MD - Earnings call transcript Q2 2019 | Pediatrix Medical Group, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the MEDNAX 2019 Second Quarter Earnings Conference Call. [Operator instructions] As a reminder, today's conference is being recorded.

At this time, I'd like to turn the conference over to our host, Charles Lynch. Please go ahead.

Charles Lynch

Thank you, operator. everyone. morning, Good are Officer, today Medel; our and With Farber. CEO, Financial Stephen Chief me Roger I'll a out our start with comments. move then into we'll quick disclaimer, and

conditions, historical to conference Certain developments forward-looking made the of by information, believe and made light statements otherwise. Securities of made future in current may update to during any statements be are MEDNAX during are or and Act Private they trends, other statements factors of this MEDNAX's to Reform and These statements such and whether be the expected management and call information no events Federal today, assessment appropriate. statements deemed their assessments as new as XXXX. future or duty be Litigation revise meaning of based undertakes forward-looking a within assumptions of call Any of experience this result forward-looking on

could materially on report Factors. that XX-K factors including recent cause annual its business on developments statements and entitled section the the XX-Q, most in reports quarterly forward-looking Important described and from to company's results, differ Form Form actual Risk decisions are

website XX-K financial remarks in comparable in reconciliation be metrics. will In of at earnings and section management, press the located morning's our GAAP this mednax.com. report to discussing financial Form these the annual non-GAAP by today's measures on we can found non-GAAP measures most A be our of release, Investors

Roger that, I'll call With our the to Medel. turn over CEO,

Roger Medel

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

guidance EPS with and results line EBITDA our Our ranges. in adjusted were

range of neonatal led by volumes. we was At towards a growth forecasted, same-unit high the that upper end level, the revenue

the internal to EBITDA track ongoing towards offset We also in our continue business. headwinds to improvements our

those across of I'll morning. on scope which some provide quarter, service and detail focused lines our transformational the activities, the we also activities service are our organization, both increased inside our this core During and

made have changes, a also we initiatives, I will transformational our of discuss. which organizational number part as Finally, of

almost services where all In underlying we across on volumes for Looking hospitals growth rate is service women specialties. lines care trend the our our the at slight of which volumes increased of neonatal the from births provide and And and based of increased slightly, across was units. children's the quarter, the an our that admission quarter. the first up into improvement neonatology, intensive

Additionally, quarters. experienced and payer have several children positive, was a past for women mix in services slightly continuing that trend the our we

Southern Houston, we Lastly, the acquisition in Texas. two and one during one of quarter, in medicine the California announced practices, maternal-fetal

with In solid growth in radiology, remained and line revenue our expectations.

We group. medical and have efforts into And across is vRad. practices a true both radiology seen I collaborative believe continued organization our our rapidly evolving with national

in anesthesiology, volumes while payer unfavorable. Lastly, mix slightly increased was modestly,

our clinical and focus areas practices moving including of to rollout management progress to within anesthesiology practices first the to continued technology of model efficiently. on grow compensation resource We provides incentive, both a more several dollar them discussions across about that a with with our their operate to practice organization, and

our within not anesthesiology which for contract profitable for decision a a exit in contract took to organization, a system step management was with This a the also health portfolio Minnesota. us. was We towards active services

decisions committed facilities where portfolio specific or where continue be appropriate to forward, to challenges like we're are Looking we contracts evaluate profitability. to there situations most thoughtful individual step, exit making will sustain this and the to management strategic might and

we a the length talked efforts discuss is about historically wage labor This past industry. pressure is unit face especially cost volumes constraints across population. is and clinical at What country levels to including focus factors, revenue broader over which and but I'd growth high mix expand from at in to our these scope. the and own efforts, also headwinds we largely margin like The business to our continues few across have quarters, exogenous addressing today the inflation and in reflects transformational our of that

challenge not margin to MEDNAX. is This unique

for believe this these headwind spoken that now. time headwinds amount have addressable. we of substantial also some a But is about We directly

For the action bottoms-up, in our we of have corporate practices across plans past all months, undertaking and XX been our functions. focused

During towards million XXXX, of on XXXX, a improvements that had announced that $XXX goal. remain annualized the we of these we track end action goal plans and in by

continue believe the in we plans, our opportunities support throughout significant we within Besides there last want significant organization. have set this in in consulting committed best-in-class these in resources inside and all across conference detail beyond Stephen the lines we provide With this action of our efficiencies initiatives functions both are that with organization our will to transformational of I which for year, service emphasize greater our year, that investing broad mind, have on partnership a resources discussed undertaken and call. to

address Marsal to accelerate with to & our opportunities. Alvarez us on we capabilities partnerships FTI meaningfully these world-class As us move today, Consulting and efforts. of fronts to And Accenture, fully help and resourced bring our aggressively are multiple

coming outlook will expectation we acting the quarters gap. the will on we incorporates our we as right the In unchanged, several to that plans and general, are continue are discuss, path And to Stephen close our is also our that outlook for take. believe the

taken to Another important our to provide steps we've structure. update enhance and organizational flatten relates I'll

XX-year disclosed with three medical of groups our we MEDNAX. Today, our President, company leaders of directly Calabro, nearly a Joe the report the longer no to month, core each last career As after with me. former is

that have great care we undertake support the world-class our MEDNAX committed taken else, enable practices everything will as of that to as taking a focused efforts is, to we of our physician we're before bolster and believe remain ensure a patients we organization company. the on clinical I and leadership steps

recently is who Mack a I'd services. now recognize joined Dr us for end, took neonatologist his quickly for Medical Group. our Operating named women for and to West and and as Chief Hinson alongside on recently Practice National To then Mack of Seattle-based roles from two presidents. Medical in our President leaders leadership Mountain Director like as Medical of our to Group corporate Officer MEDNAX that these XXXX. we most of children Practice is leadership President and regional his region increasing He

