Q3 2020 MEDNAX Inc Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Mednax third quarter 2020 earnings Conference call at this point all the participant lines Arnold listen only mode. However, there will be an opportunity for your questions. You may queue up for question at any.

Time by pressing one then zero if you need any assistance during the call. Please press star zero and an operator will assist you offline as a reminder, today's call is being recorded.

The conference problems to Charles Lynch, Vice President strategy and Investor Relations. Please go ahead Sir.

Thanks, and good morning, everyone I'll quickly read our forward looking statements and then turn the call over to add some more certain statements and information. During this conference call may be deemed to be forward looking statements within the meaning of the federal Private Securities Litigation Reform Act at 99.

These forward looking statements are based on assumptions made.

Made by Mednax is Matt.

In light of their experience and assessment of historical trends current conditions expected future developments and other factors they believe to be appropriate and.

Any forward looking statements made during this call are made as of today and Mednax undertakes no duty to update or revise any such statements whether as a result of new information future events or otherwise important factors that could cause actual results developments and business decisions to differ materially from forward. Looking statements are described in the company's most recent.

I will report on form 10-K, its quarterly reports on form 10-Q, and its current reports on form 8-K, including the sections entitled risk factors.

In today's remarks by management, we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this mornings earnings press release, our annual report on form 10-K, and the investors section of our web site located at Mednax Dot com, but that will turn the call over to our CEO Mark or Dan.

Thanks, Brian Good morning, everyone.

Sorry, my remarks by telling you what I'm honored to work with my colleagues is that there was a real passion throughout the organization, including myself members or as a core team in office is providing the best care for our patients leading research and clinical support.

In chemicals, an Apple store and for me that's possible apart.

Those practices in addition to all.

I've already mentioned the leaders of hospitals with test work commitments quality care and hope to expand our relationships.

It's probably going to meeting many of our doctors and nurse practitioners.

They are making.

Seating or Midtown and welcome to show support for continuing commitment to reinforce our mission take great care to patients.

Joining me on today's call are Mark Richards, our new CFO I talked to makinson leaves, our pediatric that obsesses operation, which of course will be all of our operations after the sale of radiology.

Oh.

Matt I worked hand in hand to lead the day to day operations of the company along with a dedicated now smaller senior team.

Mark as you May know has worked with me for over 10 years, and as an operations and capital allocation focused CFO, Mark and I will detail. The results of the third quarter Mark will detail. The results of the third quarter, and then I along with Dr. Hinson will provide a more granular understanding of how we are operating.

Before I turn the call Tomorrow, let me make a comment about the radiology sale.

Before I joined Mednax than the competition.

Or the size Accordingly, and my first days and weeks that opinion was reinforced our board members share that vision. So we started the sales process. They certainly was competitive and concluded in just over one month we.

We were and are very pleased when you agreed upon price and when the deal closes we will be able to make our strong balance sheet much stronger, allowing us to operate our core practice areas more efficiently and to grow and to grow more certainly.

I have no update today on closing times since we are isn't customary regulatory approval process. When we do close the transaction, we expect to pay down debt and fund accretive growth more easily.

With that we are very shareholder friendly and its tools like buybacks a distribution don't seem wise in the future we'll work with our board to do what's best.

Mark will now speak about the third quarter.

Thanks, Mark I certainly appreciate the warm welcome.

Like to thank Mark or award in the Med tax team for an exciting opportunity to work here.

Focus over the past two months going forward is on operations with the goal of driving core profitability.

I'm over senior accounting Finance, Pax technology, and art, Yeah, and we'll continue to report our organizational structure for optimal efficiency. While also ensuring adequate resources are available to execute on our business plan and growth initiatives.

Before going into our third quarter results I know the modeling our company has been challenging given the divestiture earlier this year of American Anesthesiology, and the announced sale of Mednax radiology solutions.

So concurrent with this this mornings press release, we provided on our website full quarterly financials for 2019 and year to date 2024 hour continuing operations I will make references to those financials were both sequential and year over year trends.

Turning to the quarter I'll give some details on our piano drivers to add some context the information provided in our release.

As we announced RCD unit volumes declined, 4.3%, which marks a partial recovery from a roughly 9% year over year decline in the second quarter of this year.

This recovery with greater and our office based practice areas based on the more severe impact it was services experienced during the second quarter.

And on a preliminary basis, our overall volume trends in October appears to be similar to what we saw in the third quarter we.

With patient volumes across the organization down mid single digits on average compared to last year.

Within our hospital based practices, which include neonatology and related services.

I forgot I see you have hospitalist and heads Yar. Our next few days were down 3.9%, while volumes and other related services were down somewhat more.

First at the hospitals were in the Nick you were down 3.2%.

And the rate of admission was down slightly year over year.

I'll note that the third quarter of last year was a fairly strong comp period was first up 1.7% and mixed use days up 3.4%.

Its important important to keep that comparison in mind.

Looking at a two year stack basis. For example, first declined by just under 1%, which.

Which is in line with our experience over the past several years.

And our office based practices, which primarily include maternal fetal medicine and pediatric cardiology volume.

Volumes also declined by approximately 5% a significant recovery from Q2 when volumes fell by roughly 17%.

Pediatric cardiology remains among the most impacted service lines in the third quarter, but.

Mmm volumes rebounded sharply and were down only slightly compared to last year.

On the pricing side, we received just over $14 million in shares funding during the quarter.

Which was a contributor to our 3.9% same unit pricing growth along with normal managed care price increases.

Offsetting this.

Payer mix was modestly negative during the quarter.

At this point are all mix remains in line with the range. It's been for the past couple of years.

And for the quarter the negative comparison appears to be a year over year fluctuation within that range with last year's quarter being modestly on the favorable side of that range.

I also want to flag items on the expense side.

Our practice level salary wage and benefit expense was up about 8.6 million in the quarter.

Most of this increase or just over $6 million reflects the flow through of care sponsors and practice bonus expense.

Our DNA expense was up about $3 million year over year.

As we detailed in our press release Gionee includes about 10 million in expenses, we incurred as part of the transition services agreement.

Wouldn't snap up follow.

Following the sale of American Anesthesiology.

The reimbursement for those expenses is reflected in our investment in other income line item. So there is minimal impact on adjusted EBITDA, but they do in flight or GSK expects.

As one last bridge for DNA, there were just under 3 million in P.S.A. expenses within our second quarter GNS.

Finally on our Gionee expenses is the wind down of the Ts They would map.

This activity will wind down as we move through 2021, but in terms of financial impact Mednax, there will likely be a lag time for us to bleed off these expenses currently being reimbursed for.

So I would think emerging expense, excluding those PSC cost as a future state that will work towards and not an immediate step down in GNS.

Our transformational and restructuring expenses were $34 million for the quarter.

Which included about $27 million of costs related to our executive important restructuring right.

$5 million and consulting costs, and the rest related to contract termination fees and the like.

We will continue to reduce our transformation activity through Q4, 2020, and expect an ongoing consulting expenses to be minimal by early 2021.

Overall adjusted EBITDA was just under 73 million for the quarter up from 69 million last year.

We know that many analysts models for the quarter still included our radiology organization.

Hello Bridge results of People's models, we detailed in our press release that Mednax radiology solutions generated Q3 revenue.

The adjusted EBITDA of 126 million and 21 million respectively.

Again.

On a sequential basis, our adjusted EBITDA showed a sharp recovery at 73 million from $56 million.

One last piece in detail the care responds we received in Q3 contributed 8 million of EBITDA compared.

Compared with 3 million contribution in the second quarter of this year.

I'll make one final note on adjusted EBITDA for those of you keeping models why we weren't providing financial guidance for the fourth quarter of.

Ill point out that while we have applied for additional heres funds based on HHS guidance, it's uncertain how much we will receive during the fourth quarter.

So the more appropriate comparison to use for your models would be our third quarter adjusted EBITDA, excluding the care's contribution to Bobby.

As we have done for the past two quarters will provide specific details of any cares funding we received during the quarter. When we report early next year.

Turning to our balance sheet and cash flow.

There are a number of moving parts on what's flowing through continued operations and discontinued operations, particularly.

Given the collection of retaining our from the infusion transaction flows through discontinued operations the.

The better way to look at cash flows.

Then as our total increase in cash for the quarter to 295 million from 132 million at the end of June.

Roughly $40 million of this increase reflects anesthesia a our collections. Another 28 million reflects the receipt of income tax related refunds.

And the remainder reflects operating cash flow from our core operations within continuing ops and from radiology within discontinued ops.

With that I'll turn the call back over to Mark.

