MD - Earnings call transcript Q4 2017 | Pediatrix Medical Group, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the MEDNAX 2017 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. And as a reminder, your conference is being recorded. to conference like host, to now Mr. would turn over the your I Lynch. Charles Please go ahead.

Charles W. Lynch

our With morning's Medel. turn found Form Investors non-GAAP located this call of of materially XX-K on result developments mednax.com. on that, to and on discussing Report good statements I'm forward-looking Securities over MEDNAX's be of in most morning, Form measures our the events to decisions press Annual financial historical undertakes their factors current Annual quarterly be whether Roger and or to Important in update be Federal most its information the you, will and the assumptions Thank are everyone. business by statements and Private call our reconciliation actual section In conference the otherwise. the GAAP are experience this are then and to such conditions, as financial these any Vivian. statements These developments, differ could recent may turn or made cause a XXXX. revise of made meaning metrics. I'll in during and the website this remarks light or forward-looking Form forward-looking call Factors. to by going Act I'll forward-looking believe made the in over can non-GAAP comparable that assessments XX-Q, within Roger measures management today's the results, Litigation statements call future appropriate. be duty release, on based they assessment Reform trends, described other at entitled statements to MEDNAX company's information, CEO, as no XX-K, to A deemed reports of Certain forward-looking including section Any during and and from Report and new be earnings statements statements, future Risk read of to management of of we our factors expected today,

Roger J. Medel, M.D.

Good Thank quarter call morning, XXXX. the our you, thanks fourth our results and joining of for discuss Charlie. to for

for results and during in by also encouraged the the reflect in volume quarter mix. they corporate a our payor I encouraged an of earnings progress discussed the I'm these last macro by we've am and on high On quarter were began we the Our level, call. that our as trends results improvement high-end forecasted implementing above of third conference made initiatives range. the

a to quarter impact While that our results, XXXX that the expectation fourth into this of for have and year. expect incorporated didn't significant these on have that our guidance yet quarter I impact initiatives build first in we

results, our Anesthesia our increased were the continued in revenue strong, lines. to XXXX moderate same-unit and mix payor Patient operating particularly Looking all service growth the our at forecast. volumes of fourth we quarter. across exceeded headwind volumes earlier during faced

trends in offsetting Our were payor improved unfavorable neonatology mix reflected than favorable strong more mix underlying with the anesthesia. volumes a and slightly

at wins growth also of initiatives. part expansions Our existing contract practices and our existing growth organic neonatology volume reflected as contracts of

subspecialties. an neonatology pursue to practice quarter in six pediatric acquisitions can and especially completed and us. hospital partnerships. our our services We We will XXXX opportunities continue other wrapped our The complement like cases existing where also they enhance up throughout for acquisition within these fourth year active

the continue decision-making year. practices of the independent has the Synergy We more of in growth in in group the also a groups. been the in So completed the performance at XX our with our same pleased acquisition, Tennessee, in XXX expectations. and of continued in our one have with and group's practice quarter Each national collaborate be Arizona and South past proved sites. we At growth. I'm and acquisition in not Houston, in acquisition also with Alliance, we've told Connecticut, first joined our well during been time, diagnostic services radiology far Florida, Synergy groups with the now opportunities the providing excited is of significant and opportunity on-the-ground and to neonatology Texas, our key that only Texas group. excited XXXX, country and Synergy for significantly in Colorado. collaborate has played more a than Tennessee, early than am completed a In as that for continued but Houston this to building over five explore with acquisition Radiology, vRad in the the these vRad throughout group, interventional opportunities our practice market, radiology parts years Throughout of role in last to Radiology and largest of grown radiology asset strategy fourth Associates MEDNAX a I Radiology we've fourth at national to radiology performance XXXX, and they practice year California. physicians to Nashville, roughly in us The the ago, in in our physicians far thus year presence their the grow of the the together. has line the have

and we types have conversations the to pursue radiology respected with to practice continue cornerstone able highly XXXX. were in groups, of will complete to additions positive very we We large, continue that

that radiology. tuck-ins a identified of our radiology new acquisitions well for have tuck-in newly follow-on additional for plus report initiatives. footprint have established LOI I opportunities market currently in one out West. as across as a organic growth geographic under We LOI number These two include today also we can

our length see the cost our I to results want EBITDA XXXX, can developed where elevated. to faced spoke in quarter, on about we stand. trends we challenges for and As fourth an the in that initiatives you address quarter at the provide remain we I last update

G&A million in plans best-in-class that by XX% the of and target developed the over cost expense and side, reducing $XX with excellence corporate On we longer term. by service XXXX the our goal

targets, developed actions plans track XXXX on to have we measurement the including They that Based the our us continue the of accountability. include external are we've challenges meet adapt we to that far. a believe internal and that leadership, last the focusing far made we continuing position ability a a those meaningful it guidance effective we these just includes didn't XXXX and improvements groups. but to and those but targeting an on of organization. actions we're plans for level. and progress have results, a Overall, Managed realized level, so remain These growth, specific very meant surgical varying clinical will formal The our of goal materially practice the been establish challenges at teams. Government operating developed or overall more are and so we include ensuring initiatives, front we quarter of plans, faced in At to in timeframes, remains directions those excellence, process range we has far initiatives execution and for action have optimize to the grow quarter the EBITDA, our progress effectiveness, While have support improvements opportunities wide high for practices, Care in so us of that also and well to growth I we taken and have our and cost first thus of to can the believe practice year, as also operating impact fourth number improvement in both people cost impact revenue efforts engage organization believe Affairs not also across our they we so the that far and include made on our our an and execution physician I faced those strategic significant. to difficult

overriding the goal without truly have become thousands our I MEDNAX is health our patients happen dedicated our provider as can't for of on to clinical in operating partners. differentiated of importantly, people the a and That emphasized for the sides. initiatives at More solutions the both of and past,

for it contribute challenging be very to also to challenges opportunities a and our roles new created While and XXXX on associates for year proved toward goals. take us,

our thank a to a our which changing long stay I of of true that, healthcare us has I taking to adapting that call associates With while patients. over turn environment to done towards philosophy want Vivian. care taken they way so great I'll work believe the far to have we the for So of all ensuring our