Mack Neonatal He Medical Degree completed Health Army School of Completed Medicine at Food his and Lewis, from National University Madigan in Washington Washington Administration. receives scholarship research post-doctoral Institute his George Pediatric and his Drug Medical the Walter Center Washington the his at at Sciences. and Fort in Medical Fellowship and DC. Army also then Reed Perinatal Center Medicine Residency Cancer

anesthesiologist University leadership a is Katherine She a the He Pediatrics a of Southeastern in Grichnik and held cardiothoracic now is at Dr. University senior also Dr. University University. operational at that appointed a where clinical, Washington. XX deployments Hinson the the has executive from with was Nova masters in our roles. practiced administrative Services is degree System, years of of background Academy extensive leadership she Anesthesiology. president the fellow of medicine. Health American Management multiple Duke at to in has and for Tulane Uniform Grichnik focus Dr. has who also an University and

and overseeing quality Vice and quality specialties. than of for across was joined first of metrics she and for In to President our promoted safety more Director XXXX and Research Medical our first complete safety XX the Quality, MEDNAX Anesthesiology XXXX, became Education clinical Group be MEDNAX and in National

five to for Vice have hospital be Medical staffing Indian an and specifically Grichnik the member and and team Dr. reporting her. Clinics In XXXX, Center, overall she Senior as Cleveland Chief co-managed to moved budget service River President Medical where Officer executive the lines

Basham, as organization staff improvements teams, In were quality, directly to every Leslie rejoin President over Puerto Clinical has achieve and more Vice happy across and and of for XXXX, early Directions been now and Medical where for of Radiology clinicians of These executive hospitals we totals joined leading Director same operational Dr. to safety our all and President that Directions, care the in she Surgical XX who been Rico the work X,XXX an since , Grichnik since Matt organization Development patients who X,XXX Matt Devine and Surgical day. than joined states physicians performance together has physicians XXXX who Kathy Presidents President have year. me with and

a number organizational These mine, people effected the other and number included transformational of a including Contract. Chief position organization long-standing a our beyond Chief Officer. these have we Marketing roles colleagues including a many medical Growth, people activities Managed a changes also new and our over been leadership National past add but were of as the follow have Chief well a not in of Sales eliminations. continued easy our changes Vice made of of have and These Vice and and made Officer President We Financial Strategy of additions of part National have decisions a groups, President of of year, changes as and to significant leadership and members Care key and make, new to Operating organization we

these of changes activities while to operational our transformational and in to these our flattening organizational acceleration the across we I part are have we that accountability the an leadership enhancing further of structure, addition are All management made of execution initiatives transformational important believe an that organization. undertaking. and will our updates enable

critical Joe organization. to turn in Calabro to growth our call to roles our Since of his and over for from I to that thank opportunity before the all leadership this took then us Joe Pediatrix today. were our want MEDNAX to to Now XXXX, I Stephen, take evolution contributions organization joining

and colleague has him been has done for over the the personally I all importantly, I and trusted wish him he Joe thank best. a More years,

our the to turn I'll Chief that, Farber. call With Financial Stephen over Officer,

Stephen Farber

and a within as quarter forward. the Thanks, thanks joining activity some I'll touch transformational expenses Roger, to at items restructuring our for and like and call. on updated we're for our our including outlook year looking discuss that moving good views results, second I'd Then morning, whole. a our how and on few

our As of were in of of EBITDA results our $X.XX. with mentioned, line growth $XXX revenue same-store with and expectations adjusted EPS adjusted million X.X%, Roger

were first As was in some in our there and but operating within the general, pushes results our well expectations. pulls, case the quarter, were

comparison models previously I'll recur EBITDA the amount portion from of our not disclosed, year-over-year as this did year anesthesiology year. for EBITDA quarter contract quarter. last an a the This roughly company, million contribution the $X we on of of those meaningful For represents remind that included for you that second you the maintaining a

and the Moving on expenses. and million totaled in roughly three second buckets. These restructuring generally fell quarter into transformational our $XX to

our consulting which than over we The totaled efforts. $XX as spend, somewhat million, just first higher forecasted $XX million was our accelerated

cash half component the the to related severance charge write-off physician was which noncash eliminations component of based million, contract of this line of in a about discussed. $X anesthesia incurred of in the was Last, on Roger with being In aggregate intangible cost the million expense our roughly Second of million, noncash we $XX termination $XX related certain over rest of items the to total, about Minnesota XXXX. was noncash. expected just

We'll June decision services our anesthesia you give of at through extends of our at of revenue, contract some to the best provide anesthesia to our it specifically Moving in EBITDA roughly been breakeven practice To has that the exit to terms system X% sizing, contract which of contribution. term, Minnesota. remainder XXXX. patients through represents but this in

exit As this a else our all effect should not on being have dollar any result, equal. EBITDA,

our investments internal partnerships. Moving on and to consulting

engagement initiatives the of ramped targeted. the corporate work span and moreover the we've and activity. to which across to all detailed our to fully noted, been business, and trends And address our our resource now primary at able line further areas cost our full Roger practice at Roger the As reaching service level activity we've scope partners, services. with we've done headwind, actions We're our remain shared our we've the level, quickly in decline the to our up

quarter want in past are we stages over others appropriately. targeting, work underwriting with of across scope the to on work interdependent early with streams I decisions of that this efforts defining the activity, are focused making any we're the our much that and ensuring areas emphasize timed remain of the that

with activity quarters continue activity real occurring a course the XXXX, a time we through line of to XXXX. and over with late the year As across result, bolus X off to this of XX of tapering anticipate transformational

