Pediatrix Medical (MD) 20 Feb 242023 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the 2023 fourth quarter earnings conference call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Charles Lynch. Please go ahead.

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

Officer. Thank Financial you, Charlie, Richards, and good morning, everyone. Also Marc our with me Chief today is

within results quarter were revised the expectations in fourth Our provided we November.

quarter. comparisons office-based against within year field in offset strength overall services, in our hospital-based lower maternal our volumes the very same-unit are reflected volumes these Our volumes by medicine strong prior services. Notably, partially

that distortions absent from pricing same-unit last Marc year's stable, underlying Our quarter fourth also detail. will certain was

$XXX of million profile maintaining also structure; against across our to a practice efficiencies morning reflects continued support It margin provided outlook assumes program; our and level we in each for our strong, we X details of face. I'll and adjusted XXXX, transitioning between EBITDA stabilizing in-network give This high relationships preliminary priorities. status. strong revenue sustainable management effectively on progress clear to and cycle outlook priorities: the payer headwinds this $XXX generating million. a these Turning

forward in our RCM interim model. a the long-term Thanks quarter to transition fully activities soon to fourth have internal resources, expect to hybrid First, combination disruptions have team that RCM We've date, staffed transition a with the our engagement this significant to will we worked and have our of and new of we intend that be we moved encountered with expansion closely under vendor not we continued through shift XXXX. an shortly we any robust to to and relationship. a

remain within percent Second, will does necessitate G&A while a internal expense staffing efficiencies our this continue our expected nonclinical compared XXXX, XXXX. of RCM total model to G&A infrastructure we revenue as such our additional identify in that hybrid line, comparable to within at

Third, typically entered been we although higher an with our this X negotiations in where been above XX%, we out-of-network. in-network previously position, in-network status successful has with states had payers following X even year

by our clinicians possible value the As to to under arbitration the for claims patients. made able we process ability services we've of Act, renegotiations which Surprises our critical out-of-network in to demonstrate we've No past, navigate that the these effectively through believe discussed their affiliated been were the the provide

and families the broad in role We of our have recognition to we a patients gratified payers now in-network our by and are have access pleased services, to very are that market. these essential

performance range I of focusing on last practices financial narrowing organization. quarter, are the Finally, as we in individual across our also noted

these and We array themselves plans affiliated of wide have and of identified tactical an a structural specific initiated range plans steps. and strategic for encompass practices,

have activity accelerate will been that through on the expect year. we we executing As plans, these

in XXXX. Overall, from impact our I'm that of we priorities will result, that detracts to focus of focus stakeholders. priorities the a that patient. throughout all year. are cumulatively on financial success to firmly through believe executing the confident benefit critical this I improvements the that our is build As believe look our these on operating no the great mission And these We remainder forward way care the to of take will

we a the patients. This I the improvement X critical concurrent emphasize Pediatrix turning seriously a conferences, over in will want that affiliated our XXth week, clinicians. With the for is conference Richards. strong annual our we care have be focused the for Before call that all long organization, the and well are of to clinically that, mission testament patient over so review these else, role specialty at neonatology. our most Marc, above goes Pediatrix the to events turn fragile with hosted Marc I'll attendance play we to neonatology for we call very hosting and XXth It beyond Neo, quality take to that annual and important

quarter. Jim. morning, you, I'll Thank some details provide Good for the everyone.

offset quarter. in fetal somewhat strong mixed strong office-based specifically prior Notably, against fourth quarter. hospital-based medicine. were with were by comparisons volumes volumes in the these year same-unit Our the maternal declining volumes volumes,

X the make comparison. year-to-year out items On are call appropriate there key to an side, pricing to for you

in which fourth for we the XXXX This of in did quarter. RCM reduced pricing not growth the of prior quarter recorded same-unit 'XX, revenue X% vendor financial roughly 'XX. support First, to QX aged fourth recur by related our from our receivables, in

which pricing amount pricing a did of recorded fees. QX growth of an also payer we by recur, what contract and XX cares items additional points. included same-unit basis our modest 'XX not dollars in a clouded a administrative favorable in and as QX of growth which and we in view These mix positive reducing Additionally, comparison, 'XX, stable

slightly the malpractice reflecting our expense, salaries year-over-year, compensation largely offset increases incentive cost expenses. group and practice in lower expenses side, On level declined partially insurance by and

salary growth digits. elevated remained Jim As underlying the pricing in noted, level mid-single

fourth operating of flow million. resulting slightly to team. We build flow operating as the quarter, generated continue full internal in increased reflecting for our year partially staffing G&A Lastly, million $XXX increases year-over-year, we RCM in $XX cash cash

that were year-end ended at material transition cause the any of under compared RCM and of year-end of cash we're the in to not year did the just Jim in flat pleased and our As at total leverage of with X.Xx. and million $XX basically QX. We end billing disruptions million our for borrowings $XXX collections fourth net quarter. noted, DSOs