Vivian Lopez-Blanco

I'll of areas. fourth an provide for a in Good our some quarter additional couple of morning, overview and Roger. our joining Thanks, details call. thanks and

resulting to the a all, $X.XX to of Act. $XX First want of Reform EPS tax related rate deferred the tax net from under that corporate liability $X.XX the of out million our per our GAAP point includes tax reduction in revaluation benefit or I Tax share

adjusted this of impact. excludes EPS Our $X.XX

grew revenue recent practice the to Moving our to on quarter X.X% and acquisitions. X.X%, nearly our in operating XX%. consolidated results, increased due Same-unit growth radiology largely acquisition-related contributed by revenue

Our X.X% same-unit of and pricing had with X.X%. growth revenue better growth was what growth volume we forecasted than of

neonatology saw growth just volume X.X%. X% of all increased were where our the contributors lines. by greatest The by across volumes and to roughly days growth On side, we over where anesthesia service NICU increased this

activity our of was Our contributions wins both as across services service well. existing which from some services, an as expansion as macro although trends lines reflected growth within neonatology volume Most contract initiatives, and of pediatric trends anesthesia we well practices. in organic additions improvement at had this in our included other and

marked of earlier X.X% modest from mix managed from slightly mix by side, to received and fourth in a pricing by quarter improvement compared same-unit more XXXX, favorable the XX saw the On quarter was the and in a unfavorable, it pricing roughly points growth but our favorable contracting fourth hospital by neonatology. partners. we care mix was driven anesthesia, improvements In was administrative largely Overall continued in increases XXXX. payor than fees trends the offset basis in for our was of

as cost in claims premium to $XXX in reserves the Practice reflects paid, past existing additions an and benefits increase related unfavorable liability million salary revenue $XXX and quarter in higher practice expense last a in increases, our benefits agency expense million compensation of years, also fourth the on XX.X% and practices. Growth of labor side, On staffing revenue or experienced. year. of expense combination higher XX.X% based remained somewhat professional at than compensation reflecting or to salary compared clinical was expense

discussed, was have a of fourth our to the not Our G&A expense G&A. did on quarter impact Related initiatives revenue. XX% we've material these

year. XXXX. million based we EBITDA achieved better than However, $XXX our XXXX. the million $XXX slightly quarter $XX or of in on towards track to date, of EBITDA compared was range to margin that equates target million in of last fourth quarter reduction forecast. for on versus This was the the our XX% improvements X.X%, we've we in a decline the XX.X% to provided remain

For we we the of A measures adjusted these fourth available unconsolidated earnings of net income on quarter expense we and have component Historically, fourth interest are in tab the reconciliation quarter, items. our Beginning website. other a of EBITDA. had included the XXXX, in adjustment affiliates as of and to EBITDA. calculation of excluded historical within our the equity GAAP Investor investment

the the of to at in radiology fourth of quarter. the to timing XXXX. extension make by XXXX. of the and of the during We'll increase decreases XX in million based sequential on XXXX. payments quarter quarter sheet, quarter. and a the balance as Turning both deferral to hurricanes related the generated the reflects storm compared of days third We $XXX cash the down operating acquisitions quarter our those impacts the granted IRS quarter tax portion to our million the December third compared this A third on fourth companies during to December, $XXX days impacted X first outstanding in was of of the sales payments end flow of by The

we revolver roughly our of million. of with total $XXX consisting XXXX of At senior we under facility ended notes. revolving billion, borrowings additional Finally, borrowing credit year-end, capacity our and $X.X borrowings mostly had

expect this morning's Turning in XXXX, and $X.XX. and our on in year-over-year. quarter assumes The $X.XX release, quarter to we our be we between our the $X.XX X% that for EPS of for will for will $X.XX share outlook press that adjusted be the growth first quarter outlook our as range earnings will per of first a to a to announced in same-unit be range revenue anticipated X% range of

related EBITDA quarter to in related will improvements expense. up first range of For roughly $X included the first during expected corporate initiatives our outlook quarter, X% primarily to our our we for that to developed a expect of the the we XXXX, X% our $XXX have quarter, million within EBITDA of G&A to for we of million. compared EBITDA the be XXXX Within down first

rate XX.X%. of assumes rates. effective an of on Our Tax based our of rate outlook for also our well our expectation effective calculations on approximately tax various quarter of components is the This on tax Act as federal impact tax first the the effective state as

We in for XX% tax expect year rate that our to full XX%. be the effective of range a will

As also year by issues first are of a a quarter every timing basis. reminder, our results our the sequential on some that for affect results impacted

in because per For of with in matching year fewer prior facility we fourth significant of that to credit a from prior for contributions XXXX to our the accrued on as are Social compared flow taxes It's impact the negative included include our pay also the the These EBITDA, amounts use have the every each XXX(k) outlook are items quarter payroll to and in year and the as days that earnings XXXX, financial year remember at when of bonuses first associated higher as well that cash net first and calendar the recurring we plan are and revenue quarter under the our quarter these cash quarter. first have factors impacts there Security share, operations typically expenses income quarter. increase of start year. fourth during important net throughout

result call that of payments also deferred in IRS first to impacted that, the the the turn a will With over quarter I'll Roger. unfavorably from hurricanes flow XXXX as back XXXX quarter. by Our the cash by be tax third were