for I'll of early-stage have terms help minimize our how reiterate In ensure activity, implementation process of been underwriting standing priority undertaking. that is to streams any I we're particularly some The made last up we've risk. case quarter. scoping comments existing supporting change This an tech-enabled this activities we work we're the and

the XXXX returns significant, anticipated a viewpoint through will and goal once is this relates since of yield beyond these year also where the not said, committing returns immediate. XXXX towards to these guidance go outlook, they That for most we our As yield. our will about our capital, only this projects, fairly that we be includes to begin really minimal as be is and expect from the on decision-making our recurring investments we're be but won't

was round cash range at our range our to operating for flow XX% cash my operations, true operations the aligns continuing our quarter the operating of of component This cash A well which this X/X $XXX a cash for of look operations flow more million-or-so. with from is general flow adjusted from into the roughly taking quarter will cash strong. comments to $XXX continuing transformational the expenses. operating the in expectation I'll quarter in be EBITDA. the But On way of from better continuing reported with basis, in account and was restructuring flow million. year,

of terms million. during year-to-date of million stock, own our $XXX cash, of uses $XX quarter, repurchase our the to bringing primary repurchased In activity we

We acquisitions also completed during two QX. modest practice

guidance related transformational our year, shrinking share bulk activities As capital and I'll discuss our to the for the thus our been has towards in of XXXX base. far deployment

our a incorporated that range I'll two is taken of outlook. EBITDA of our the our In $XXX bracketing release to million morning, narrowed key adjusted in expectation at range. previous factors Turning full this press which we've end and to outlook. that our to midpoint, low year account into point the we

from to a guidance while that's somewhat was in a quarter level same-store the of growth standpoint. second muted First, X% line historical in with nonetheless our our X%,

look we we guidance second the outlook, the half, what modestly the we're that retaining below contemplated at of in which general formulating into As our is beginning year.

key in the years. underlying and preliminary X% of of quarter in it's the the to believe improve neonatology as a But any always, couple increase that slight outlook declines and did trend. X% over birth to second volume, between change component of As our revenue compared view prior is we to true

we range having to do an what on in similar From first X% the a weekday revenue standpoint, observed prior trend But same-unit somewhat in growth technical half. half anticipating now year. underlying in of the we're to of based a of we same-unit general, higher revenue during expect this third the quarter second additional a X%, versus year

The second factor cash. account our into is taken we've use of

our our invested quite primarily in share thus the shrinking and far and activity transformational For activities, our year-to-date, been we've low. base internal M&A has

outlook, relates As million part I'll we to our acquisitions. of deployment of that full adjusted forecast remind you our as EBITDA that year range, original $XXX specifically assumed towards

our in total million several of We for lower full the this our that brings down $XX dollars. will acquisition of activity now year year million. All equal, else being anticipate range deployment the be to level by outlook $XX

brackets be As the we and we expect provided consensus. also for adjusted this to million EBITDA quarter million third between $XXX which morning, current $XXX analyst the

in the last million mind year was view, year-over-year keep salary the outlook Please practice with of rd expect third full-year recur ratable to our this fourth year. adjusted third won't see EBITDA Based quarters. on and that in QX the half quarter XXXX $XX of million. this at to which QX QX of compares related that we roughly expense updated the a that physicians terms fairly burdened of between adjusted reported second view, In and of EBITDA $XXX in of to of you'll this be year in this

from that and of continuing will repayment. this Finally, operations operating investments, repurchases, to for be a uses debt we transformational expect share of continue cash year, remainder our of mix flow the acquisitions

couple a margins. comments I'll wrap up with of about

our XX% margin XX%. full to equates expectation in to a for year release EBITDA for of roughly narrowed press the this said we of range As XXXX our morning, adjusted

year. in-flight the this common purposes, note for a gap we all distortions of we to resourced website. for morning, are all executing on activities the and good transformational an we've some plans we margin give whole of for through outlook posted course today consulting over information across alongside when this There action help modeling relates said, in half But our of As discuss addressing quarterly and of forward comparison, partners those year. move of to tandem the we to year should and on of this margin XXXX, clearly in anticipate the our scope of gap for a as continue face these you XXXX, financial fully headwinds initiatives versus our account as our measuring been our including into administrative for on a financials we've take this EPS and reconciliations with our move in to this focus transformation views and is our EBITDA second we detail. certainly XXXX That to adjusted historical last basis were do narrowing that

now back With that, to Roger. turn I'll the call over

Roger Medel

we like for comment up before Stephen. the make to Thanks, last questions. one call I'd open

my my in decision full our own Another to variable salary disclosed commitment with This my particularly per demonstrates With that of our $X this to almost are company's performance. and entirely to all we're stakeholders item tied and and compensation our ensuring to with shareholders will we year. in aligned early be my what July reinforces change, decision was lower our doing success. my wholly interests

With the questions. that, let's for operator, call up open

Operator

[Operator Instructions].

question will line Suisse. Credit of go with AJ the come today Rice ahead. Please from Our first

AJ Rice

saying trajectory positive but couple more understand Hi and and half would this back and this is incurring up and cost it reasonable do the you'd or in cost less ready proactively make you to sounds back the modest year, from it the reasons I a you in think benefit, it is stepping almost market, that some little half cost expect year be do back of see hopefully like to to a next parts M&A terms savings the that next set in of mostly EBITDA of even like activity. and of 'XX one of everybody. we're if on as for and then you A early come you thoughts your to not couple, growth you're what a year it's the forecast? seeing marketplace well, the just any to see of guidance given out the XXXX is in initiatives specific year,