As some to before a in year expected reduce cash we outlook. borrowings our reminder, will and are a of free we this incentive out each cash as cash turn 'XX compensation and of user flow the potential balance details beyond. I'll add QX to quarter any needed we first and pay generation other benefits, in

with modest as Jim anticipate be touched as 'XX. $X.X And expect of to by RCM on, 'XX We will versus that infrastructure. efficiencies offset revenue growth over our G&A $X net we to in team continued revenue our or expense of billion across percentage additions 'XX, our comparable billion a corporate

first represent of Finally, we quarterly EBITDA back anticipate that to of our to in the turn our over largely that, quarter will adjusted I'll financial EBITDA, Jim. earnings progression, full XX% normal XX% adjusted the results. With seasonality call year of terms reflecting

Thank you, call the Marc. Operator, let's now for open questions.

is Jefferies, Jefferies. question Brian from [Operator Tanquilut Instructions] from Brian first comes the line open. line from your of Your

A.J. Okay. on. from Rice to We'll We'll UBS. move go

sized Would first half? previously in in half Anja The 'XX the is be company 'XX. million for a This first that for the a in RCM around of A.J. on $XX tailwind headwind pricing

don't No, think so. I

what an as of I of this We end-to-end vendor quarter are is 'XX, midst i.e., a say, a which we would hybrid we in the progress transition, various through transition, from to transition in continuance staged stable a components solution. expect through 'XX. to we in fourth maintain throughout the this pricing of saw

arbitration on quick average The a of the reopened this arbitration around cases on arbitration rate? updates XX%. a company previously? than talked go then in portal Got cases it. are XX% the arbitration. Are about there industry And more seeing And win question in CMS you rate previously having versus success any December. through

this, to in just to with continued say we having a since now that creation for process increase capability we've we're by I were cases. and our our process related we back number of I'll that seen payers contemplate of internal arbitration, refine that having the an start, to would haven't in-house. much the network

the most Yes. our the And win going least approaching XX% are almost for at months. has approaching improved We're we we're rate course arbitration. to data, on our when of several recent rate win last

from comes of Ryan question the next line from Your Daniels William Blair.

This is for Daniels. Jack Senft Ryan

and wider Can was adjusted takes the versus the the and quarter you this for of admittedly than range? admittedly wider EBITDA maybe range what just you you've for the puts past. guide of the gets the low the to end end that first high about the First, was to in rationale talk the guided

or catch you right, you Can first full I related didn't the year? quarter to clarify? the

quarter. first the Sorry,

about of versus the $XX a was guide you've the in think $XX range past done what million million. I

for or it. a at. range which million give a take, think we're $XX provided range, where year, full I the that around the XX% is, midpoint of We've

the first little on For That's year do of bit EBITDA. $XX you a narrower the full what Marc than provided if of quarter, math million. XX%

meant I year. full yes, misspoke. Sorry, definitely I the

well. XXXX you plan initiative just we here And Curious mentioned here? give your capable additional color to you're or Last what XXXX? can you've of a to I get here. And just follow-up And planning heading cost quick just do if then that in about too, comp. that. growth can for at challenges least if any just kind clinician done this maybe you labor into Sorry quarter, to then as expectations know and with

I within focal them. And across for to? we within you for our is moderation of and this fairly moderation full across growth experienced can do level spectrum the different year versus in add we that, a as practice of of have plans start some EBITDA broad towards practice we of of discussed in this margin. what in year our practices specific some an the overall geared lot number pretty guidance expectations morning, some is a and any underlying to year. expense want our a that off the past gross growth. color. previous of referenced obviously, is And level practice quarter, stabilization and let Jim, have Within Jim expense spectrum. this over expectation points Jim similarly that And

Yes. variable really We're fixed comp and looking the around have doing that. at on we're to what more stability side

and the along is in pay in practices think starting the what some challenge and I up those to way new seen the that physicians. specialties, we've Additionally, recruit of the harder --

of we expanding we'll where clinicians still as specialties where an that. think of had not pool a labor we've are -- I to use going the have the that in think the largely But we contract some think really see headwind. some I there's of locums, to

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

of between the revenue billion price? of are components growth $X revenue split are On to the growth the and guidance sort what billion, $X.X volume

throughout volume stable range I I take in would expect Volume, Pito, would to a we 'XX provided. factor we as of indicated, couple line we -- stable pieces. expecting transition improvement contributing transition, a is the 'XX, our top complete say we to various our we there's through course, our also, certainly, out through guidance. We're of hybrid or and end to RCM rate opportunity as for of remain the the we over we solution, move of rate year. complete stages our somewhat approach the that as

Okay.