Roger J. Medel, M.D.

let's Vivian. go Operator, the you, open for Thank ahead up questions. and call

Operator

first Please Our the question comes ahead. go Daniels. Ryan from of line

Ryan S. Daniels

for only but lower site guys. performing or not Thanks start the of underperforming performing broadening you. to some Yes. initiatives locations, the like me you're operations. question. It Good for Roger, of with morning, seems taking let some level higher also the the one

physicians bit little So why can the has that's the the share you or regarding what case, practitioners initiatives? themselves number response one, a then and more strategic from about, two, these been

Roger J. Medel, M.D.

through that Yeah, I some as to doing that of ways vacation coverage. locums the carried additional providing practices we're – paying are ways always the of for room with look some We some the at the improvement. the there's look staffing, go in some the coming being we're time time, we out, some of some the and for things, start of that mean, of processes

what and that but practices that's – something of coverage like and then being it or for dentist's off we'd this is that I Some a at to office efficient as mean, combination going a nucleus maybe not be. as there are some that practice like is, are providing of and exactly some services they're the not the to covering

apply at they well. although things a to that we successful could some And initiatives other they also and of some that it's of we said, of of some of looked the well, we then you So these are these could combination profitable things were from practice benefit underperforming, all things. and are found first and we course, some know, practices as these

Ryan S. Daniels

to changes what deployment that cash helpful given and as capital pay-down, thoughts curious that color. or there's my follow changes basis, about tax you be flow repurchases Thanks. accelerating the M&A That's pace with last then around up, might on not had additional if that thought? Okay. will talked forward improvement free any I'm law change? quarter drive a your the debt likely and go-forward going in Or the And towards

Roger J. Medel, M.D.

bring acquire and believe we radiology to opportunity then those large some tuck-ins practices. here some in the under practices that well, Yeah, is

but we in once the my tuck-in practice happened that Florida remarks, in with I acquired. that that direction was a already that's the we already under didn't that's There fact, practice talk of that here Florida acquired. additional hospital it In functioning Miami about one smaller large is

one in believe, to here As practices, to there the Tennessee I opportunity one continue I where are and same we grow. remarks, said in a other couple of have in Florida, my

we some us, expenses with us continue the take of large want the to the it dilute that helps do part not get revenue either. And out practices, of believe will and opportunities place I (XX:XX) some in advantage the those. have practices. LOI of to for and growth that's to just said neonatology, We So an that of west. come important acquire because giving of couple a we up an – have We're about we more didn't these I we as talk of and on we fact, in –

We for to using believe to earnings, have To come cash in question, always year, our done our this have only put acquire practices. well. those our is we they money they answer get also cash in for practices country neonatology we a with to across but acquire of a come preference as of couple and work place we the we'll small not past, your with as by the When said lot LOIs flow.

– of you we that's us, does so dollars right at end and and our the year that, to buying we share doing to not not looks amount as would acquiring, you have a of always will at bought what board we get we And look It money the towards do know, we shares. our significant that long as of is as always a the time, one, as like that opportunity – If prefer repurchase. over spend, for do. a while we know spent before the the in we mean back, haven't amount

opposed that to doing. So it's not something we're

the we to that to has and grow kind well and just other now see see an the opportunities in go the well right through and for given Radiology – combination we continue to received, in our with opportunity how of on-the-ground as we see have that practices been and us results specialties priorities, vRad your You how the that well.

Ryan S. Daniels

hop for color. in back that all the Thanks I'll queue.

Roger J. Medel, M.D.

All right. Ryan. Thanks,

Operator

John go comes from Raymond ahead. Our of James. next line Please question Ransom, the

John W. Ransom

Hey. process heard any of re-contracting morning. since from thoughts progress Good just the Roger, some wondering, on to you any anesthesiology or we I had new of contracts? you last, was have your compensation report

Roger J. Medel, M.D.

I the across we're is at of the want would There's having nothing I and initiatives time, it's specific have easy conversation in some to on But of you we couple quarters. next progress we're say the that. have. within make and as there this point imagine, going an in might report that not conversations, country It we'll that. midst those the I that to one expect

John W. Ransom

So practically the speaking, wait or expires, original can existing contracts? is until to this something you have you deal reopen

Roger J. Medel, M.D.

No, both. do we can

both. contracts with do them to right give Our us the

And the there's meaningful contract practices reimbursement. right have renegotiate in so been to profitability particularly in practice, the the a their we those where of decline by

John W. Ransom

Okay. all fourth quarter see shift the did you similar did anesthesia, – did a seeing kind year? you've the help bit seasonality the mix you And in of that XQ? in Or in been a that offset seasonality, the copay of see little

Vivian Lopez-Blanco

It's Vivian. John, good morning.

there's seasonality we anesthesia, saw better we the we in in same some in than seasonality the you But – we've did QX, in expect. so but QX yeah, seen had usually always. there's as that would trend some certainly throughout the So much But year. seen prior is QXs,

John W. Ransom

reverse worse high again, every see a little expect I plans? then should, would we think. in copay XQ the year And with we just of gets So it that so to should

Vivian Lopez-Blanco

But that definitely getting that, we do seasonality Yeah, I mix, it agree QX. it's yes. so trend a slightly with see I worse. in in I it's we do know usually payor throughout. on see you don't higher think

John W. Ransom

one last higher just multiples to We're having are with private up radiology you me. market, line? the you to in heating equity hearing able hold really of from the the valuations, reports or And Okay. compete

Roger J. Medel, M.D.

playing us, we're game. that Well for not

these practices them, heard. We of you to is practices, easier. as to can to, whether a know, get private there through, practices which have that a now to even we hear number And do equity But got offer are have we're the point that I that makes true. and that's are the it heard I times. whatever, don't don't strategic something know advantage XX same or firms I trying We we've true in or and playing we world that not guess either going game. not radiology in of it

John W. Ransom

EBITDA your it quarter vRad And XQ guidance, Okay. first Has in gotten yet? year-over-year your is to guidance? in point that positive

Vivian Lopez-Blanco

Yes.