Roger Medel

we Look, acquisitions. Yes. yes, from back stepped

we Specifically, the of during half to said as utilize, first earlier, we our the year. decided cash

marketing people as of some far to are as have, of strategy and as that. and And and result we pediatric are quarter We having stated, couple sales acquisitions acquisitions money new spend where focused I expect new maternal-fetal best our as said growth this hired I people, third concerned. would shortly a within on that, and see that a

you that. little to for it as takes Now, of a time know, bit up ramp

that And that much contribute acquisitions to of course, expect, won't so can during year. that, roll the for year you remainder the the into of of the earnings year. contributions will the that But next the see you'll

So to it for back. was step a us decision

up revamp only our geared And to organic early before can expect from you end M&A have see to to We returns our the -- but the growth of some see well. activity not that start the as year. activity, of

Stephen Farber

a that And we've and in everything in it our A.J., and and tried while We results of we're gap. this the of narrow numbers and sense year I balance some give is now. of of have really your our around the our our range we comments, to do momentum. questions to give A.J., In and doing there? between activities the guidance, some trying try ultimate gap that why seen concept headwinds our don't a gap all terms for tailwinds in color over

premature it's to a for us any bit think XXXX. around make I commentary

gap. as been purposeful this and speaking try continue close period have we think that about in to we I very transformation

narrow, gives I do bit to for sense. think begin So it you to but hopefully, close. when a of expect that We it's we premature indicate expect to us a it to

Operator

line Next with from Citi. we of have the Giacobbe a question Ralph

Ralph Giacobbe

to I midpoint. as think wanted the on the well. full the Just to $XXX The be commentary bracket was ask year, million to that or guidance

then you keeping XQ quarter, be of is something you considering to new million? $XXX look or fourth stronger at it ramp, expect typically kind the $XX range seems EBITDA, sort at is cost again, I million sort in guess, disconnect to the results. suggest a are third back So $XXX Or I the of be would two, of on savings, of so if And than that And year-to-date for historically, there can half as to range, certainly it, quarter. relative million one? million least $XXX what flat half. first clarify And the stable lower just the I'd to midpoint a million, the $XXX guide

So maybe getting and out just you worse. that maybe highlight anything could flesh if is

Stephen Farber

Sure, Ralph. It's Stephen.

range $XXX midpoint. bit of stated publicly a million, tend that's a the the think that, around range not over just narrow the typically, year. have I simply We companies Yes, to the course their

point sure million really I either. intended precise landing really a the not But I'm target would maintain isn't of range. idea So $XX estimate a a that obviously, be to

So constructive, We've out you tried couched bit. it. to that's that we've be a and little how hopefully, helps

of the the that ago expect the In a of ratable minutes half few somewhat to have back that QX QX comments made I do and year, one was performance. terms we of

did in million the imply we've $XXX mention roughly million of $XXX million back midpoint a the of first half in half. would $XXX You done sort of sort and that

of out I expenses about of the way quarter that is the know, at break it front-loaded things. QX and us, it's that other quarter a taxes in all to ratably, you because if of employment million as obviously, related So midpoint. year a about sorts a always bunch is for $XXX you distorted think The

QX up So number million then that and us of type to was QX. $XXX in coming for $XXX million kind

all into expect we seasonal and bit we number other efforts expect of as on some And of for contribution contribution of transformational we with see because Typically, than year, we a activities ramp that before or ratable than some to feel minor that of begin thinking for we year, up more significant being ones rather factors do those QX they for this a comfortable nominal while items. that us, little of and a now you QX QX meaningfully your the stronger softer this QX don't being underway of questions. XXXX. answers expect have Hopefully, amounts where QX

Operator

question Kevin from with Fischbeck the comes Next America. line Bank of of

Kevin Fischbeck

being to talking QX see me here, what slowed is just I would deal going down. guess, to the the seeing exactly you're it are you what QX, a you that I back thought guess of the But doing guys you back while But a looking sudden, guidance in year? less you what I that saying, that why about guess, what to bit ramp to Yes, Street go you thought be, the lower you that wanted half it's the comfortable for The understand bit that I little I certainly unclear the here. the basically is and lower for. was number you're you're being with volume like saw feel makes than

might maybe then some hinted of you you be with quarter, in I that, canceling line contracts. kind last guess, And

to profitability as to this them there's additional contract far wanted implies contracts in underwater the So something that might the guidance just if see that and you in getting cause of structural anything of half are around whether that year back terminations? queue more of as general,

Stephen Farber

of very you Stephen. have, reverse? all don't contract those in It's book we we at were it as explicit couple of we across this than being last of specialties. morning, we large we I contracts portfolio. take Look, and as And our and than our had, think of quarter, probably I started about over Why last quarters, we're terms sort know, the a Sure. Sure. talk are looking of in about, more to cancellations,

Minnesota, favorable portfolio longer-term And we actions. the profitable around take a our are contracts we and in conclusions going where outlook, not and time that contracts we had I we management are have think we've commentary reach through evidenced have active it's digging if to don't are over or

not that. So, say I'm to how clear it sure yes, than quite more

really any opportunity to on of would terms some affects stable have we how from and simply are have the that it to be a stands. QX improve because in interest if as to QX, factor in contributing, it it's guidance. don't view that maybe having eliminating In reason we profitable that expect [indiscernible] marginal, wherever and not I are occasion, contracts not

So, be impact I expect on meaningful to a QX. not would that

our some of there I the them impact of very other was revenue of kind Kevin, really a I reflect are a remarks. trend performance other mean quarter-to-quarter, a a of followed and unit we trends, particular closely there QX, factors little muted our in In you them time long with of flat think about multitude were for terms factors some and don't prepared really us QX noise anything that more during spoke than of that