Thanks, Mark I'll now pick up and provide you with a look at what we're up to what it means.

When I look at our share price and read analyst comments about our company I see a misunderstanding we're not an organization that is sitting around waiting to see what share we will get our country's birth rate and at this point, we don't see any signs of a major drop in birth rates like we've heard about anecdotally.

Instead, we are very actively managing every aspect of what we do to maximize efficiency without ever putting more patients anywhere, but as our number one priority we.

We have been reducing our overhead and in particular slashing and outside consulting spending which for the year to date was almost $50 million in total and almost $30 million related to our continuing operations.

Well, we're not providing earnings guidance I will reaffirm our view that we can achieve a steady state EBITDA run rate of $270 million in 2021.

This assumes no major continuing effect from Covance.

Confident and this is bolstered by the combination of our control of our business is spending along with the direct and constant push for sustainable organic and new growth.

If you're having trouble getting from our current quarterly EBITDA levels to where we think we can though I would point to a few things that high level.

[laughter].

The $14 million in care dollars, we receive in the third quarter and the EBITDA associated with those dollars did not fully make up for the lost revenue.

Due to the pandemic this.

This is clear when you see that even including these dollars our same store revenue remain down slightly this quarter second.

Second we continue to make overhead spending reductions, which likely won't be fully evident until after the end of this year.

We've also made significant changes to our leadership team and reporting structure, which also were not reflected in our third quarter results.

Third the changes in sales and gross which are reporting directly to me and our veteran Chief Development Officer, Dr., Jim Swift and operations reporting to me, Matt and Mark are new and will materially affect the way we run the company.

One of the expand on this last point, Matt and I are visiting our practices and hospitals in our key markets and we now for the first time have practice data analytics to allow a much more effective monitoring financial control of their operations.

His total focus on increasing efficiency and first hand understanding of our practice isn't part of the hospitals was begun last fall by NAC and our team.

Now has a full support and attention of our entire organization.

To underscore the importance of this focus sales business development and strategy now report directly to me into that as well, we see many ways to grow organically and with a combination of new practices and new and expanded hospital relationships and we are very confident that we can grow without straying from women and children's health.

I can attest to the strong relationships, we have first hand with hospital systems, who are eager to find ways to expand our partnerships and we will be all over this.

In fact, just this week, we were very pleased that subject to customary order pool. The memorial healthcare system here in South, Florida announced their decision to choose Mednax Toledo Neonatology services of course across three hospitals, including Joe Dimaggio Children's Hospital.

She's been was only possible because of our reputation our.

Dedicated and we dedicated focus on women's and children's care and relationships that we've built and nurtured long before I got here, our founder Dr., Roger Goodell, and our senior leadership with Matt made this a reality I can promise you.

At our passion for excellence and smart growth is alive and well at Mednax.

Dr., Matt has and will now share I want to teens is combining his passion for both clinical excellence in operations Excellence Matt.

Thanks, Mark and good morning, everyone as Mark said, starting the course with Roger Dell, We have insisted on building our relationships and our reputation as a leader in women's and children's health when we met with the leaders and Memorial Health care. This was the focus and the commitment we brought though so were very excited to.

Begin providing services during 2021 and to bring our decades of dedication investments in data and clinical research and our mission to take great care of the patient to several additional outstanding hospitals here in South Florida.

Across the three memorial health care hospitals, where we'll be providing neonatal care. There are roughly 13000 annual deliveries and a 120 beds. This is about 1.5% addition to the 2019 annual volume across the Pediatrics organization.

This is now a very flat organization with a complete absence of silos will work together the teams to make sound decisions for all of our operations teams and our medical groups.

Hi, Great Mark that we aren't is understood as a comedy or not just in Britain neonatology practices, but a diversified national medical group across more than a dozen pediatric medical and surgical specialties, plus maternal fetal medicine, and they'll be hospitals Ob hospitalist services, providing the most vulnerable patient population.

In the country to care to the patients.

Working mothers their newborns and children.

It's incumbent on us to ensure that positions across our organization are fully supported so that they can care for their patients as best as possible.

Physician spend years of their wise learning and training and the scientific medicine in order to bring their knowledge and skills that's out of Asia.

It's an art owns the repeated patient interactions that allows every clinician to translate science into compassionate care for our patients, but health care. It's also a business. It's our business requires us to work every day to the tools in the hands of our clinicians. So they can deliver high quality care to our patients in the most cost efficient.

And the second way possible and to do so in a way that positions us for growth as an organization.

In order to do that let's all we focused our efforts around the market based approach in each geographic area. We consider how we can strengthen and support our practices and how we can be better partners with our hospitals. So we can expand existing relationships and four new ones.

What sort of tools, where we supply.

We're introducing several tech enabled solutions that will improve the efficiency of the work our clinicians do each day.

These include a significantly more streamlined charge capture system, a cloud based image access and sports solution. The continued development of our cloud based neonatology specific nodes in data system and upgrades to our ambulatory HR that are better for clinicians and improve the patient facing oral for our patients.

Yeah.

Since August we're supplying real time data practices vacancy and more importantly, manage patient volumes our operations team and clinical leaders are highly focused on improving access to patients more actively managing our market relationships. These data enable comparison of our productivity data across the practices.

It will allow more direct dissemination of best practices. This also enables a more active management of staffing and expense allocation.

One of the greatest predictors of success in our partnerships at the hospital and health system level, There's a high degree of strategic alignment between our clinical leadership and our partners. This requires of our clinicians skillset beyond just the practice of medicine.

And to this end were Relaunching, our endemic delayed clinical leadership development program physicians and nurse practitioners from across the organization will be started with this new program at the first of the year. So we can actively develop and support future clinician leaders at Mednax.

The steps we are now taking will help us better allocate resources will improve the efficiency of our clinical staff and will enable improved patient access and market relationship management and will foster stronger health system relationships. These actions will maintain our current book of business improve our presence in our markets and retain and attract.

I'll get clinicians and new practices to a growing mednax.

With that I will turn the call aftermarket.

Thanks, Matt.

Operator, now, let's open up the call for questions, Matt and Mark and SPD, Charlie Lynch, who are available to answer.

Questions.

Certainly.

And just as a reminder, ladies and gentlemen, if you wish to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one general demand.

And for school lineup, a DJ rights with Credit Suisse. Please go ahead.

Thanks.

So the team as they go forward.

<unk>.

I know I appreciate the comments about not to focus on.

Short term volatility of birth rates, but I know there was a comment in the press release about the what you're seeing in terms of.

Maternal fetal patient quality of being slightly down.

Does that give you any indication of what the next couple of quarters might look like in terms of volumes is that.

Suggest.

So to your long term correct okay.

Obama.

Like we are.

Yes. This is Mac.

You know it certainly suggests that we're seeing a similar type volume that we've seen in the past. The fact that we're returning to baseline and beyond that I think it's hard to predict.

Forward beyond that information.

Okay. Okay.

Well.

When you finish the sale of the radiology business were calculated you'll be just north of two times debt to EBITDA, although presumably you have a lot of a decent amount of flexibility on your own.

Well deployment can you talk a little bit about how you're thinking about capital deployment terms of.

Repurchase tuck in deals larger deals.

Other uses of your cash flow going forward is probably the radiology so.

Sure.

Touched on I touched on that briefly in my comments. This is mark up.

We think there are a lot of growth opportunities in our core area and around our core area and we're working very hard on that so we want to make sure that we have the capital to deploy to make that happen and to always have a very strong balance sheets process.

Yes.

Where we have a very sophisticated board and we're very careful about past capital allocation as I said, we're very shareholder friendly if in the future to make sense to consider a buyback or or some kind of distribution. We'll of course, we'll of course, we'll do that.

The great thing is where this company to have a great core business and also have the financial flexibility to make the right moves.

So.

So we have no plans to announce today, but our eyes are wide open.

Okay, maybe just a final question then.

I know over the course of this summer there good discussion about.

As you refocus.

On the wealth business and not pediatrics legacy business there was the potential.

To re accelerate a bit the growth rate I know putting upward.

Really quarter to quarter is side and maybe get back to you know certainly low to mid single digits.

Type of top line growth.

Do you have any view.

Use all of that I know that wasn't really your assessment that you offered it was the previous group, but what is your how you feel about that.

Well, while I won't put a number to it yet because the process is that I described in my comments. It really just recently started I do think that we have a lot of avenues for growth.

Starting now and going forward. So I am confident that we can achieve a solid level of of both organic and add new growth, but again you know in our areas is not we're not looking to do anything.