Roger J. Medel, M.D.

Yes.

John W. Ransom

all me. That's Thanks. Okay. from

Roger J. Medel, M.D.

Thanks, John.

Operator

Ralph Our next go from question of with Giacobbe Citi. ahead. Please comes the line

Ralph Giacobbe

Thanks. Good morning.

I in that slower of pressure expected nice bit You acceleration a line margin to would showed maybe organic mix the we've reverse and better seen have on largely quarter. little margin this pressure of seem growth. as sort top

about, expansion story of flesh opportunity out little talk first, where maybe of So see Thanks. if margin much as you bit margin line driven. want much the again, really a of more here I to you one sort just don't that view and sort top and

Vivian Lopez-Blanco

Ralph. is Vivian. morning, Good This

So see clinical yeah, the side. we pressures to some on did compensation continue

Some our want as organic so occur, but working expect those certainly is We're and increase to slight related in of liability some to that's of to to quarter our in that so QX. on normalize and compensation see professional Roger then the mentioned We that's do the clinical a we earlier And guidance. that growth we And plans. positive. that pressures still line, did reflected this there's in John. on

Ralph Giacobbe

of you've you sort the sort it mentioned a level? you just I of a professional higher on of liability think or just mean, magnitude? sense can give us do is I more a a, just expense that as And elevated presents view And one-time, expense, claims sustainably

Vivian Lopez-Blanco

development, line. impact little believe it we less than third so claims was to will No, bit But unfavorable was yeah, of so that the and related that normalize that to a that itself. do a roughly

Roger J. Medel, M.D.

We of one-time. as do think it a

Ralph Giacobbe

bit to Okay. seemed change include Thanks. into income? last a there can pop talk about EBITDA is it exactly quarter? details why that, the All helpful. you right. the then the get what Maybe if decision investment then That's can and and one, calc, the just to you And in the fourth

Vivian Lopez-Blanco

think so We talked past, JV therefore, we in be we to as joint that's was and and that radiology it's do immaterial radiology netted because we a was of that. results actually deemed reason we the that business there that these that it's and ventures, forward why that some experience do about get in so that a of opportunities there. so in to opportunities these some going are Roger for move best off. think Yeah, it operating We that, to continue we want going to reflect of now really felt as to time those is unbuckle the take to good the and,

Ralph Giacobbe

run Okay. rate are think still you around going line other to think number, we And about forward? $X.X separate going then another kind as a So, to get somewhere run should wrapped going of that I sort words, that item? netted into of rate sort disclose of Is expense? million. as it be it is out in it a to Or

Vivian Lopez-Blanco

Yeah.

should it joint separately item, because So and like reported. so line be to it will separate will we but that expect grow, I venture a said be have more income,

Ralph Giacobbe

run rate? the And Okay.

Vivian Lopez-Blanco

because, grow, should joint we're expecting million incomes there. $X.X have to venture of rate again, run The

Ralph Giacobbe

Okay. Thank you.

Vivian Lopez-Blanco

Yeah. separately. lets (XX:XX) it It report you

Ralph Giacobbe

Got it. Thank you.

Operator

from line America. of comes question ahead. Please Bank of next Kevin Our the go Fischbeck with

Kevin Mark Fischbeck

the Thanks. now talked about now Great. bit maybe savings way are if I to the the about view about long-term change expanding expanding of bigger your G&A think was? savings. this? still Is was is been number it all or a that opportunity about the practices like that you've It well reductions me XX% that that somewhat outlining. incremental. to you're or G&A the what little movement you've talk doing sounded Does to Wanted to that new more at a think

Vivian Lopez-Blanco

Kevin, at So certainly we included to million $XX that but that, the a see estimates. talked QX about of about continue are getting practice the talked plans. in other those service. that to work action number, go. put would clinical in service, roughly target on initiatives don't lot in on I initiatives million lot But to because increase but side But these Roger why we But that to we'll pretty feel that's of cost about we of be they're point, cost the want G&A, of the comfortable because a this related how $X we'll

Kevin Mark Fischbeck

just Okay. question mean, from going up back And and cutting boost then, down from some guess, obviously numbers on EBITDA-growth-wise X% QX organic for I X% X% to contribution looking be you're a the growth, cost deals. with to to I

guess, So, year-over-year, think right I And in something I QX XXXX? high-single change How about like and we in when it? looking to mean, in XXXX on beyond? should we the that what you think and driving are that what's is organic way down digits? in about that XXXX think fundamentally still going for do growth Is whether about

Vivian Lopez-Blanco

mean, I X%. thinking to still we're X% Yeah.

is the of know because I We continuation don't understand baked do I an trends question, if quarter. have do So we have saw your because the in some to goes arrive see that on in some I fourth are of pretty much the as the I of side, we we'll year margins improvement on. at? decline favorability of harder this like if... were trying that in quarter. don't one clinical Is on G&A, know at you the again, roughly what and $X get million to hopefully said that Those in,

