Given the risks and cost of hospitalization, there has been significant interest in exploiting machine learning models to improve perioperative care. However, due to the high dimensionality and noisiness of perioperative data, it remains a challenge to develop accurate and robust encoding for surgical predictions. Furthermore, it is important for the encoding to be interpretable by perioperative care practitioners to facilitate their decision making process. We proposeclinical variational autoencoder (cVAE), a deep latent variable model that addresses the challenges of surgical applications through two salient features. (1) To overcome performance limitations of traditional VAE, it isprediction-guided with explicit expression of predicted outcome in the latent representation. (2) Itdisentangles the latent space so that it can be interpreted in a clinically meaningful fashion. We apply cVAE to two real-world perioperative datasets to evaluate its efficacy and performance in predicting outcomes that are important to perioperative care, including postoperative complication and surgery duration. To demonstrate the generality and facilitate reproducibility, we also apply cVAE to the open MIMIC-III dataset for predicting ICU duration and mortality. Our results show that the latent representation provided by cVAE leads to superior performance in classification, regression and multi-task predictions. The two features of cVAE are mutually beneficial and eliminate the need of a predictor. We further demonstrate the interpretability of the disentangled representation and its capability to capture intrinsic characteristics of hospitalized patients. While this work is motivated by and evaluated in the context of clinical applications, the proposed approach may be generalized for other fields using high-dimensional and noisy data and valuing interpretable representations.