Outside of our core areas and we're very fortunate that our core areas have a lot of opportunity and I would I would go back to the comment that Matt made that by looking at looking at our company and the span of our company and you look at it market by market think about how we can be better and bigger partners with hospitals and and have more.

Practices join us in and around our core I think it gives us a very credible way to grow.

Without the without stretching and I'd say.

You talked about the New award that we got from from Memorial Hospital here in South Florida.

I think there are there are opportunities like that throughout the country and we have a great team of operators, who are really working on how to take advantage of those opportunities and that and this may seem unimportant to me. It's all important. This is all we do is we talked about a day and night, we are working together as a team we have no.

Well the distraction. This is what were doing so that gives me a lot of confidence in our ability to address.

Okay. Thanks, a lot.

Thank you.

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

Hey, good morning, guys.

Mark just a question on the comment that you made during the prepared remarks about.

Just not seeing birth rate compression, obviously, you put up a 5% Nikki volume growth save 34.3% same store number for the quarter decline how should we put those two comments together I mean, what's the what's the link between those two.

Well.

The reason for my comment is obviously, we hear plenty of anecdotes, we read articles and and was pretty passionate about this to look to see if there is some clips that we're approaching them or something quickly in Europe, because dire dire predictions.

We're not in a basis went on in the business of making a.

Long term forecasts on brokers will leave that to others, but we don't see anything within our four walls that would indicate a precipitous decline. So what I'm, saying is that I see us growing and we expect that there will be plus or minus some changes in the birth rate, but we just don't see anything that would tell us that we're walking into a into.

Who a clear sustained decline and eat and you should assume well I'll tell you. We have look to see if we can find that trend like that and and we had and when we tour or a net use and and our team is out quite a bit we haven't we haven't found that so obviously if something.

Prices were to happen it would change things as this.

God forbid the pandemic becomes the worst of the country than than it has been that would affect us, but we just have.

We have tried this.

Very dispassionately to find a trend and we have so we know what we're certainly not expecting a big jump in the growth rate either not.

I appreciate that very helpful. So and I appreciate you addressing the sell side concern. So I guess just along those same lines. If you don't mind, just describing to us what the comp structure is now that we're down to the legacy core business without anesthesiology and Rad.

Thinking about the flow through of payer mix changes in volume changes over time.

What's the variability in the comp and how should we be modeling that again with the risk in in the horizon, whether its payer mix shift their volumes compressing.

Well I'd say that that the that kind of detail is to comment I'm not guidance, but I'm not dodging the question, but we're making an awful lot of changes and have operated discussing we still operate this company with.

With a focus on both our core business and on radiology. So we are in the process of restructuring the way, we operate which is going to affect the overhead.

And and Halloween, how we run the business and then as we.

As we grow in the areas that I think we will I think it's going to enable us to.

We still have the financial leverage characteristics that we've had but I think that we can we can operate as a much more efficient company then that we've been able to in the past.

We'll provide those details in the coming quarters as we as we make our changes here.

I appreciate it and then last question for me Mark you are known as a turnaround guy coming into Mednax is a fresh set of eyes.

Obviously, there are cost opportunities here and I guess, you guys alluded to in your prepared remarks, but if you can just give us more detail on what are the areas you're seeing right off the bat, where you could see non compensation expense opportunity. Thanks.

Well, we highlighted that the company for a variety of reasons and a lot of money on on general consultants over the last few years, it's not my nature to do that I'm not questioning what was done in the past, but I will tell you we're not doing that in the future and Barca. Richard is a talk about that so I think that there is just a when.

You focused company and I appreciate your comments and turnaround person.

Look we just look at every penny we spend it happened we do a different areas. So we try to find and there are lots of ways. When a company focuses to to reduce expenses going forward, but like every company. We're learning from the pandemic about what travel is necessary and what travel isn't necessarily and what we can do to make our office is more efficient as we.

Streamlined office expenses have come down and they are going to come down further so.

I do think we're good screening and we have nothing else to focus having said that I'm also as excited I'm much more excited about the fact that the team that was already in place when I got here is really an amazing team.

I don't think that they have the opportunity over the last couple of years to do so the focus on as you know there were an awful lot of its external distractions and and at a much bigger company. So you had to spend time on anesthesiology radiology and all sorts of other things. So I can't underscore. It's certainly my past is just what I've done I've come to come.

Ladies and said Hey had an amazing core business, obviously, great people that are let's let's work together as a team and focus on everything it even in the sales process.

Two for me and not just within the team to be worked so closely together means when there's an opportunity we jump on immediately and the whole organizations involved there's no less you can imagine a sales process to be that responsive has got to bear fruit. So I would go on and on about saying, we're finding efficiencies and in many ways.

And.

You can probably hear in my voice on to the more than a little exciting when I speak to the head with hospital systems and they talked about how much they rely on us now and how much they would like to expand our relationship but we haven't had the bandwidth and the focus to be able to really work day in day out on that.

As you know we can do that and we are doing that now.

I appreciate that thank you yet.

Our next question from Gary Taylor with JP Morgan. Please go ahead.

Hi, Good morning, I had a couple of questions first is we're just thinking.

Thinking about setting the company in calculating.

Enterprise value Arthur any adjustments, we need to make to the balance sheet outside of the $885 million of radiology proceeds are there any.

Unearned cares act received or any accelerated payments on the balance sheet, we need to reverse out.

Hey, Gary It's Charlie no.

Those are what you would look at I think as we mentioned related to the to the REIT transaction Oh, we don't anticipate any any tax implications related to those proceeds so that's a good proxy as.

Minus fees and expenses for what you would expect us to receive on the carrier side you know the only the only funds we have applied for or received or what we talked about which is that roughly $14 million. We got in this quarter and something less than that in Q2, we didn't take any accelerated payments or anything like that.

Thanks, and then my other question Mark I, just want to make sure I understand what you're saying about.

The 270 million.

Run rate I think you're saying.

You won't necessarily guide for that in 21, but you're expecting as you exit the year to be at that run rate excluding.

Transformational expenses adjusting for seasonality et cetera that is that correct.

Well, it's just that when you say at the end of the year. The my only hedges like every other company on the planet I don't know.

It's unlikely that on January onest, the pandemic switch will be will be switched off so I'm, saying that if you hit endemic wasn't affecting our business.

He described how it has.

Dan I think we should be able to achieve that $270 million run rate I have seen a forecast that are a good amount lower scratch my head and I don't see any sign of that and I think that combined with with if you look at what we were able to do in the third quarter.

And and project that out along with the changes that we're making and we are making the changes now not like seven months from now.

We see no reason that we won't be able to hit that number unless we get a copper from the outside and as I said, obviously, we don't forecast.

A steep decline in birth rates.

If that were to happen that would definitely make a difference.

As I said in the last call I will tell you that we are as a business is also growing and at a time when things are choppy and people are concerned about birth rates and they're not sure where they are I do think that provide a buying opportunity for an organization that has a a smart careful long term approach to.

To our business, so I think that.

We don't know for a lower growth rate.

But but there are opportunities that come in a in a choppier time, where we're here to take advantage.

Appreciate that just a quick follow up on the restructuring and transformational expenses, which have been pretty material. The last couple of years certainly worth its corridor as well are you yet in a place to sort of talk about how those how and when those ramp down so we can.

Start thinking about a true EBITDA performance without the noise of excluding a material amount of expenses.

Hey, Darien Park Richards.

Yeah, I would say we are in the process of ramping that down and you know I would expect very early on in 2020.

2021 excuse me.

That that effort and the related costs will be moving to zero. In fact is that January or February.

Probably in that range of maybe some residual that'll that'll flow through in the early part of 2021, but but not not material and certainly nothing to the level that you saw here in the third quarter.

Okay. Thank you very much.

Sure.

And next we'll go to a Whit Mayo with yes. Please go ahead.

Hey, Thanks for the question if I look at the EBITDA reported in the quarter and take out the 8 million per cares Act. It gets me to say.

65, historically mednax is or get a call at 27% of the full year EBITDA in this quarter, which would imply kind of a 240 million dollar base.

Base, So I'm just trying to come up with a starting point to think about how we build up to the 270 and if there's any headway.

Headwinds or Tailwinds that we should consider in terms of you know in a normalized environment, where you would be versus the pandemic, where your your budget was and where you are now costs that you know anything that that may help us sort of bridge the gap would be would be helpful. Thanks.

Yeah, Hey, Whit, it's Charlie I can give you a couple of things and Mark alluded to this in his prepared remarks. When you. When you look at that 65. It doesn't include the cares mine.

That effectively gives you a fairly broad depiction of our operations right now as impacted by the volume trends. We've seen this year related to the panda and over and above that when you look at the contribution from the carrier dollar we received this quarter.