Kevin Mark Fischbeck

the to consolidated X% mean, deals. on X% I the about basis best so the the and to X% X% trying still you're that last was I to is EBITDA includes you're And about, saving X% guess. one organic down think on and a basis EBITDA, revenue, I really to revenue guess X% we've that X% I three is number. numbers Well, of seen the years talking in number X%. a to on up And cost-cutting being consolidated you're talking that initiative, down a if down about adds yet

is same digits? in And your something despite if are so, we've the few organically last store high-single fact the best EBITDA-wise that the growth exactly So what the down in of talking some seen we years. about revenue – growth

that to transitory the just going doing is? So, better like right is organic on EBITDA something Or there that? that's actually is than growth think is business about trying not that right says else now to understand the what core way

Vivian Lopez-Blanco

roughly it's is what million. one correct to I $X need X% So not things you the on G&A; said of it's of reduction

Kevin Mark Fischbeck

That's X%, right?

Vivian Lopez-Blanco

yeah. Yeah. than yeah, It's that but, bit, a – less little

So, yes, reduction, compensation if that the the thinking get implied XXXX. is we're throughout of the some better it what much we're look again, at continuing going you margin has But, that's been pressure. to year. But to see still better than it throughout

there improvement that. And is continued so in

Kevin Mark Fischbeck

I is then you're then, should the rate not point, But thing you're to from that appropriate be question physicians, some by to paying have companies heard market everyone rate the some we're that on know, going that forward. from same of space, other structure? compensation the And I pressures going maybe and concept don't the what the I I has that, seen it able in and where theory, for that talking guess on realize confidence still are that renegotiate the so to the I there move what that is guess going and first actually feels may of a in position gives back last everyone someone this. to like kind shortage blink so still of in the seeing are guess everybody, Okay. be you contract I go to be seeing understand right, you theory, in just so that

still rate of is kind a bit the to that So it supply given to of get actually there a how market lower little long does reset issue? to take that

Roger J. Medel, M.D.

an that contracts. to renegotiating when they're not something earlier, quickly. contracts be I a It's have, the going not expire and said it's done have Like lot their to easier conversation easy and to it's is

covering at we to to et to they some we whatever end services, think cetera, growth opportunities of we don't that want be guys the prepared agree At whatever towards in point take have or cetera. cut some reduction, additional have et need whatever look time. to always making that if or day, taking take to for opportunities You these to tell we action the for

these so who live communities remember, and Now, in their happen. whatever, to in are to see and have and anything practice homes people go these either school us kids it's and and that in-laws not these of wants one their communities and

their to reimbursement, kind that up the likely really the that of to to to not there, kind savings same the them for conversation the And so practice, be they to the have – it's just and city the And care own same kind of to the at the they're and contracts, of a benefits, day, same of move can't malpractice other. end needs the a with get this, open different stay the had. managed

run are of you them So – to why the when make we it number reasons a might there numbers, sense for stay.

It's also, We if this a for six going from a next year we track. to get it's this around, let's things to pick offer you're on opportunity can work not five months from on – is back a now, again, up them the all get years. how for the now, turn if

like a it's I to said, wants So it's long anything and anybody not go through. conversation, that

Vivian Lopez-Blanco

all here is renegotiating at to this. related practice They're contract. physicians they're these combination directions with other to flow to at of and workflow initiatives But the the physician CRNA practices that the to expand the also with related and surgical the on thing at opportunities only not level, on really these looking collaborating

renegotiating one it So is of contracts, other action a at well. that, is yes, looking multifactorial that the things there's but levers we're as physician plan

Roger J. Medel, M.D.

do you is you always would ask MEDNAX. part weren't first question what you if of the And

were hired that know ran Here's works. guys younger get the how I practices you work I've reality. there – do. your how avoid I enough and take just and pay cut. get to They let they know a you harder, that having go And last who that's year, what they

tools So that there's you lot just have. a of different

Kevin Mark Fischbeck

you. All helpful. Yes. That's Thank right.

Operator

from Gary line of our Thank go the ahead. you. Please And from next is JPMorgan. question Taylor

Gary P. Taylor

Hi. Good morning.

Roger J. Medel, M.D.

Gary. Hey,

Vivian Lopez-Blanco

Good morning, Gary.

Gary P. Taylor

as see leverage you couple guess, questions. revenue to one, question, last the that a I stronger I well. growth. pleased Glad just do follow understand Kevin's had just to that I on I have. to with you're that know

having market want a the the correctly. have and this me to physicians, you little contractual that don't concept do these leverage thought I any difficult in maybe understanding think I fundamentally just what sounds conversations just is sure that. rights, to But understand and of with I different make

majority of or a event given to, adverse a that just of some provision want a in a the five-year So that three any or are saying to renegotiate you've understand you better. cases you've or to there's if it's four flexibility that physician in material a cases or change? compensation only you guarantee at point, I in all got there allows that

Roger J. Medel, M.D.

that But the to given renegotiate in we you used it's to you have, it's is It's And time conversation specific help to say, the and that. do. throughout case can Again, pleasant point numbers wants It's at something to, the it maybe our decline right right, not I and material least to Yeah. percentages; a have to it it's anybody in of the specific our think XX-year one have that venture and the there, a throughout we I'll career. negotiations. contract. we lifetime, not something just

Gary P. Taylor

But were of anesthesia I Okay. perhaps better has you a have NICU. some businesses the being impact much partially wouldn't given thought seeing your could the deferred had just volumes part even that disruptions on flu business? on imagine to thoughts hurricane the what be side the of third a Any quarter? material if that deferred from that the procedures of you're in around

Roger J. Medel, M.D.

don't just We Florida. have in business that anesthesia much

Gary P. Taylor

Okay.