So basically stable volumes and stable rates.

brought those you rate network, as or was contracts mean on tailwind I that headwind? a a in out-of-network rate So

That's that's if an from an for to we're us, move favorable in-network Pito. -- generally out-of-network generally going to position

last component organic and growth revenue is Pito, the the component opportunities the around top last estimate -- of there. that line And

Okay, which great actually a is segue.

high we ranges with low are is set simply basically end the the out? Or guidance what sort for variable high contracting end volumes Looking base between components and and contracting the end only of are doctors set, where with end pricing low the at the versus between your guidance? there your

certainly be I side, I the of transition that, we plans. that on it practice the mean, range. want of Pito, to would I say and our a that RCM clear in in be have is in lot our that a activity corporate component plans level operational

there an guidance to of range. those that into So is execution take account wanted within each component that we in

it of been here. of any with Two Okay. there renewal? pretty to any enough. physicians, sort stable? those contracting more is to up turnover Is quick come change for as your your these those contracts? contracts ones change docs Fair With on there has Or turnover

stable. pretty been It's

them a contracts, Our turnover And in, with these we very, medical the in are we're renewed as these of commented And specialties period. are some we've specialties. of very a low over of for before. the home really X-year most again, is lot

So within organization. to breeds I clinician pool the think of confidence that a remain really the part

was it flow 'XX All 'XX, be in pretty should as stable. And here. right. then quick for similar Makes for complete last it one Free pretty now sense. cash conversion RCM's

would Pito. I so, think

from flow. a at XX% EBITDA look you was operating If 'XX, to over cash adjusted it little

Our general of into adjusted maybe the operating flow. range of of been in X/X thumb rule EBITDA has cash

a So about. of for that's kind think baseline you to good

line from comes the Your Jefferies. next question from of Tanquilut Brian

Sorry remarks, each about question, business. strategic in changes that I of you Maybe alluded earlier. your structural, making about technical guess you talked what my distances to? you're those with that if the first you into can Jim, share the buckets to falls and tactical X us prepared

make I for of have some personnel. contract as suppose our with look PAs. terms and the practices support we thus value, partners. think nurse one we do the terms in And as are volume practitioners an we've talked far. And other well past, when X the our of or at we element looking And service that we affected relationship really those about making that we are case elsewhere. in areas, in mix that the and the staffing within face are favorable the issue to we inpatient know certainly, been where piece. Two, have that those because partners seen the we staffing hospital our sure executing rightsizing make it in in we've clinicians really opposed regard, largely ambulatory in is, patients -- have practices practices those at services the some in other versus with of associated being of to our that the patients and directed revenue back to it adversely becomes I about right are we're as That's that with is in had results using really we've such hospital that as that, network physicians sure

around that we we and elective benefit a our So an from ambulatory feel patient get going more execution volumes there's to of as standpoint. marketing be

Got it.

year you're market talked share? the like Just you inpatient, rate ability of thinking from is to since tough the Is you're hinders maybe about your there that then about a losing in comp volumes. it And hospital birth last is how Okay. than the curious anything hospital seeing just Or other growth? altogether? it drive kind

other [ cost the as did DR 'XX issue last saw take services NICU such volume part we related think to the I of amount for volume the pediatric see year, that year this of ICU. this is in out not a and large we moment, pediatric the inpatient that pediatric ],

and certainly our inpatient NICU I people and bit services length think higher of that. of a degree from we've little the a talk standpoint about increasing of seen severe stays, prematurity

bread Some variable NICU of around butter admissions into the the and the across country. have been

but of are But volumes anticipate volumes don't the being. going of we where decelerating we will indication again, we remain time -- So forward. for see any kind

actually we strong years positive years note ago. slightly highlight quick And quarter did against. Yes. were that. went our just Brian, we fourth We X they a as over And some that had pretty on the X days stack, look that NICU comps at versus

we things sense movement are as a year, into in look more and looking time volumes. get view better not longer-term providing many where within view, of our across at in we appropriate result, we neonatology practices are going. to it outlook as we're as where to And meaningful our look for a usually services. So states anticipating as frame 'XX, any the patient a

talked the in let's of sense. out-of-network for say, in-network, business, lot last exit you a be much year? makes maybe going That me. about just as And question Since to the guys then we is how left