You can see to that even including those at the top line and I think the flow through of the EBITDA you know is.

Comparable to what you would have seen if we had sufficient volume to get there you know our same unit revenue was still down slightly year over year, which is you know somewhat less than our trend in same unit revenue for the past several years. So that's the most important thing that you know while we're pleased with how much we've seen volumes come back.

Can parse it returned to normal they are not back to normal and that had an impact in flow through to the EBITDA as Mark mentioned now the two seven days is predicated on a view of normalized normalized performance the.

The last thing I would bring up as just a different reference point is when you look through the.

The pro forma financials, we provided for 2019.

Website, you'll see that for the full year 29 team for continuing operations, we had adjusted EBITDA of $260 million to $161 million. So that too is a relatively appropriate baseline to think about for last year, which was not impacted by the panda.

And when it's Mark the other thing you know that I would say over the last several months with the reorganization of the company and everything that went on the sales process that I described as our now and going forward. So prices. This was somewhat interrupted so indeed in the third quarter and you still have significant expenses.

As Mark Richards said will be mostly gone by the beginning of the 21.

And ER and the overhead changes that I that I described will be in place in 21. So there was a lot of spending in the third quarter that we won't we don't expect to see in 21, coupled with that.

That affect the sales, which you didnt see in the third quarter of this year because again, it's I would say the buff proceeding to the third quarter that pace was not as robust as we expected I think Bart maybe more specifically, meaning our normal sales marketing and business growth process, yet not their radiology sale process yet.

No. That's all just just to be clear Charlie I think you were you were suggesting that if we look at the care's contribution that's a decent representation of.

How performance May have been in the absence of the pandemic is that a fair characterization.

It's structurally that's what I met with my other point is relevant to this.

I don't think we would have anticipated a negative same unit revenue growth in a normalized environment and by.

By that I mean, the funding we received through the carrier Zack did not fully.

Replace what we experienced in lost revenue related to volumes.

Okay. That's helpful and maybe one other question just scanning the queue. It does look like.

Got it.

Disclosures around payer mix and subsidies and subsidies looked like they were up 10 million year over year and I know that's the normal course of business, but I guess, maybe just remind us how this works with your hospital partners how much visibility you have into sustaining those type of increases and maybe.

What the trigger points are a forum for you.

Yeah I saw you mentioned in your note wit, and just a quick clarification there.

You know that contract an administrative fee revenue was up about 10 million year over year. The majority of that increase is related to new business and contract time in Hawaii that include some level of.

Admin fees.

Only about 3 million represent the same unit comparison year over year. So that that's really where you saw the increasing that ends.

Those are all negotiated.

Contractual structures. So that's just part of the new businesses that we sign we see that as just part and parcel of how we're providing services on those contracts.

And with its Mark Ordan I also go back to what I referred to and Mack described in more detail.

This company for.

It's existed did not have in my opinion anything likely a good dashboard to be able to look at at the.

The factors that contributed to the results in its ambulatory practices and other other places in the organization several months ago again long before I got here there was a strong effort to create data analytics and data analytics. So that we could really looked at all the financial movements in our revenue in our practices to think about the compares.

Listen, but what best practices are versus whats employed elsewhere.

I don't know how you can move results without those analytics those analytics didnt exist before they were first rolled out starting about a month ago.

So you know.

I'm just trying to give you an everybody an understanding that that.

Ed Wood is running in a week to week it's.

It's very hard to drive the car with no dashboard and no windshield, and and and I actually I would say I admired what people were able to do without that but with that we can look at scheduling. It would look at a host of things and and and be able to move the needle where in the past. All you can do is go in and we have people well so.

So yes, it's just a.

Yeah, I I can't put numbers to it now I look forward in the coming quarters, putting numbers to it but you know from.

From my experience elsewhere, that's what gives me confidence that it's.

We're going to be different here.

That's that's helpful sounds like there's a number of cumulative positive forces there. So I appreciate it thanks guys.

Sure. Thank you.

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

Great. Thanks.

Wondering if you could provide a little bit of color favorable fourth quarter it sounds like.

So on that point.

Yeah, there really wasn't a major change in there but.

Any different than air mixed between the core Nikki business and the other services that you provide in that hospital. It can't get there yeah actually impacting it and that's kind of where the parents.

Yeah, Hey, Kevin its fairly no we haven't seen anything like that.

No.

Mark Richards mentioned that looking at the mix in the quarter. If it looks like fluctuations are at a pretty steady mean over the last several years and that is indeed, what it what it looks like.

So.

You know week.

We didn't see anything in there that looks like a change in trend and you know that trend for the past probably four or so years as you know in our payer mix and keep in mind for pediatrics sectors. We're really looking at a largely binary mix between Medicaid and not go.

Okay.

It's been on a slightly favorable trends.

Generally flat, but slightly favorable for this quarter.

Over the last quarter, it just looks a little bit unfavorable but there are fluctuations around that or that norm. So we're not in a place where we're where we can see a change in trend, we'll see how things develop but it really looks like a normal fluctuation.

Okay.

I guess [laughter].

Any any has been exactly on the the payer rates it sounds like that would normally from update.

Anything to think about as far as Medicaid rate upticks in the current environment.

No nothing to call out.

Okay.

And then I guess, maybe finally.

When you think about be a cost cuts that you guys are talking.

Talking about kind of ramping into future quarters how.

How much more is kinda back we realized versus where their Q3.

Realized losses.

Well good amount I mean.

I guess the good news for the organization as these amount of it was in it was in non payroll expense were able to eliminate a lot of things.

Without a without.

[laughter] chipping away at the organization and obviously many cuts were made before so I think that in ER. There are a host of opportunities in non payroll areas.

Well beyond the consulting in terms of the size of the organization. We've made changes or if that is largely the changes we made Don and Anna.

I don't know that I would expect that they've done so you'll start to see those in the fourth quarter and beyond.

Hi, there.

Thanks.

Our next question is from Ryan Daniels with William Blair. Please go ahead.

Hey, guys, Nick we go in for Ryan Thanks for taking my question.

I guess, so you kind of touched upon that to start the call, but historically, you've pointed to kind of like historically, 3% growth.

Maybe a goal getting that kind of 6% area. I know you said that's from prior management, but I was just like what would be like kind of the moving parts.

To kind of get to that mid single digit levels that no mostly targeting organic is that going to be a little bit more.

Good news and then I guess like what kind of birth rate itself would be no in that in that general area to get to that area.

I can't give you a precise answer but let me try to help you mark.

Hi.

We expect a choppy birth rate, we don't expect it to be up or materially down so with that as background.

And not being able to predict any better than you can with the effective Oh co they might be putting those two things aside I think it's all of the above meaning that we are very focused.

We are very we have a series of regional leaders regional Presidents report up to two terrific operating executives, who report directly to Mac and to me as Matt said, we have a very flat organization, so to be able to work with our practices and our hospitals to look for new opportunities, which I would call organic growth within the.

System, we're all over that and I think we have a terrific team to to to do that but I have to meet the heads of our mid Atlantic group or a group that Texas. They not only have a greater understanding of operation. They have a terrific relationship with our hospital leaders.

And again I'm only bragging about them not about me.

Right on certain days.

So I'd say that that gives us a huge opportunity inorganic growth in terms of tuck ins same thing we have a terrific sales and business development team. That's out there theyve established long relationships with practices, it's not completely under our control because somebody has to decide that they want to sell but I think that the more that they see that we are totally focused on this business.

And then it's all of US. So we don't recently the team has been working on an opportunity a major opportunity in ER and ER and then at them and yes. It was all hands on deck to make sure that practice was comfortable that we think about the future of the practice.

Think about what we can do to make the doctors and other clinicians as happy as possible and and you know that that involve you know just about everybody working together to make it as you know I got to get involved you know when it was already 99% done, but look I think yodle, but oh.

So we will work on so I'd say, it's going to be a combination of organic growth.

And.

And and tuck in acquisitions, and and with our eyes open to other areas in.

Womens and.

And childrens health.

Health that that we think can be added.

Creatively.

Thank God definitely very helpful color.

And then kind of you to go cloud internally, you've been making a lot of investment to improve the analytics.

Analytics and things like that I was wondering if we get when we get to an area, we'll whereas you improve that you'll provide you know the street with a little bit more I guess specific data on volume you patient days things like that.

Well I think I think.

It's always been.

March in my practice in our past lives to be to disclose as much as we possibly can so of course as we if we tell you that we're doing these things and they should bear fruit and I think we owe you didn't tell you to what extent they are bearing fruit. So we'll do that yeah. As we as we were very confident of the of the progress.