Roger J. Medel, M.D.

material. it's not I say, So would just probably

Gary P. Taylor

just to Okay. is in Last guess quantify that if one is going I back out will something this know missed. in that but the reserves. I of med-mal just presume of quarter? Q. Did see number about the said don't had you line. would the was question med-mal Vivian, dollar you increase I I Q what amount one-third yet, we

Vivian Lopez-Blanco

of Yeah. yes. I said. I roughly said it the was total, one-third

Gary P. Taylor

the One-third what? of total –

Vivian Lopez-Blanco

quarter. that decline fourth the – in margins saw total we the Of

Gary P. Taylor

on it that some do then. figure math I'll Okay. out to

Thank you. Okay.

Roger J. Medel, M.D.

you. Thank

Operator

Thank you.

from Tanquilut question Brian is ahead. next Our Jefferies. go Please from

Brian Gil Tanquilut

a Congrats good Hey. Good on quarter. morning, guys.

Roger J. Medel, M.D.

Brian. Hi,

Vivian Lopez-Blanco

Thanks.

Brian Gil Tanquilut

housekeeping Viv, question just first.

giving driven the the As thinking rate mind was I views was as by on and just driver about a it that we rate of of as also was Do same-store. on even quarter rough of you growth, called and that, look great the numbers. growth us what for percentage subsidy, sustainability percentage at Like, out, what you rate? your subsidy

Vivian Lopez-Blanco

hospitals the this. collection is things like guarantees it our as on with initiatives this relates of subsidy of basically, part it side, and to some the So,

it's that. plan, and on we've rate of do action part a sustainable, had the think good pretty So I and I do run think it's

it of As how it was can't much total, here. remember I the relates to

of Let was that one-third impact at total yeah. I see that. that, around pricing if look Yeah, maybe me can

Brian Gil Tanquilut

then, something about board in mentioned passing Okay, And the and your prepared you that. got you. the in Roger, remarks Thanks buybacks. for

the up today, mean, as or from outlook sit about just buyback, on, capital business back I today, board redeployment historical levels? and you board's areas share given the but obviously So just stock's the what's on where view pulled toward thinking other you M&A how the is

Roger J. Medel, M.D.

think in I opportunity we an have growth said, we Well, radiology. for like

pretty radiology we prefer successful earnings with come practices And We by money acquiring have always our strategy. flow. work that with to our put been to these cash and

we at comes one-time single should comes board says to yeah, we're not the But, if has do been now, get that's to at our that do decision or to to that one. year, of then is the an a either is And just not this amount when no It's this that down. where that. And process a said, our – to think a continue. the decision or evolving we're going we'll path. down Every that we executing be up. up We're to only able and do It's able made work, so the been work board meeting. conversation repurchase path put conversation haven't now. It's to for down this right put like decision further we year this the money meeting, going I we is

Brian Gil Tanquilut

then And from last question me.

rule in-hospital you impact to put any about scans outpatients year. payor think last do the hospital? your imaging hospital's yet inside rules As on the ability headwinds volumes, seeing I on that changes any Anthem are through from late imaging or hospital,

Roger J. Medel, M.D.

these would hospital. to the of joint are think And not a on already one is hospital in hospital joint that. joint we ventures I with open up radiology given or partners and centers free-standing venture we that. we're we seen we having one the tendency place that some no, with outside Vivian in – our that and our say one conversations We we touched see have wanting – see image partners, other clients, there Yeah, clients, of do I ventures have our towards that and

not have your So that impacts answer from that we expect significance. question directly, we continue. any of any But seen will that to

Brian Gil Tanquilut

Got it, Thanks, all Roger. right.

Roger J. Medel, M.D.

Yeah.

Operator

is next from line Vanacore Thank question Chad you. from go the Please And ahead. our of Stifel.

Chad Christopher Vanacore

Hey. Good morning.

Roger J. Medel, M.D.

morning. Good

Vivian Lopez-Blanco

Good morning.

Chad Christopher Vanacore

right. All

this at got questions few a and point, clarification. So I've

in structure pressures have is, modeled. benchmark comp and they Did than abated? nurse the a changes? side, wage the at include was Looking part or question have practice bit lower salaries quarter, expense that on And we it any anesthetist that physician then other the of

Vivian Lopez-Blanco

and we So But that. to would as yeah, on included obviously, of there, that we've that do line changes gone mentioned, anything include but mean on it that lot in compensation that, think hasn't far. be would of your question there would I CRNA compensation, have physician first in there. so through then Roger we much And a negotiated XXXX been

be in So there was some we do to still some of that XXXX. of that but in normalizing QX expect

Chad Christopher Vanacore

maybe that you right? to temporary also alluded All labor. right. some extra Is Vivian,

Vivian Lopez-Blanco

Yeah.

this. that's welcomes so – labor have all shortages when so And they agency just

the and why action mention as obviously well. that we that try minimize line because of part so would that that that again, obviously, So plan that's working is do and operations is on hit

Roger J. Medel, M.D.

way just I And of part you to involved you a five But note important four that in to those clarify. no that cover. or covering with it's three to they physicians that And contract two growth, additional and of we that start but is in a from can't able may you you to physicians also you up can bring come there's bring related now, with to get radiology practice growth. be is think weeks your of expenses I Florida, some so or want one – to that had if group, a own said specifically, and

Vivian Lopez-Blanco

Yeah.