That element guidance formulated is the to six as for a bit have when what ago we expected year. had months of muted we our

quarters the and think us then performance of a I QX we've, to some ratable a little most extent of kind the a to previously couple has So the part, is QX of of QX came level last over realistically together course it, for of bit ramp into experienced. for people models

come a color hopefully little more on think gives numbers I that together. you So the how

Operator

Please the Jason Next question will ahead. Jefferies. Plagman come line with from go

Jason Plagman

up year-over-year and X% begin so to transformation SG&A your Decline year you even sequentially, were those flatten that produce out of basis initiatives on either should when dollar see dividends. we the as or expect or the some on percentage question as two next a to and X% point or in revenue Just at

Stephen Farber

Sure. guess if of think I you Jason. I Good at I way know, kind sequentially. it morning. about you It's the look SG&A is Stephen. mean, Yes,

that million million, a on anything really $X really like hundred $X.X it point of to that. few drove base. was think million dollar It's hard kind I with specific aggregate that

capabilities we've have about more tech have lot for of number a but sorts initiatives we a we we the efforts out, are of initiatives mean are talked SG&A for It number that both also in great change in we take a the transformational and other a while example, of I of enhancing, place, change. initiatives process on money have we around enabled and IT. number that are play has a of spending

cycle, real where of revenue SG&A number of we're it even our includes rent elements number, it includes and So making There it investment. really, estate. includes tremendous a IT,

in and hard that's of respect relatively the anything discern very evolution look to improvement it's So directionally movements small and the to of at importance that with number enterprise.

Operator

Our the with next of question comes from Bank. Deutsche Chickering Pito line

Pito Chickering

some took on you of once can million another that MedData, Like of On last you sale $XXX quarter color again give after million quarter. charge $XX charge in the this us the asset?

update you took is sort how why sale charge Just of on that and the going? us

Stephen Farber

because about that Yes. can be It's we about say That it, specific Stephen. sure, say to sure it. Sure, Yes. something and I have process it's nothing is say there to we will And specific when is it. continuing, Pito. for continuing, really

are where In I that. charge And what heading the again, The record charge, was exactly quarter books. accounting that. think seems and the our required initial at is we we this what I and more of considerations stand be driven all impact quarter, move of process, the largely you're rule to think under the how nothing on operations discontinued the look it accounting is transaction that you to required accounting around the this rules move and the in where than terms saw that to this look, to from by was do

Operator

come will with of Gary JP question line Morgan. from next Our the Taylor

Gary Taylor

I did have questions. two actually

to ignore one, can. want If you you the second

The first one I'll just with. go

changed is may of Or little annual say still you subsidy be $XX of million, like you Minnesota, Would there could has as or a like if terms right? just And long changed about possible how you contract? developed a contract? it's that proven time. color give resolution you never that why was if that there? to us have Roger, just then breakeven But Has little around Minnesota. more up second staying It $XX in revenue, be had contract? it end has subsidy EBITDA. it I the anticipated? And there could had sounds unprofitable? for have mix one Just be really heard million you Is the it in can more a my you

mitigate any satisfy possible legislation? around would the arbitration of and in you seeing balance the being and billing Senate, that about of arbitration we're just the Some and concerns have wondering what's might some legislation House proposed if provisions you

Roger Medel

both Can those? ignore I just of

Gary Taylor

you call later. I'll Then

Roger Medel

it. This [indiscernible] with start is No. I'll

we've was additional know had requested us, Minnesota exactly and a of been the we number when it's had cover additional of to physicians a but nurse years, So for number number to a a a -- years. don't number of group I of that hospital disappointment because And anesthetists.

And additional continued provide to et so cardiovascular and we there, top cetera. anesthesia notch team recruited services a

continued to hospital we As activity. more services, the requested increase the

and talked our help that able for hospital really of kind the us from weren't that they the We additional grant about to request. hospital, decided need

it decided continue to makes us we for And not sense there. so

talk is friendly us know whole provide who may So we hospital local the to that. we're try et decide be a point, about to meantime, another with it's arrangements to whether a making that going there year and coverage. to some other the hospital again situation for knows groups, In at yet, cetera, so some the to

So the really that's situation there.

is again insignificant. the balance just just me out-of-network On stuff billing, let our that say

being out business our We have of made network. never

are just year. happens of In it is that happened and get that that to we acquire often this fact, in groups our it is network. And often, recently first action network, out

So isn't conversation. But it. to idea there we able are And as We us, a you any just proposals, know. for is just, have of processes looking fair being really anything the issue. it's sleep We're are it's a many resolution terribly about. losing to appear proposed we think, that and anything we're important not being very not this over. us, we're worried at The like

Operator

question Vanacore a with have from Chad we Next Stifel.

Tao Qiu

This clarification. a I is Chad. one quick question Tao have for and

transformational million XQ It this restructuring spent and looks be like half You of quarter. would on that. $XX spending

to bit the of we cadence a million total bulk year, this deployment, it $XX capital million has with with So $XXX model being little dragging should that of the XXXX? to

Stephen Farber

Sure.

element only expense. some given of slightly that are for part is on look cost. to we that Some that forward your, million put really amount, that $XX the outlook in of consulting the the to QX consulting facts the relates different. actually only The The spend we've

$XX in contract $X some the the $XX my of $XX the was million So million severance. other remarks, I was $XX on during million write-off intangibles stated this of million million and QX, was consulting, Minnesota

course to we continue The our the piece. whether it's tend find it that quarter, the of portfolio from do will we transformational one to number. impact on more a over other to that way consulting we have quarter-to-quarter opportunities decisions make is So which basis, because manage visibility or the that specifically,

million, including terms of not transformational the In to balance been other million year, the next course over important that expense the of this a anticipated, to items range think $XXX it's the is the these I $XX and total clarify, that of spend anticipated discussing. we've of year consulting

Tao Qiu

it. Got

spread be more out. evenly it'll So

what's So just contribution revenue quarter? MedData clarification, EBITDA a this from the

Stephen Farber

discontinued moved to ops. we've I mean that

are... So I think there

Tao Qiu

$X million.