We'll make some close is that some of the spending that Matt described.

I still think leads to a financial improvements, but very importantly, a lot of these things are just things that we must do and.

At leading clinicians to make sure that we're always at the cutting edge practices.

Brad This is no only want to join a first rate company and hospitals only want to partner with a first grade company, we would not have gotten this memorial health system.

Contract.

If it weren't for our reputation and working on volatile. So I will tell you that when I talk about areas that we're going to cut the cut spending items.

Ah I, notably Didnt include things like research, where I think it's vital for us to to have to be a leader in that area and.

And we have.

We have a physician who is head of our clinical services of the company.

Dr., Curt Hecker and no ease of doing business person also though he said hey, we need to support our doctors.

And other clinicians.

I I listen I listened really carefully and by the way he reports.

Directly to me and but I think that that is a that.

That is a sincere selling tool for hospitals and our practices because they know that we're doing the right thing and they're only going to want to be part of a company. That's doing the right thing that focused on it. So so I'm not I know one of the things that we're cutting in areas that are going to affect the quality because because we're not we'll fund.

We'll find other ways to cut it will turn whatever the light bulb, what we do that.

Awesome. Thanks, I appreciate taking the question.

Sure no asking questions. Thank you.

And next we'll go to Peter Greene with Deutsche Bank. Please go ahead.

Hi, good morning, guys.

Taking my question.

A couple of quick quicker.

Following up on the 300 million.

Good girl went pretty well on the ground as we were.

Okay all right.

Model.

No.

He brings that Wouldnt know.

Deferred revenue or something and then they get to that number.

Yeah.

I apologize smart, but could you like maybe a movie.

Move a little bit back on the phone and its coming through garbled.

I'm getting your question.

Can you hear me better now.

Hundred percent area.

[laughter], but just to follow up on the $250 million, EBITDA, 2021, which I understand that.

The cobot impact.

Possible model.

Maybe I missed it but do you break out what does it split between organic revenue growth assumption for M&A to get to that number.

Yeah, Yeah, we you know.

I think mark made a comment earlier that when we when we think about the ways to get there and it's all the above so I look where.

Theres a reason why we don't have specific financial guidance just like every other company were going into the fourth quarter and going through our budgeting process and will be a lot more granular as we move into into 2021, but I think you know going.

Going all the way back to the earlier this year when we when we started to discuss our financial profile. It was based off of a multiple factors between the opportunities for organic growth the opportunities for acquisitions the opportunities for cost improvements you know without any specific line or or contribution from each of them. So.

I think we're still thinking about it the same way.

Fashion without a specific contribution from X y or Z and and let me add one of the reasons I said that and I was so declared or that and as I was reacting to things that I read and I understand the reason for that things are great, but I, but I think that there was a thesis out there, which I totally understand it.

Sure if the birth rate is going down and you're not and you not really grown and you're just going to sit in there how you're going to get the two seven I totally get that so so my point was hey, I don't think we're not growing I know that was our our business better than we have because of the focus that word and that's that's been enable.

So that's the reason that people think that 270 might have been believable in the past, but they don't believe that now I'm, saying, hey, the things that you are that you're focusing on do not have the whole picture. So.

270 wasn't a new number over the number that that had been out there that I think people will pre pandemic and before everything else said, yes, that's an achievable number obviously, excluding radiology and I'll just reaffirming that that is the thing that we haven't played a pound we're looking at going forward absent Athens.

Birth rate calamity or endemic laughing.

I think we can we can get there and by the way. Its this November we have we have many months ahead of us to to to make the changes but.

That.

We're talking about.

Okay third question on Retrains have you seen any differences the ages of pregnant mothers are sitting in their practices.

One thing that I can do quite a bit due to Kobe just curious what you typically with things like that she is.

So if I understood. The question frankly are we seeing different types of mothers in the practice.

And I would say and I think we're seeing the same sort of mix of maternal patients that we've historically.

We've been married for the ordinary study that looked at quality and looked at trends of the business.

Led by somebody who is a very very data driven then and passionate about so we try to see if there's something it's just something that were missing.

So we have the.

Hello. This is Evan I have for all the time.

If it's something that that we see so we're not.

And the.

Business of playing hide the ball.

But so.

So we do look at it carefully.

Look David against the anecdotes that are out there it looks like.

Okay, and then last one looking ahead, we cash flows.

Are you just talking about sort of where do we talk within reach of core business at this point.

Are you looking out so from an ops you get a good is Stephanie good question.

If you think about sort of the cash flow, whether it's got lots for capex going forward, how should we think about the conversion from people talk to castle. Thanks, So much.

Yeah, you know its.

I think you're just talking about you know what percentage of EBITDA. We think we can pull through into into GAAP operating cash flow and free cash flow. The other guys. You know we generally looked at that in a in a broad sense in the past and I think the parameters. We think we've thought about in the past to look like for pediatrics, which is which is that.

Hey, they have spare a rule of thumb is to think about us pulling through somewhere in the range of 60 to two thirds of our EBITDA into into GAAP operating cash flow.

And beyond that our Capex requirements are fairly minimal you know for for continuing operations, though should be.

I'd say comfortably under $20 million a year. So those are the parameters you should think about and you.

No I don't think they changed dramatically post the sales of anesthesia every element.

Great. Thanks, so much guys.

And our next question from Ralph Giacobbe with Citi. Please go ahead.

[noise] Ralph Giacobbe. Your line is open if you're on mute, possibly.

Yeah, sorry about that can you hear me.

Yes.

Okay, alright part about that.

So can you talk about maybe discussions with physicians and staff.

Point any any turnover if you can give us a sense of churn.

Churn or if that's stable and if you're looking at and then previously you know that there was a push more people to service lines connected to look you in women services is that still a focus or is it more focused on sort of the core ended at this point.

[noise], let me take the starting the first one because a a net back and back and add to it.

Hi, I had the opportunity back much more than I have to meet with a lot of our for the physicians and nurses practitioners around our system.

And and there is a tremendous just two things that I'd point to a great level of enthusiasm and also real interested in helping.

Uh huh.

Well I don't know I call. It an agent John Lloyd is one of our Neonatologist in it.

In Texas, who has been enormously helpful to me as I think through what we should be doing to better support our practices you know this.

This is.

This is kind of unique and it's fantastic that that people, who were part of our organization want us to succeed and they want to be as helpful. As a candy to enable our success and obviously, if we're listening it's going to help us and it's going to help that so we've seen a lot of that I'm very grateful to Mac promote opening these.

Doors for me so that when we go together.

He can explain some of the acquisitions made and then I guess I can I can listen to try to understand that and then let Matt talk about the the other specialty to announce them better than I do.

So go ahead, yes, though I think I would agree with Mark I think the the.

People are enthusiastic about the focus on women's and children's services I think that's.

That's a very uniform response that we're getting is were talking to multiple practices across the country.

With regard to a service lines within pediatrics.

We do a couple of things one is we certainly want to pay attention because there is specialty specific focus it's important the specialist want to talk to other specialists neonatology just want to know what their partners are doing lots of country has two pediatric surgeons that we had a discussion with the pediatric surgeon Lee surgery leaders yesterday about it.

Exactly this thing, but it's also important to think about the whole. So we're not we're not thinking that we want specific.

Pieces pediatric from accounts here, but we didn't want to continue to to help facilitate the discussions within our specialty but thinking about the specialties cross talking as a whole is really important our success going forward and we are devoting time and energy to make sure those things happen.

Okay. That's helpful.

That's helpful. And then I was I was hoping you know in your prepared I think you talked about normal managed care pricing.

Maybe just remind us what that typical rate is and and is there any opportunity there or are you seeing maybe incremental pressure there. Thanks.

I don't I couldn't find its more I wouldn't point to two any change.

Along with focused we focus on our relationships with our with our payers and there's no. There's no again there is no trend there that I could point to we have a great team is focused on our managed care relationships leader that team comes from.

The payer world. So it's great to have somebody who who.

Who speak their language and appreciate what they do and the care they use.

So.

There's no change that we would point to is that there is always going to be with any any relationship like that elite the two sides to it but I just knew that.

Coming into it but.

But again it goes we focus that we can now focus on those relationships and the and work as partners with our payers.

Okay fair enough. Thank you.

And we have question from Gary Taylor with Jpmorgan. Please go ahead.

Hey, Thanks for the follow up I just wanted to go back to the.

For Q just for a second I know, you're not giving guidance.

Guidance, but I think Charlie had said sort of think about.

At least sort of the starting point coming out of Threeq.