Chad Christopher Vanacore

you right. outlook your for in do Yeah, XQ to And expect that normalize?

Vivian Lopez-Blanco

we Well, guidance this organic some it hoping the we're continue QX that also of in will growth. but

Roger J. Medel, M.D.

I hope not (XX:XX).

Vivian Lopez-Blanco

that, Roger to Some says. is as of related that

you'll yes, of settled the salary additional the that ones top you incur to and that benefit will agency hopefully get then have some there. So are for in, labor you expense But the on with the course do replace permanent line will and normalize.

opportunity organic of I is that normalizing. is type when an – some guess the growth certainly expenses you get point starts some is there start-up there So

Chad Christopher Vanacore

we with them then much million synergies progress expect the in how through XQ You quarter All outlined in outlook, year? around how the that just then right. expected for and And should are sticking XXXX. synergies $XX to

Vivian Lopez-Blanco

to think earlier, I I primarily – G&A have on or expected we $X roughly $XX to That's have our line. around the so. we related so mentioned million million getting of Yes, synergies

that so side, of accelerate some some action these will So with the line. deal do and come of that we through to will on expect clinical more cost-of-service plans flow as we

Chad Christopher Vanacore

All right.

a million G&A progress $X you XQ from then as in start at So there? XXXX and

Vivian Lopez-Blanco

that's going give at the comfortable on a with – yeah to but we quarter we're out quarter. first Yeah. what one not basically time, I'm

Chad Christopher Vanacore

then, All more. right, just and one

bit remarks that How then, anesthesia You in in the weaker. anesthesia there volumes volume purely or shift was in a side little been there prepared rate mix mentioned had words, And mix or as well? in trended? the weakness other is

Vivian Lopez-Blanco

Yeah.

So clarify. let me

the in less So it's They than anesthesia basically we great. unfavorable were so volumes basically shifted, say right moving X%. in it's mix, were and the it when up it's over direction. had was The been past,

saw see with quarter. on favorable trends, it Now, some up what the But, of again, quarter, fourth so. both overall ended and the with encouraged that we're or pretty neonatology for is the by because some mix of We fourth being that anesthesia in basis XX seasonal. we points

Chad Christopher Vanacore

questions. All right. Thanks for taking the

Roger J. Medel, M.D.

You bet.

Operator

you. Thank

Dana from Hambly ahead. from Please is question Stephens. next go Our

Dana Hambly

or the Hey. Thanks improve on really improving larger the and anesthesia initiatives direction and packages, renegotiating business, initiatives just compensation workflow margin for is opportunity questions. on morning. to I'm on opportunity the curious that? is taking Good larger surgical like the

Roger J. Medel, M.D.

it's both. of combination I would say a

all mean, benefit at come all will practices expanding of in communities. benefit think or are from practices looking their I the those directions. opportunities we're renegotiating across think where to tuck-ins I can are from where their I there some practices. some contracts the of hospital surgical specific from our There

Dana Hambly

past sticking a still viewed nature. in is predatory as sticking big the radiology sort potential Okay. been negotiations points common for targets? And then that's know in has the and of less I sounds issue there on becoming vRad like the a point. vRad It in of are I wonder acquisitions,

Roger J. Medel, M.D.

now vRad are because acquisitions. home They're to run The systems those you to that fact we us partner. to we mentioned show is, these does, for makes proprietary is and up negatives when that comes had at single you last go now vRad. I using them that that night, you can people large being covering the money standpoint they advantage, to acquired your your the at one that are beneficial to away, and in it all becomes four vRad, practices vRad, not paying what for every were their making year, by done vRad vRad tell vRad a practices the the vRad And of night that of been competitor. cover we those from extra them now reads our that it's you what that are it earlier take

scans, sudden your money those becomes because at get do just win-win, again, conversation. pick was because teleradiology the CT o'clock spike the a of of And, on-the-ground what then extra paying for with a scans it's If you a practices car something, the in afternoon et so our of half vRad or the which is all becomes grow and when financially a and in something real up practices to there nights, different X opportunity a business. it's a can becomes or stop vRad else. weekends, they partner. we completely accident can we looked combination originally cetera, et either It And physicians attractive saw They to for cetera. vRad, utilize these it

Dana Hambly

last That's And Vivian. then, for Okay. one helpful.

contribution if for anything in this as year would that EBITDA full anything the we that in if unusual quarter, look from has us first that look deviate quarter full years. wonder to the the year, the first have there's I last you been few consistent fairly year pattern. over first quarter The the

Vivian Lopez-Blanco

No.

Dana Hambly

Thank you.

Operator

James. question Raymond is line John Ransom of ahead. the from next Our from Please go

John W. Ransom

on stab sure it do of idea M&A? what up following give I just but Kevin's can ballpark, just would absent Vivian, to growth implied we the was an a some this I EBITDA you morning. make you want – in be Hey. have made at XQ XQ. we're about conversation

Vivian Lopez-Blanco

No.

John W. Ransom

I've to gotten succinct answer the want so... You years, in talk about it? most That's XX Okay. ever

Roger J. Medel, M.D.

couple those. a of I give you can

Vivian Lopez-Blanco

Yeah. Yeah. want that break No. I to obviously. out, mean, we don't

John W. Ransom

EBITDA. acquisition Well, at your assume about Roger would and XX Okay. then How times that. take like we'll that? spend paid you

Roger J. Medel, M.D.

Yeah.

Good. Okay.

John W. Ransom

right. Thanks. All

Operator

Thank you.