X% know position our now, stand are than things unfold. enter asking the that -- we're this you're this will thanks we're historical done. year, we because some right how we as experiences out-of-network question good where and to lower less we've don't But about that a than we year re-contracting It's of

of And of Kevin you have from America. a Instructions] [Operator question line the from Bank Fischbeck

talking company, Great. talking about questions. were outpatient said boost I with the the the you you guess once a go this you positive the in-network? usually perspective? we of is When about for follow-up rate a getting usually on a Are dynamic couple positive volumes in-network that going

several low, our The an we experience referencing rate when are reimbursement over position. the payers was to from be is hence, the arbitration the that in we're I out-of-network quite that enter. processes we receiving last tends years

unfavorably out-of-network generally you we're want... we a from rate when positioned So Jim, are standpoint.

practices impacted too, that It our think is is directed -- services, when X deliver who's that it is of Kevin, about if Yes, field had on that an might inpatient setting, outpatient does in from volume not right? that practices. our the the some volume that is But mother of at that we impact away ambulatory X on facilities. and you impact although it, does strong particularly, a numbers maternal if medicine our of

So again, that that captures very which we're with. pleased back, volume

just if -- want Okay. got the to right. I I numbers And make then sure

I the think points, was you're kind that and the the like basis? reported add X.X% X% saying way and quarter to at is Do think in pricing you minus same-store look of XX overall basis normalized quarter back, pricing positive a points. another right in Is a then about the XX it? on basis

That's right. That's right.

if quarter-over-quarter you cares is the referenced to component about down about which decline. pieces, same XX about brings of in you basis revenue the a then, through last unit X.X%, attributed to rate at there. related same guarantee unit to We've walk down that So of year. volume, other And got some X% the point is course,

Okay.

pricing, you revenue when stable guidance about stable still Or like in stable, mean your that do mean you you X% stabilize volumes assumes said pricing? say you when and year-over-year? So flat

No. end effectively 'XX. off mean, flat, say I stable, continuing the When of I of

driving rate we exit 'XX the 'XX. -- anticipate is So effectively, in rate the what

you're some be at that sort there payer a about else Okay. living, that of rate mix I in-network, is anything getting in you you're of getting would reason not else least or there? why you're cost think Is assuming update assumptions that there something should

payer flat has relatively year-over-year. we mean No. I been assume mix our

you There back the in and look are, in rate. takes If assuming as well. XX-K, that course, of we're puts

a volume, in of with Of stable is fact we're transition there bit despite through like. RCM and timing counterbalanced and anticipating flat that top I'd that, our say, a The the the 'XX growth a course, line. the rate both is little of

do guess I you doesn't capital like active be then sound anything guidance, to it far perspective? And as Okay. a the expect assuming it's from that on Or front? as deployment

still certain -- amount there and now why are make for bigger but to practices would caution in and have a in core, of at were in-network was that deploy we markets, we back capital I looking do identifying acquire. in we opportunity to had being think terms we're certainly the practices. And acquisitions us Well, our we out-of-network, largely of those the sense

we of deploying have attitude that regard. in yes, still So capital an

Next, we'll Deutsche the line go back Pito from of Chickering to Bank.

quick a question. modeling Just

guidance, if of the Sort sort should we're of modeling be generally to and about headwind. Is SARs thinking the XXXX? looking at XX point that basis we benefits how

referencing the points, sorry? basis XX Where Pito, are you

at I looking -- I benefits flat. percent G&A 'XX a saying let guess to of mean your versus you just in you're is from revenue view you be and just sales guidance going 'XX? revenue how differently, like that Sorry, me ask do as

the on have XXXX compared that our that. our view we to of partially the I safe and revenue over following for of last margin profile the adjusted And think EBITDA provided the as on Yes, some X. goal or at 'XX year represents you is range high I faced level, think a stabilization we within headwinds can solve our you

if helpful formulated large, that's we and by that's you. have So to that outlook, how

about and of of ability is G&A have for headwind your a RCM a which what of that years dealing X for headwind leverage? with And sort there I permanent guys stabilize with But jobs think you that think road, turning the issues -- Or a I this that a excellent is done a -- sort levers Yes. from tailwind? X, SMB sort to G&A down and good the offset be as and an occurred. like with from job understand into then 'XX I have beyond,

again, of we into we really, No, we at that at see benefit improvement. level. where looking to the be I And efficiencies both in think would is think is I we then terms looking of practice top a that practice start the of half year And will different the what doing level 'XX what on organization. labor. in the think, our it'd story, the that referenced overhead second at those be we're what structure, we've is goal But all our the overall we're and at in of practices that with that structurally the on terms corporate to obviously is also, the cost to hopefully look see

there questions. time, at And this are no further

for Thank everyone, and you, call operator, thank you, our joining today.

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

may disconnect. now You