Let me 3 million minus the cares Act funding.

When we look at the the restated financials for 2018, there was pretty sharp.

But the EBITDA from Threeq to Fourq, you and it's just been obviously a number of years since we've been able to see.

This business on a standalone basis, so at that level of.

Seasonal pickup.

Is that normal or was there.

Something.

HM.

It was down a lot I see but something else in the fourth quarter 2019, but just made that a steeper ramp should we.

We think about that sort of ramp obviously subject to how the pandemic light might impact.

For Q.

Yeah, Hey, guys Charlie.

That is a specific on you know as we go into the fourth quarter from the third any kind of sequential changes related to the pandemic and obviously, that's why we don't have financial guidance for the quarter No. What I would say is that as you know historically in a normal seasonal pattern based on the nature of our business the fourth quarter from a top line.

Perspective.

And therefore into EBITDA would generally have a slight downtime from the third quarter.

And you know that that's over multiple years, we look at it and you know for US internally, we can see when there are different distortions that might move that separately the.

The second point is is that.

Because you're looking at that as color from last year. There are also different items either on the cost of revenue side. The kind of represents a true ups and the like as you go into the end of the year and they tend to sort that trends you know often on ads can deal flow.

So that is one reason why we wanted to make that point related to your development of a model coming from from Q3 number. One you know we don't have perfect knowledge of the of the magnitude of care as funds, we might receive this quarter and we'll call those out and number two in a historically normal environment.

We would we would generally anticipate that our fourth quarter top line and EBITDA would be comparable or slightly less than the third quarter.

That's helpful and then if I could just one follow up for Mark just just trying to get back to some of the disconnect.

Between your outlook in the Street models maybe.

Maybe you could speak to this so if we if we look at 2018 or the EBITDA continuing ops is the 264.5 million.

But the presumption is I think for most of that just looking at continuing ops that would've been down from 2018, we don't know that number and that would have been down including act.

Acquisitions, and I know, obviously you guys goal is to turn the company around but I think that disconnect is trying to bridge.

What that organic decline looked like or what we're getting that looked like without perfect transparency and trying to.

Trying to measure that gap to where your your go forward is so I don't know if there's anything else you could.

Could provide on kind of thinking about how they are.

Organic growth or decline in this core business has played out.

It would help us.

Well, let me try to talk about the past more and.

So what do you feel like you want to talk about that a little bit.

And then I could I'd make some comments.

Which are going to be similar to what I say, but.

To put a finer point I want to go ahead.

[laughter].

They.

In South Korea, the nature of a turnaround is it doesn't go on and on a tight schedule but.

But the nature of the turnaround of Ceos Your open.

So I'd say is that I see a host of things here that could that that gives me the ability it would give us the ability to toggle what we do.

I think that we don't have a long lead time to do that these are immediate things that I said I see it.

So so again I guess less than I'm pointing to a specific number because it was obviously give you guidance is saying that I think that we have the ability to achieve that and I think that we're doing the things to achieve that so I don't linking with what happened in 2018 2019 as much as.

As I look at 2020, and I look at what affected us in 2020, and where we are right now we have on our team right now like I don't know the people who are here in 2018, 2019, and what they were doing.

I know, what what was going on in 2020, very well and and that's what gives me a lot of confidence in what we can do 2021. So again, it's just been guidance if I had set a steady state on connect the dots, we'd give you guidance all.

Oh I'm trying to say is the.

I have a high degree of conviction that we that we can get there.

And I just want to be careful of and I'd say, what I said before the reason I have a high degree of confidence because the team Dr. Madelle and others put together a this is not where we are.

I'm I'm trying to take a team and great dedicated to what they're doing and enable them to focus more and make quicker results in a flatter organization without styles and I again thinking my from my past that really bears fruit in my past the turnaround person you commented about fluff.

I like that because I like to buy low and sell high I see this I see this playing out here and and I think again absent a trap door someplace.

Because of the birth rate or co that we.

We will get there.

So I if I did not look at 2018 and say how can we get to 2021.

Understood.

I appreciate that thanks.

And with no further questions I'll turn it back to the company for any closing comments.

Well look I know we appreciate all the questions. We appreciate all the interest I hope that that would not trust revenue by not being able to be more precise I hope that we are the opposite are frustrated you by light show you. How we think how we're running the business and where we think we are heading and we look forward.

To hosting you on our progress going forward.

Have a great weekend.

Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.

We're sorry your conference is ending now please hang up.

[music].

[music].

HM.

[music].

HM.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Mednax third quarter 2020 earnings Conference call. At this point all the participant lines are in a listen only mode. However, there will be an opportunity for your questions. You may queue up for question at any time by pressing one then zero if you need any assist.

Since during the call. Please press star zero and an operator will assist you offline as a reminder, today's call is being recorded I will turn the conference <unk> Mr., Charles Lynch, Vice President strategy and Investor Relations. Please go ahead Sir.

Thanks, and good morning, everyone I'll quickly read our forward looking statements and then turn the call over to Amar certain statements and information. During this conference call may be deemed to be forward looking statements within the meaning of the federal private Securities Litigation Reform Act of 99.

These forward looking statements are based on assumptions that assessment made.

Made by Mednax its management in light of their experience and assessment of historical trends current conditions expected future developments and other factors they believe to be appropriate any.

Any forward looking statements made during this call are made as of today and Mednax undertakes no duty to update or revise any such statements whether as a result of new information future events or otherwise important factors that could cause actual results developments and business decisions to differ materially from forward looking statements are describing the companys most recent.

He will report on form 10-K, its quarterly reports on form 10-Q, and its current reports on form 8-K, including the sections entitled risk factors.

In today's remarks by management, we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this mornings earnings press release, our annual report on form 10-K, and the Investor section of our web site located at Mednax dotcom, but that will turn the call over to our CEO Mark or Dan.

Thanks, Charlie good morning, everyone.

Start my remarks by telling you what our needs to work with my colleagues is that there was a real passion throughout the organization, including my fellow members or as a core team and offices for providing the best care for our patients for leading research and clinical support.

Being careful financial stewards and for being the best possible partner Hospital practices physicians also.

I've already mentioned the leaders of hospitals with test work commitments quality care and hope to expand our relationships.

The privilege of meeting many of our doctors and nurse practitioners. This they are making and receiving a resounding welcome show support for our continuing commitment to reinforce our mission to take great care to patients.

Joining me on today's call are Mark Richards, our new CFO and Dr. Makinson leaves our pediatrics in obstetrics operations, which of course will be all of our operations. After the sale of radiology medical grew close.

Matt got worked hand in hand to lead the day to day operations of the company along with his dedicated allows smaller senior team.

Mark as you May know has worked with me for over 10 years and isn't operations and capital allocation focus CFO, Mark and I will detail. The results of the third quarter Mark will detail. The results of the third quarter, and then I along with Dr. Hinson will provide more granular understanding of how we are operating.

Before I turn the call to Marc let me make a comment about the radiology sales.

I thought before I joined Mednax as the competition focused on its core besides accordingly.

My first days and weeks had opinion was reinforced our board members share that convention. So we restarted the sale process. They certainly was competitive and concluded in just over one month, we were and are very pleased with the agreed upon price and when the sale closes we will be able to make our strong balance sheet much stronger, allowing us to operate our corporate.

This area is more efficiently and to grow and to grow more certainly.

I have no update today on closing timing since we are in the customary regulatory approval process. When we do close the transaction, we expect to pay down debt and fund accretive growth more easily.

Sure that we have a very shareholder friendly and the tools like buyback the distribution generally seem wise in the future we'll work with our board to do what's best.

Mark will now speak about the third quarter.

Thanks Mark.

Certainly appreciate the warm welcome.

I'd like to thank Mark our board in the Mednax team for an exciting opportunity to work here.

I focus over the past two months going forward is on operations with the goal of driving core profitability.

I'm Overstating accounting finance Pax technology, Antarctica Yeah.

And we'll continue to refine our organizational structure for optimal efficiency, while also ensuring adequate resources are available to execute on our business plan and growth initiatives.

Before going into our third quarter results I know that for modeling our company has been challenging given the divestiture earlier this year of American anesthesiology, and the announced sale of Mednax radiology solution.

So concurrent with this with this mornings press release, we provided on our web site full quarterly financials for 2019 and year to date 2024 hour continuing operations.

I will make references to those financials were both sequential and year over year trends.

Turning to the quarter I'll give some details on our piano drivers to add some context to the information provided in our release.

As we announced our same unit volumes declined 4.3%.

This marks a partial recovery from a roughly 9% year over year decline in the second quarter of this year.

This recovery with greater and our office based practice areas.