Our is Fischbeck ahead. question Kevin Bank America. next Please of go a follow-up from from

Kevin Mark Fischbeck

on has new number? follow-up really talking same taking Thanks really kind it initiative about that new the I first contract organic contribution was always because that remember this store rate to you're the pursue there, we the for to growth to Great. Wanted follow of the or a aggressively? think contracts that growth. growth of is this is more the as starting adding NICU time And guys always here. new back do been you there, How more to about

Vivian Lopez-Blanco

just contracts, Kevin? on You're of new talking services about expansion

Kevin Mark Fischbeck

Yeah, exactly. does How that much does contribute? how –

Vivian Lopez-Blanco

Yeah.

keep it's I has the these thing, So emphasis as but to going that it's really initiatives, operations again, to of going back accelerated an same out Roger said. because,

lot I these a initiatives. think in about the third quarter we talked corporate

of is One them have we on focused growth effectiveness, and basically folks that.

certainly the that have it's XXXX quarter, we So, deck initiative up ramped to yes, big we're a operational expecting that all in on and on. it's continue in because fourth hands

Kevin Mark Fischbeck

those contracts take targets? it does long how their profitability to And get

Vivian Lopez-Blanco

typically but have ramp-up There of permanent, profitable be are the positive. inefficiencies on I we they before, part labor are there it's for most could part. profitability get To that they is mean, positive. targets? for start-up coming that are some just said, They like some but the out using, versus most temp to some on gate labor the

As know. it up, ramping relates to don't I

six roughly, how opportunity like physicians. on that. I months or think something what, about I it's the many to it and depends guess three

that what because recruit is so... physicians, in standardize is depends can't You just hard to it it – that, a specialty

Roger J. Medel, M.D.

the on depends It contract.

just You receivables may days. have XX for to It finance your depends.

Kevin Mark Fischbeck

we up, year. Okay. But next a sounds you're little might better ramping this bit the organic expect it growth over like since

the margin, positive Is As XXXX. rolling in. it? that dilutive margin said, in EBITDA contracts the way but EBITDA are you've about think

Vivian Lopez-Blanco

Kevin. It Yeah. is,

Kevin Mark Fischbeck

Okay.

Vivian Lopez-Blanco

Yes.

Kevin Mark Fischbeck

pay more a is extra fees matter just hospital having it guys the of services as directly? and of mentioned in Okay. Or the the and then subsidies? services for And benefit that increase hospital that you the function part to the a going getting administrative of pricing, of adding is back

Vivian Lopez-Blanco

of a it's Well both. combination

but usually about for the subsidies, most is expansion part services it's it when both. services, So the we talk certainly of administrative on

Kevin Mark Fischbeck

Okay. All right. Great. Thank you.

Roger J. Medel, M.D.

Thanks.

Operator

from next ahead. Your Please of question Borsch the Capital. BMO go is from Matt line

Matt Borsch

Thank you.

can sure a you're if I a To volume to at sort extent you Want assuming about what quarter understand make year. look fourth Just do of trends the question, I could, for level. what some for that improvement this improvement at high the is a stretch into acceleration picked to fourth versus as Is seasonal sequential fair XXXX year? the you then up extent something outlook quarter that forward was question? that every

Vivian Lopez-Blanco

Yeah.

XXXX. whole we all, for guidance of don't first out So give the

would So do certainly that's continue, On that, efforts are some going on. the these we so to be the and going that I think about, just have of to growth first some we spoke as organic related comment. initiatives of QX,

rates in encouraged do we continued believe what seasonal, be somewhat macro it As of but we're some pretty saw we that. do trends, given some nonetheless, of of are the the of and that going we population but believe XXXX, with volumes reversal relates to there's some there's, getting there's anesthesia in And of certainly – to better. that all utilization that, demographics that much birth as the

for And so quarter. with we're range comfortable the first the

Matt Borsch

children. having The Millennials are finally

Vivian Lopez-Blanco

point there. Yeah. Roger's

Matt Borsch

point percentage XXX – Yeah, on reduction and going just that and gather Do in think as the about you're order did a question last basis on I tax bottom you actually, reform the of sorry. we I'm a rates, tax the to something not line.

XX% XX% full-year I for to You think did XXXX. say

Vivian Lopez-Blanco

I want get it correctly. That's modeled Yeah. right. to

rate, it the some XXXX. to but for is there we So to XX% seasonality expect our do in year be XX%

Matt Borsch

to it, point just bottom reduction? remind percentage bottom X,XXX I to the you can statutory missed sorry is And but me, why if the than getting line, not flowing higher I'm that you're the basis the

Vivian Lopez-Blanco

all, they're state that. there's state First of rate – to

from – under thing stuff. blended state items new not companies law. XX%. to the it's So was the rate, have XX% And a that blended similar there's some tax that I'm and an nondeductible are We XX% sure then will because effective other had a with

I range that some department you that. of is deduct. we're why what you still – in an through tax some so tell giving that's there's have working because that. that of a our changes But ourselves been can And is we can estimate

Matt Borsch

Okay.

Okay. All right. you. Thank

Operator

Thank are questions you. time no And in there further at queue. this

Roger J. Medel, M.D.

with to me you aren't call, for any further Okay. the operator. there everyone questions, thank Thank and quarter. Well, if you, participating speaking next I'll let forward just on look

Operator

Thank and conclude AT&T you Thank you. gentlemen, Ladies does that our Teleconference. today. conference your and for for Executive participation using for

may You disconnect. now

Pediatrix Medical (MD) 8 Feb 182017 Q4 Earnings call transcript