Medical Facilities (TSE:DR) reported higher revenue and profitability in the third quarter of 2026, as a shift toward higher-acuity procedures, a favorable payer mix and payer rate increases outweighed a decline in total surgical case volume.
Facility service revenue rose 9.8% from a year earlier to $65.9 million. Income from operations increased 17.3% to $11.2 million, while EBITDA rose 13.5% to $14.1 million, President and CEO Jason Redman said on the company’s earnings call.
Redman said increases in spine procedures, higher-acuity orthopedic cases and pain management cases contributed to the quarter’s performance. Chief Financial Officer David Watson added that the company benefited from payer rate increases.
Management said the income statement variances discussed on the call were for continuing operations and excluded non-controllable, non-cash corporate-level adjustments related to share-based compensation plans. Figures are in U.S. dollars unless otherwise specified.
Case Mix Offsets Lower Surgical Volume
Total surgical case volume fell 1.6% year over year, Watson said. Inpatient cases declined 3.4%, observation cases fell 2%, and outpatient cases decreased 1.3%.
Excluding low-margin dental cases, surgical volumes were relatively stable, declining 0.6%, he said.
Total operating expenses increased by $4.2 million, or 8.4%, during the quarter. Drugs and supplies represented the largest increase, rising 12.2%, primarily because of changes in case mix, according to Watson.
Consolidated salaries and benefits rose 7.7%, reflecting annual merit increases and higher market-driven compensation for anesthesia nurse practitioners. General and administrative expenses increased 5.5%, with Watson citing higher repairs and maintenance costs and contracted services related to anesthesia, professional fees and billing fees.
Cash Position and Shareholder Returns
Medical Facilities ended the quarter with $70.8 million in consolidated cash and cash equivalents, including $60.7 million at the corporate level, Redman said. Consolidated net working capital was $67.4 million, compared with $54 million at the end of December. Cash and cash equivalents stood at $43.4 million at the end of December.
Watson said the increase in net working capital was driven primarily by the sale of Oklahoma Spine Hospital in the first quarter. The sale increased cash, partly offset by the removal of the hospital’s held-for-sale balances and current assets and liabilities.
The company remained free of corporate-level bank debt after fully repaying its corporate credit facility in 2024, Watson said.
Redman said Medical Facilities had fully used its normal course issuer bid purchase limit of approximately 1.8 million common shares by mid-July. Through the first nine months of 2026, it repurchased just under 1.7 million shares for $21.5 million.
Since changing its corporate strategy in the third quarter of 2022, the company has returned approximately CAD 219.6 million to shareholders through normal course issuer bids, substantial issuer bids and dividends, Redman said.
No analysts asked questions during the call’s question-and-answer session.
About Medical Facilities (TSE:DR)
Medical Facilities owns a 51% controlling interest, with its physician partners owning the remaining 49% interest, in two highly rated, high-quality specialty surgical hospitals located in Arkansas and South Dakota. The hospitals perform scheduled surgical, imaging, diagnostic and other procedures, including primary and urgent care, and derive their revenue from the fees charged for the use of their facilities.
