act or future legislation.

Although we have seen continued improvement in surgical case volumes as states
re-opened and allowed for non-emergent procedures, broad economic factors
resulting from the current COVID-19 pandemic, including increased unemployment
rates and reduced consumer spending, could negatively affect our payor mix,
increase the relative proportion of lower margin services we provide and reduce
patient volumes, as well as diminish our ability to collect outstanding
receivables. Business closings and layoffs in the areas in which we operate may
lead to increases in the uninsured and underinsured populations and adversely
affect demand for our services, as well as the ability of payors to pay for
services as rendered. Any increase in the amount or deterioration in the
collectability of patient accounts receivable will adversely affect our cash
flows and results of operations, requiring an increased level of working
capital. If general economic conditions continue to deteriorate or remain
uncertain for an extended period of time, our liquidity and ability to repay our
outstanding debt may be harmed.

Based on our current level of operations, we believe cash flows from operations,
available cash, available capacity on our Revolver, funds we have received under
the CARES Act, funds we may receive in the future and continued access to
capital markets, will be adequate to meet our short-term (i.e., 12 months) and
long-term (beyond 12 months) liquidity needs.

Certain Non-GAAP Measures



Adjusted EBITDA is not a measurement of financial performance under GAAP, and
should not be considered in isolation or as a substitute for net income,
operating income or any other measure calculated in accordance with GAAP. The
items excluded from this non-GAAP metric are significant components in
understanding and evaluating our financial performance. We believe such
adjustments are appropriate, as the magnitude and frequency of such items can
vary significantly and are not related to the assessment of normal operating
performance. Our calculation of Adjusted EBITDA may not be comparable to
similarly titled measures reported by other companies. We use Adjusted EBITDA
and Adjusted EBITDA excluding grant funds as measures of financial performance.
Adjusted EBITDA and Adjusted EBITDA excluding grant funds are key measures used
by our management to assess operating performance, make business decisions and
allocate resources.

The following table reconciles Adjusted EBITDA and Adjusted EBITDA excluding
grant funds to income (loss) before income taxes, the most directly comparable
GAAP financial measure (in millions and unaudited):

                                                                   Year 

Ended December 31,


                                                               2021          2020         2019
Consolidated Statements of Operations Data:
Income (loss) before income taxes                           $    81.2      $ (18.8)     $  54.6
Plus (minus):
Net income attributable to non-controlling interests           (141.6)      (117.4)      (119.9)
Depreciation and amortization                                    98.8         94.8         76.5
Interest expense, net                                           221.0        201.8        178.9
Equity-based compensation expense                                17.4         13.2         10.2
Transaction and integration related costs (1)                    46.1         38.2         36.1
Impairment charges                                                  -         33.5          7.9
Loss (gain) on disposals, net                                     2.2          5.7         (4.4)
Litigation settlement and other litigation costs (2)              5.6          6.4          4.6
Gain on escrow release (3)                                          -         (0.8)           -
Loss on debt extinguishment                                       9.1            -         11.7
Hurricane-related impacts (4)                                    (0.2)           -            -
Tax receivable agreement expense                                    -            -          2.4
Adjusted EBITDA                                             $   339.6      $ 256.6      $ 258.6
Less: Impact of grant funds (5)                                 (25.3)       (31.1)           -
Adjusted EBITDA excluding grant funds                       $   314.3

$ 225.5 $ 258.6


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(1)For the year ended December 31, 2021, this amount includes transaction and
integration costs of $39.8 million and start-up costs related to a de novo
surgical hospital of $6.3 million. For the year ended December 31, 2020, this
amount includes transaction and integration costs of $23.2 million and start-up
costs related to a de novo surgical hospital of $15.0 million. For the year
ended December 31, 2019, this amount includes transaction and integration costs
of $19.0 million and other acquisition costs and start-up costs related to a de
novo surgical hospital of $17.1 million.

(2)This amount includes litigation settlement costs of $1.2 million and $0.2
million for the years ended December 31, 2020 and 2019, respectively, with no
comparable costs in 2021. This amount also includes other litigation costs of
$5.6 million, $5.2 million and $4.4 million for the years ended December 31,
2021, 2020 and 2019, respectively.

(3)Included in other income in the consolidated statement of operations for the year ended December 31, 2020, with no comparable gain in 2021 and 2019.



(4)Reflects the impact of insurance proceeds received net of operating losses
incurred in the six months ended December 31, 2021, at a surgical facility that
was closed following Hurricane Ida.

(5)Represents the impact of grant funds recognized, net of amounts attributable to non-controlling interests.



We use Credit Agreement EBITDA as a measure of liquidity and to determine our
compliance under certain covenants pursuant to our credit facilities. Credit
Agreement EBITDA is determined on a trailing twelve-month basis. We have
included it because we believe that it provides investors with additional
information about our ability to incur and service debt and make capital
expenditures. Credit Agreement EBITDA is not a measurement of liquidity under
GAAP, and should not be considered in isolation or as a substitute for any other
measure calculated in accordance with GAAP. The items excluded from Credit
Agreement EBITDA are significant components in understanding and evaluating our
liquidity. Our calculation of Credit Agreement EBITDA may not be comparable to
similarly titled measures reported by other companies.

When we use the term "Credit Agreement EBITDA," we are referring to Adjusted
EBITDA, as defined above, further adjusted for acquisitions and synergies. These
adjustments do not relate to our historical financial performance and instead
relate to estimates compiled by management and calculated in conformance with
the definition of "Consolidated EBITDA" used in the credit agreements governing
our credit facilities.

The following table reconciles Credit Agreement EBITDA to cash flows from
operating activities, the most directly comparable GAAP financial measure (in
millions and unaudited):

                                                                                       Year Ended
                                                                                   December 31, 2021

Cash flows from operating activities                                               $          87.1
Plus (minus):
Non-cash interest income, net                                                                (22.0)
Non-cash lease expense                                                                       (39.1)
Deferred income taxes                                                                         (8.9)
Income from equity investments, net of distributions received                                 (0.2)

Changes in operating assets and liabilities, net of acquisitions and divestitures

                                                                                  75.5
Medicare accelerated payments and deferred governmental grants                                73.6
Income tax benefit                                                                            10.5
Net income attributable to non-controlling interests                                        (141.6)
Interest expense, net                                                                        221.0
Transaction and integration related costs                                                     46.1
Litigation settlement and other litigation costs                                               5.6
DOJ settlement payment                                                                        32.2
Hurricane-related impacts                                                                     (0.2)
Acquisitions and synergies (1)                                                                84.7
Credit Agreement EBITDA                                                            $         424.3


(1)Represents impact of acquisitions as if each acquisition had occurred on
January 1, 2021. Further this includes revenue synergies from other business
initiatives, de novo facilities and an adjustment for the effects of adopting
the new lease accounting standard, as defined in the credit agreement governing
the Senior Secured Credit Facilities.

Inflation

Inflation and changing prices have not significantly affected our operating results or the markets in which we operate.

Recent Accounting Pronouncements



Please refer to Note 1. "Organization and Summary of Accounting Policies -
Recent Accounting Pronouncements" to our consolidated financial statements
included elsewhere in this Annual Report for a discussion of the impact of the
adoption of recently issued accounting standards and accounting standards not
yet adopted.

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