Stephen Farber

a that disc be me, it front I of but in number ops. not That's have will in

Tao Qiu

Okay, thanks.

Operator

Please We with have Matthew ahead. a Baird. from Gillmor go question

Matthew Gillmor

be costs pressure the our the had Roger Hey, just that ratio other there general I are where inflationary costs be some a would and on and running with and similar elevated employ would unit of equilibrium in thoughts levels eventually physicians question pressures his at some would market. sort marginal mentioned help point entire inflation remarks, had under labor thanks. at groups also reduce labor MEDNAX would that whether

drive that's how there dynamic labor that view, equilibrium market is far continues reasonable or away to you a we do in toward heading from inflation? the other think that If some are

Stephen Farber

Steve. Sure. Good Charlie for two want I'll to a more. morning. or and This to some make is comment pass I

Charles Lynch

into think do I falls category. call by it early that to too

harder business labor pretty labor think any in inflation matter As I much issue that no more real you in we be. specialized in country, you past to inflation seems get, for a the the the in the are is in and and quarters, what said employer this inflation healthcare prior

yet of it's at added which we of where seeing, highly distribution SKU when cases of think amount business fair you year is book clinicians some got of of, I places of really do have specialized of labor, some ourselves look XX% that where and one we think also of in main the disproportionate say some those it I kind factor of $X.X of you've our, is some quarters the it, clinicians that are sort the billion there three drivers to are shortages.

labor we a of a that than for made the driving market our... shortages market have of same people. and you hot comments think ,highly and we've over this I those within are have geographic about a experienced specialized is historically people what's time level meaningfully us. higher So labor This Those combination

Stephen Farber

Our feeling in comments is like Charlie, believe a as we we to you bit before, this calling you is mean is it's premature our it have when that. somewhat by extremes to single going largest add? headwind probably for revert and is

Charles Lynch

Matthew. Hi, Yes.

available we're of revenue pretty unit part of here achieve a all in to and we model directly be service around activities, there, what couple investing that the and eliminate comp same our resource management leakage within a trying as to might Radiology of cover There alongside service clinicians' volume deployed related somewhat the the that leakage deploy to our premium time to undertaking. through any that capabilities about locations it's at for thinking inflation we're aligns the eliminate the looking also across practice number the clinical of mind Just and as activities things and need whether variabilize clinicians' that of growth a of sites of to that aggregate at more are We're looking kind and scarcity labor pure cost and are some different Anesthesiology. significantly are time covering we and just we're that structure in unavoidable compensation at lines more some better moving in costs. life Share Rev keep our practice a of but have the lines, across are of practice and that of for

individual their comp path Roger number with support more first while take that in together, taking success believe and to more in as at mentioned productive own enhance place we've to to angles at alongside their and the the our all to a time it be of at linkage of pay-ins same So that, grow they we our that and productivity practices. alongside dollar efficient clinicians of there's the and do either own a impact the we're with practices they having a their when or the can and for, come his got direct practice, incentivizing the comments,

Operator

We have with from a question now UBS. Whit Mayo

Whit Mayo

little on follow like I just give engage bit. partners seem there I up what are really from is -- of your you addressable the guys what little market receptivity just to targeting? on And that Is a -- model. question what compensation more interested, encouraged I groups wanted about color the the different give on in bit this what any have just way this us visualize you with to are a are exactly of versus place practices percent anesthesia it to you maybe today? comp us seems you I'm can a trying many sense to is. how mean new model

Roger Medel

practices. well And revenue. that the our can that Yes. you it and for we intended unequivocally purpose of are Well, practices percentage And a very the of exactly model for look this radiology is is that model radiology a this all have on with is our I practices, our this tell will model. established to our radiology it and working physician basically having give we says, we

guaranteed have, get And the physicians pool. so get, our depending all anesthesia which a say, pool they cetera, of XX% direct that they revenue, their percentage instead what And et expenses, a of on they salary, get of what whatever, they there, is cetera. upon from salaries, et side manage

then to that additional any advantage that become The is for they responsible expenses.

that of they additional decide responsibility. get resource, of they an side is that they physician if The So additional dollar whatever, door. comes any flip or the additional have to $X.XX, first, their they that an an additional et the like -- then $X.XX, would cetera, clinical in out nurse, becomes

they the them our savings, expenses of we the growth works there provide and for it really services of and are get they no that of our in for they're incentivized incentives right? their or But opportunities they door. and team, go member nurses That's any that So bring with all additional just -- very very model. radiology dollars importantly practices. well a to as It see. aligns out the additional physicians XXX% the longer of the that So those that

our to we're to what we're that plan, our is to Our do going practices anesthesia goal, going model. change

they all contracts. years Now our just acquired seven anesthesia when got you we understand, between practices, five so and practices, these

an up that some is takes is we plan year, conversion number a and them for few model. to when longer There for the renewal. practices, that are into so there but to point early model time convert to At But current them, converting the all of realistically, a change their that them model. get practices on, are renewal. new that And every that are are from incentives these a come attempting of we our to of

converted this practices have It There already practices. majority X year, a be to that a X another end to practices more next maybe more X our we year. XX% be model. the or Currently, are the probably of and currently of is before X not that of of or be current, our on anesthesia than are that our on that little are practices, around would converted I plan. say, of there'll

Whit Mayo

Yes.