Based on the more severe impact those services experienced during the second quarter.

And on a preliminary basis, our overall volume trend in October appears to be similar to what we saw in the third quarter.

Patient volumes across the organization down by mid single digits on average compared to last year.

Within our hospital based practices, which include neonatology and related services pediatric actually you had hospitalists and Penske. Our our next few days were down 3.9%, while volumes and other related services were down somewhat more.

First at the hospitals were working the Nick you were down 3.2%.

And the rate of admission was down slightly year over year.

I'll note that the third quarter of last year was a fairly strong comp period.

First up 1.7% and mix to be up 3.4%.

So it's an important keep bad comparison in mind.

Looking at a two year stack basis for example.

First declined by just under 1%, which.

Which is in line with our experience over the past several years.

And our office based practices, which primarily include maternal fetal medicine and pediatric oncology cardiology volumes also declined by approximately 5% a significant recovery from Q2 when volumes fell by roughly 17%.

Pediatric cardiology remained among the most impacted service lines in the third quarter.

Mmm volumes rebounded sharply and were down only slightly compared to last year.

On the pricing side, we received just over $14 million in shares funding during the quarter, which.

Which was a contributor to our 3.9% same unit pricing growth along with normal managed care pricing increases.

Offsetting this.

Tiger mix was modestly negative during the quarter at this point, our overall mix remains in line with the range. It's been for the past couple of years.

And for the quarter the negative comparison appears to be a year over year fluctuation within that range with last year's quarter being modestly on the favorable side of that range.

I also want to flag items on the expense side.

Our practice level salary wage and benefit expense was up about $8.6 million in the quarter.

Most of this increase for just over $6 million reflects the flow through of care responds into practice bonus expense.

Our DNA expense was up about $3 million year over year.

As we detailed in our press release DNA includes about 10 million in expenses, we incurred as part of the transition services agreement, we have with map up following the sale of American Anesthesiology.

The reimbursement for those expenses is reflected in our investment and other income line item. So there is minimal impact to our adjusted EBITDA, but they do and quite our GNS expense.

As one last bridge for DNA, there were just under $3 million in key essay expenses within our second quarter genetic.

Finally on our GNS expenses is the wind down of the PSC would map.

This activity will wind down as we move through 2021, but in terms of financial impact at Mednax, there will likely be a lag time for us to bleed off these expenses currently being reimbursed for.

So I would think of our DNA expense, excluding moves PSC costs as a future state that will work towards and not an immediate step down in GNS.

Our transformational and restructuring expenses were $34 million for the quarter.

Which included about $27 million of costs related to our executive and board restructuring.

Roughly $5 billion and consulting costs and the rest related to contract termination fees and the like.

We will continue to reduce our transformation activity through Q4, 2020, and expect any ongoing consulting expenses to be minimal by early 2021.

Overall, adjusted EBITDA was just under 73 million for the quarter up from $69 million last year.

We know that many analysts models for the quarter still included our radiology organization.

Hello Bridge results of People's models, we detailed in our press release that Mednax radiology solutions generated Q3 revenue.

Adjusted EBITDA of 126 million and 21 million respectively.

Again on a sequential.

Central basis, our adjusted EBITDA showed a sharp recovery $73 million from $56 million.

For one last piece of detail the cares funds, we received in Q3 contributed $8 million of EBITDA.

Compared with 3 million contribution in the second quarter of this year.

I'll make one final note on adjusted EBITDA for those of you keeping models why we aren't providing financial guidance for the fourth quarter of.

Ill point out that while we have applied for additional care response based on HHS guidance, it's uncertain how much we will receive during the fourth quarter.

So the more appropriate comparison to use for your models would be our third quarter adjusted EBITDA, excluding the care's contribution to that.

As we have done for the past two quarters, we will provide specific details of any cares funding we received during the fourth quarter. When we report early next year.

Turning to our balance sheet and cash flow.

There are a number of moving parts on what's flowing through continued operations and discontinued operations, particularly.

Given the collection of retained our from making it easier transaction flows through discontinued operations.

The better way to look at cash flows.

Then as our total increase in cash for the quarter to $295 million from $132 million at the end of June.

Roughly $40 million of this increase reflects into future AR collections. Another $28 million reflects the receipt of income tax related refunds and.

And the remainder reflects operating cash flow from our core operations within continuing ops and from radiology within discontinued ops.

With that I will turn the call back over to Mark.

Thanks, Mark I'll now pickup and provides with a look at what we're up to and what it means well.

When I look at our share price and read analyst comments about our company I see a misunderstanding we're not an organization that is sitting around waiting to see what share we will get our country's birth rate and at this point, we don't see any signs of a major drop in birth rates like we've heard about anecdotally.

Instead, we are very actively managing every aspect of what we do to maximize efficiency without ever putting our patients anywhere, but as our number one priority we have been reducing our overhead and in particular slashing and outside consulting spending which for the year to date was almost $50 million. The total in almost $30 million related to our continuing operations.

While we're not providing earnings guidance I will reaffirm our view that we can achieve a steady state EBITDA run rate of $270 million in 2021. This.

This assumes no major continuing effect from coated icon.

My confidence in this is bolstered by the combination of our control of our business in spending along with the direct and constant push for sustainable organic and new growth.

If you're having trouble getting from our current quarterly EBITDA levels to where we think we can though I would point to a few things that high level first.

The $14 million in care solid we received in the third quarter and the EBITDA associated with those dollars did not fully make up for the lost revenue experience due to the pandemic. This is clear when you see that even including these dollar our same store revenue remained down slightly this quarter second.

Second we continue to make overhead spending reductions, which likely won't be fully evident until after the end of this year.

We've also made significant changes to our leadership team and reporting structure book, which also were not reflected in our third quarter results.

Third the changes in sales and gross which are reporting directly to me and our veteran Chief Development Officer, Dr., Jim Swift and operations reporting to me, Matt and monitor our new and will materially affect the way we run the company.

I want to expand on this last point, Matt and I are visiting our practices and hospitals in our key markets and we now for the first time have practice data analytics to allow a much more effective monitoring at financial control of their operations.

In total the focus on increasing efficiency and first hand understanding of our practice is in part the hospitals was begun last fall by NAC and our team.

This now has the full support and attention of our entire organization.

Underscore the importance of this focus sales business development and strategy now report directly to me into that is what we see many ways to grow organically and with a combination of new practices and new and expanded hospital relationships and we are very confident that we can grow without straying from women and children's health.

I can attest to the strong relationships, we have first hand with hospital systems, who are eager to find ways to expand our partnerships and we will be all over this.

In fact, just this week, we were very pleased that subject to customary board approval. The memorial healthcare system here in South, Florida announced their decision to choose Mednax to lead their neonatology services of course across three hospitals, including Joe Dimaggio Children's Hospital.

This achievement was only possible because of our reputation.

Our dedicated and read dedicated focus on women's and children's care and relationships that were built and nurtured long before I got here.

Our founder Dr., Roger Medellin, our senior leadership with Mac May did a reality I can promise you.

That our passion for excellence and smart growth is alive and well at Mednax.

Got to Mac has and will now share our teams combining this passion for both clinical excellence in operations Excellence Matt.

Thanks, Mark and good morning, everyone as Mark said, starting the course with Roger Dell, We have insisted on building our relationships and our reputation as a leader in women's and children's health when we met with the leaders and Memorial Health care. This was the focus and the commitment we brought to them. So we're very excited.

To begin providing services during 2021 and to bring our decades of dedication investments in data and clinical research and our mission to take great care of the patient to several additional outstanding hospitals here in South Florida.

Across the three memorial health care hospitals, where we'll be providing neonatal care. There are roughly 13000 annual deliveries and 120 new beds. This is about 1.5% addition to the 2019 annual volume across the Pediatrics organization.

This is now a very flat organization with a complete absence of silos will work together in teams to make sound decisions for all of our operations teams and our medical groups.

Hi, Great market. We are in this understood as a company, we're not just a grid neonatology practices, but a diversified national medical group across more than a dozen pediatric medical and surgical specialties, plus maternal fetal medicine, and they'll be hospitals Ob hospitalist services, providing the most vulnerable patient population.

In the country to care to the patients to date.

Second leathers their newborns and children.

It's incumbent on us to ensure that positions across our organization are fully supported so that they can care for their patients as best as possible.

Physician spend years of their lives learning and training and the science and medicine in order to bring their knowledge and skills, but thats out of Asia.

It's an art owns the repeated patient interactions that allows every clinician to translate science into compassionate care for our patients, but healthcare is also a business DARR business requires us to work every day to the tools in the hands of our clinicians. So they can deliver high quality care to our patients in the most cost efficient.