Would I prior plenty is some was say your not the some norm, model EBITDA, anesthesia. if you around norm groups this that that you this so mean should isn't model pay revenue easier with structure there the really this bonus out and and of the So transition? an like based are uncommon off of percentage be of in docs will. there an

Roger Medel

for neonatology is, or model continues just we, our, I of was and in reflection what yes, model very it prior model to don't well neonatology work really current a our our is other really, look, and reasons.

expert plan. bonuses, a cetera. had And is neonatology. is really very don't not anesthesia the model us did basically the that groups, on they're on to base with kind comp similar for understanding an with I so model I and what salaries other the well et compensation really others' know what we for although am just some institute for was worked But my guaranteed of that continues

Whit Mayo

on follow-up topic. One this

I've these Anesthesia, sort in you of I'm Radiologists and catchers, don't drive things anesthesia my in sense the out I that past. this head. trying a Just like different radiology all value do things. pitchers. the above of radiology. say between the drive ball. they to the compensation they're and Like they just the are than comparison sort not heard the volume. think Radiologists, anesthesia visibility all sort in that

on reconcile So stuck more and the can to And in one door? the guess of off. understand anesthesiologist how incentivized you point. me money that is help bring kind like I'll then maybe I'm help hop I

Roger Medel

Yes. of Well, the get door, they're in if model, with this getting they of. the first dollar revenue, $X.XX XX% again, walks the new that

mean drops And base mix incentivized about patients, rather today, cetera. et or having obviously a the whether to number payer now than whether I things there so they salary. have they're what whether guaranteed a see point is talking of happened, guaranteed we're their expect is But they which see, that are, salary, a of we them other independently

one one run provide have anesthesiologists. Here what efficiently, services start about ASC an many they we're maybe too have many to more Maybe too they talking maybe is or where anesthetists them incentivizing they can right? nurse pick services and out or up to to go their

the B, a, idea the them; significant their the or grow, going to of are they run percentage both incentivize efficient. is comes to additional a more dollar because or door to to in get practices to run that So

Whit Mayo

thanks. helpful, Super

Operator

line question with Daniels a have Ryan we William of from Next the Blair.

Nick Spiekhout

for that comment is I that is moving trends away based. of in could seeing or but that Spiekhout but mine can answered, talk, Ryan. you're wondering how was you're if on I bit I this if guys, any Hey you Nick in Most And have valuation and acquisitions of just know from front. wondering if much any you I guess little was been a of

Roger Medel

and say on saw on acquisitions saw there with the we anesthesia. the did acquisitions and some had children the I slow we when you pretty what We breath to we that issues small take a down Yes, clearly we're acquisitions would That continue dramatically. still do women specialty that side.

type children's we if a and go you expect ramp up. we this back, that year and to of, couple So did acquisitions women

valuation the did in and the and multiple talked increase The our about for so that past. women in four times children's we've centered practices range multiples really remained has not

related acquisitions valuation. taken have a also We that step is back on and Radiology to

those firms than to equity those not that's are seen We so number of and Radiology kind double-digit are we're private that higher at future there the into a have that that of field joining field and going for a foreseeable jumped be multiples have multiples. the in multiples

Nick Spiekhout

I'll thanks. great, back That hop helpful. Okay, was then.

Roger Medel

couple can a follow-up questions got that of we take as well. We've

Operator

Ralph with to Citi. go We'll Giacobbe

Ralph Giacobbe

Thanks.

I sort just what you. give say, at quick can wondering through are you a of this us one, and wanted revenue it Just case, contract. the XXXX total just at more that's contracted to guess or Minnesota of negative that sense zero of Did of why this revisit point. the point your broadly, percentage if highlight and I has margin you at contracts Thank a then June

Stephen Farber

somehow didn't I Yes, know That hi, day else. was highlighted. and news made the by don't I that it. somebody who know highlight Ralph, one highlighted I don't

are this addressing concern at to more than us that. We actively because are just and we the two of small, that three, those. point, brought was our maybe percentage that nonperforming no contracts very in of a couple, or but

are stage We to away are not them. we where prepared yet at from walk the

three. but with a subsidies, like will, maybe the it percentage practices etc, or hospitals We we're renegotiating some in two if still we working and to, it's not with high the I have say, but

Ralph Giacobbe

right, thanks. Okay. All

Operator

a have Taylor, from We JP question Morgan. Gary

Gary Taylor

just bit Hi, just following a up little more.

you've consistent know, the The your some lobbying on inpatient when is a of I talked number appreciate years, benchmark legislation. very rate at median appreciate billing a but the on the how balance network really being actively calculated. against that A.J. for least, and concept Sorry to of that. issue, of this I same to come been back and conservative we about I comments

that that pricing Do or there your specifically, might to So the you just kind median metric thing inpatient do disadvantage moving sort concern that more some you maybe concept MEDNAX? that? manipulate there what Is companies of could managed care about of markets an be that? like rate thoughts might where of -- a on the

Roger Medel

stuff. all Yes. people there's Well, that abusing look, of always a concern

don't And this else to sense say. of able to or to arbitration of a us. for so a idea I having being lot go what -- an know mediation makes

brought lower have layoff. you've decides if a got been now go contract, are out -- company abuses, the situation kind But had. rate cancel I'll than and avoiding the the your about if you you're The through doesn't of a what before, contract? than Now hoping rate is what to and That's renegotiate for higher that's has to to median care what you and because of been question happen. that getting were does, kinds is that you biggest a think And that the the managed for brought question of back as rate you're up, it a system. a I has those reimbursement high the lower high by network concern we out contract the is me, being say, mediation.

Gary Taylor

don't get anesthesia for proposed specialities, fee XXXX I just follow. get then there The that by that your for they RVU plenty okay looks quite And for onerous physician things happen Understood. radiology. And know XXXX for some proposals one relatively looked but schedule of there's the were that there. and fairly time

commercial to So any pass, the thoughts explicitly maybe on that come modeling? of just did Medicare have those have to cuts that? are then specifically, if contemplate some we'd you do And that to tied RVUs contracts

Roger Medel

our that system the -- steer analyst through long anything provides way team specialties. in analysts wait, that forests It's leadership impact the VP rule model. Yes. And that and Codings then of the our you, is produces. our a team rules financial runs analysis me let of presents published, time, clinical they the and tell once our context such across At to helps the the just pull reimbursement for is, CPT-level risks to links a same that proposed

drives it again specialty then our -- the the Our council. few to clinical our Coding CMS All led CMS, leaders advisory thought And a for Coding. VP summary shared VP includes operations leadership, weeks. know, comments by of accepts that that as you our with response is toward and of recommended

we say big you, of definitely any there key just campaigns. just in Many such a Certainly, hard already long And team will a I'll steering like a want, period successful It's say associations of return been this. there's tell activating way time uproar actually our are impacts. investment. an hold. that RVUs I we resource don't on just revaluation their is significant has to have comment but it this get to medical

I of don't And are, percentage tied number they a to We them -- have contracts, that are some years. of they know are specific Medicare. do specifically tied what to

each reimbursement change. The as year We're value-add. do the cetera, another, cetera, RVU we RVUs, for talking might et how to whatever Medicaid sure, So only be one don't make some. much to opposed is have about et just

so focus is, thing going And to isn't number really on RVUs because that's the to the of change.

Operator

We follow-up Deutsche Chickering have Bank. from a Pito of

Pito Chickering

leverage XXXX like looks MedData be look looks debt last out X.Xx if in due sale, the whack versus guidance, leverage XQ midpoint that quarter. about Realizing you versus net of at guidance to the midpoint of but X.Xx the to

M&A, debt and stock those for from reductions? And repurchases shift debt talked the on you'd a Could is us? repayment You call there today. repo ratio rank where into about share leverage

Stephen Farber

leverage it. because I but we your proceeds to the taken whatever haven't The, EBITDA removed MedData, Stephen. of here's I I'll from pro look of use forma it's the to say we mean, guess out any Pito, that, we've for what whack, expect ratio description, Sure. of all does impact

in number. you of a the rather mid-Xs from you kind easily to calculate debt applied XXX% get, high of of So were proceeds the number repayment, can that than you Xs end can more of up that kind deal pretty if

something, our In think of and look terms I think we've to this I continue for is that and time at capital, now, use somewhat similarly of we of sort we're described that prioritizing some opportunistic.

course, active being that regardless continually debt interesting we was posture and for strategic we not to what there's particular or consider very we overall While little in add would would have a a down. the or M&A, up it, very been impact, said, value our enterprise little if have of was something have of

completely we or where think say decision sure terms and the in quarter, perspective. a see. have committed we're And capital each in I'm to that to that are transformational are structure And outlook our about And particular opportunities a is area trading percentage, make underway. more from we I not overall Nothing that. really of has we that think there's activities the one what we, a about from we just capital where changed structure I much we and

Roger Medel

range. in to M&A just add very be we the I'll continue in question, Xx those children's the continue see to Yes, that on field, favorable women opportunities the multiples and and

and see multiples. to in at activity field can I you children's so think expect increased those the lower And women

Operator

And from of we Bank have a of question Kevin Fischbeck America.

Kevin Fischbeck

I go exactly legislation, you view When to with you're price the guys still that wanted about that Just commentary, with get, wasn't is I to kind still me. the just you if is number backstop clear the guess, you it's there will arbitration be you an simply in or lot don't, follow-up pretty billing it the lose not of the comfortable a the million median, to of addition because sleepover. that really, even say that,

Charles Lynch

Charlie. It's Kevin. Hey

is implemented when and outcome on ultimate what view be still there's process if that our this outcome there an will gets on like. clarity ultimate it think not the is unfolding, the I

the starting I tiny free the revenue from from standpoint face really the just and our driven just negotiations is slice with the a network, it open just only think of predominance we're and government. frictional out and It's payers turnover. on the or from of of that that's

I remains of in lot payments negotiation. of healthcare and is, our of interest that frame think a a vast for that services Our peers partners majority is

and So interest it's were sides both our fair that's on lies.

to will they make whatever because change. call preliminary going or it's legislation post that or think this the of that have to impact are at slice I likely small all this

that's looking favorable come may kind opening as to is that what the we're of and or for there not and resolution So tomorrow what's [Indecipherable] extent the us, we still I week. finality that discussed it on discussions of at some being on next think look but some beyond for either continuation today,

Kevin Fischbeck

be alternatives guess was arbitration I anything the just back. anything over an and of XXXX that one would potentially would XXXX median And under have

percentage below that is that we should above anesthesia of the below might be number that. be that of that, you guess, I whereas you XXXX. volume correct know might what My how and is of your the do guess radiology So, think or about directly most

Charles Lynch

and under there legislation other [Indecipherable] gets out regarding is it classified think of exactly plenty that slice to I double of kind we ways have be come lot to of of another a what a what might fine to this look well. at as

we're don't So, so better extreme out. I come on an Right ultimately might point think clarity looking at we it get such and what fine some with now,

Kevin Fischbeck

thanks. Great,

Operator

there At are this speakers, questions time in further queue. no

Stephen Farber

We questions, participating Okay. look you If there any thank quarter. you everyone aren't thanks with operator and further forward this to next for speaking morning.

Operator

you your today. thank for We that, you. does participation, conclude conference AT&T. Thank our that With and for

disconnect. now may You

Pediatrix Medical (MD) 4 Aug 192019 Q2 Earnings call transcript