In an effective way possible and to do so in a way that positions us for growth as an organization.

In order to do that last fall, we focus our efforts around our market based approach in each geographic area. We consider how we can strengthen and support our practices and how we can be better partners with our hospitals. So we can expand existing relationships and form new ones.

What sort of tools we supply.

We're introducing several tech enabled solutions that will improve the efficiency of the work or clinicians do each day.

These include a significantly more streamlined charge capture system.

Cloud based image access and storage solution. The continued development of our cloud based neonatology specific nodes in data system and upgrades to our ambulatory HR that are better for our clinicians and improve the patient facing world for our patients and their families.

Since August we're supplying real time data practices vacancy and more importantly, manage patient volumes our operations team and clinical leaders are highly focused on improving access to patients to more actively managing our market relationships.

These data enable comparison of our productivity data across the practices and will allow more direct dissemination of best practices. This also enables a more active management of staffing and expense allocation.

One of the greatest predictors of success and our partnerships at the hospital and health system level is a high degree of strategic alignment between our clinical leadership and our partners. This required of our clinicians skillset beyond just the practice of medicine.

And to this end were Relaunching, our endemic delayed clinical leadership development program physicians and nurse practitioners from across the organization will be started in this group new program at the first of the year. So we can actively develop and support future clinician leaders at Mednax.

Steps, we're now taking will help us better allocate resources will improve the efficiency of our clinical staff and will enable improved patient access and market relationship management.

And we will foster stronger health system relationships. These actions will maintain our plan for the business improve our presence in our markets and retain and attract talented clinicians and new practices to a growing mednax.

With that I will turn the call back to Mark.

Thanks, Matt Operator, now, let's open up the call for questions, Matt and Mark and.

SPD, Charlie Lynch, who are available to answer.

Questions.

Certainly and just as a reminder, ladies and gentlemen, if you wish to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one general demand.

And first go line of AJ Rice with credit Suisse. Please go ahead.

Thanks, everybody.

This is to the team as they go forward.

Okay.

So I know I appreciate the comments about not being able to focus on.

Short term volatility of birth rates, but I know there was a comment in the press release about the what you're seeing in terms of maternal fetal and patient quality of being slightly down.

Does that give you any indication of what the next couple of quarters might look like in terms of volumes is that.

Suggest the.

Similar to your long term correct.

Volume.

Like ratios.

Yes. This is Mac.

It certainly suggests that we're seeing a similar type volume that we've seen in the past. The fact that we're returning to baseline and beyond that I think it's hard to predict.

Forward beyond that information.

Okay. Okay.

The key question, obviously, when you finish the sale of the radiology business were calculated you'll be just north of two times debt to EBITDA also presumably you have a lot of a decent amount of flexibility on your own capital deployment can you talk a little bit about how you're thinking about capital deployment firms.

Your repurchase tuck in deals larger deals.

Other uses of your cash flow going forward is to public the radiology.

Sure.

I touched on I touched on that briefly in my comments. This is mark up.

First we think there are a lot of growth opportunities.

Our core area and around our core area and we're working very hard on that so we want to make sure that we have the capital to deploy to make that happen and to always have a very strong balance sheets process.

I think where we have a very sophisticated board and we're very careful about past capital allocation as I said, we're very shareholder friendly if in the future is being sent to to consider a buyback or or some kind of distribution. We'll of course, we'll of course, we'll do that.

Great thing is for this company to have a great core business and to also have the financial flexibility to make the right moves so.

We have no plans to announce today, but our eyes are wide open.

Okay, maybe just a final question Dan I know over the course of this summer there been discussion about.

As you refocus.

On the women's health business and Pediatrics legacy business there.

There was the potential to.

To re accelerate a bit the growth rate I know, putting upward volatility quarter to quarter aside and maybe get back to you know certainly the low to mid single digit.

Type of topline growth I Wonder if you have any.

Views on that I know that wasn't really your assessment that you offered it was the previous group, but what are they fear how you feel about that.

Well, while I won't put a number two with yet because the process is that I described in my comments. It really just recently started I do think that we have a lot of avenues for growth stock.

Starting now and going forward. So I am confident that we can achieve a solid level of of both organic and add new growth, but again in our areas. It's not we're not looking to do anything.

Outside of our core areas and we're very fortunate to have a core areas have a lot of opportunity and I would I would go back to the comment that Mac made that by looking at looking at our company and the span of our company and you look at it market by market and think about how we can be better and bigger partners with hospitals and and have more.

Practices join us in and around our core I think it gives us a very credible way to growth.

Without the without stretching and I'd say.

You talked about the New award that we got from from Memorial Hospital here in South Florida.

I think there are there opportunities like that throughout the country and we have a great team of operators, who are really working on how to take advantage of those opportunities and that and this may seem unimportant to me. It's all important. This all we do this we talked about day and night, we are working together as a team we have no.

As a distraction. This is what we're doing so that gives me a lot of confidence in our ability to grow.

Okay. Thanks, a lot.

Thank you.

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

Hey, good morning, guys.

Mark just a question on the comment that you made during the prepared remarks about.

Just not seeing birth rate compression, obviously, you put up a 5% Nikki volume growth same.

4.3% same store number for the quarter declined.

How should we put those two comments together I mean, what's the what's the link between those two.

Well the reason for my comment is obviously, we hear plenty of anecdotes, we read articles and.

We're pretty passionate about this to look to see if there is some clips that we're approaching them or something to quickly here because dire dire predictions were not in the bases that went on in the business of making.

Long term forecasts on birth is we'll leave that to others, but we don't see anything within our flow that would indicate a precipitous decline. So what I was saying is that I see us growing and we expect that they will be plus or minus of some changes to the birth rate, but we just don't see anything that would tell us that we're walking into a.

Into a clear sustained decline and eat and you should assume well I'll tell you. We have look to see if we can find the trend like that and and we had when we tour our mixed use and and.

EBITDA quite a bit we haven't we haven't found that so obviously, if something precipitous were to happen. If you would change things as to this.

God forbid that a pandemic becomes the worst of the country that didn't happen that would affect us, but we just.

We have tried.

Very dispassionately to find.

Trend and we have so we're certainly not expecting a big jump in the growth rate either not.

I appreciate that very helpful. So and I appreciate you addressing the sell side concerns. So I guess just along those same lines. If you don't mind, just describing to us what the comp structure is now that we're down to the legacy core business without FTD allergy and Rad.

Yes, just thinking about the flow through of payer mix changes in volume changes over time.

What's the variability in the comp and how should we be modeling that again with the risk in in the horizon, whether its payer mix shift their volumes compressing.

Well I'd say that that that kind of detail is to comment I am not sizing that I'm not dodging the question, but we're making an awful lot of changes we have operated this company we still operate this company with.

With a focus on both our core business and on radiology. So we are in the process of restructuring the way, we operate which is going to affect the overhead.

And and how we how we run the business and if that as we.

If we grow in the areas that I think we will I think it's going to enable us to.

Yes, we still have the financial leverage characteristics that we've had but I think that we can we can operate as a much more efficient company then that we've been able to in the past.

We'll provide those details over the coming quarters as we as we make our changes here.

I appreciate it and then last question for me Mark you are known as a turnaround guy coming into Mednax is a fresh set of eyes.

Obviously, there are cost opportunities here and I guess, you guys alluded to in your prepared remarks, but if you can just give us more detail on what are the areas. You are seeing right off the bat, where you could see non compensation expense opportunities. Thanks.

Well, we highlighted that the company for a variety of reasons spend lot of money on on general consultants over the last few years, it's not my nature to do that I'm not questioning what was done in the past, but I will tell you we're not doing that in the future and Mark Richards.

Talked about that so I think that there is just a.

Are you focused on a company and I appreciate your comments as interim president.

Look we just look at every penny we spend that happened we do a different everything so we try to find and there are lots of ways. When a company focuses to to reduce expenses going forward, but like any company. We are learning from the pandemic about what travel is necessary and what travel isn't necessary and what we can do to make our office is more efficient.

We streamlined our office expenses have come down and they are going to come down further so.

I do think we're good screening and we have nothing else to focus on having said that I'm also as excited I'm much more excited about the fact that the team. It was already in place when I got here is really an amazing team.

I don't think that they have the opportunity over the last couple of years to do so the focus on as you know there were an awful lot of its external distractions.

And.

At a much bigger company. So the ahead is spending time on anesthesiology radiology and all sorts of other things. So I can't underscore certainly my past. This is just what I've done I've come to companies and say Hey, you have an amazing core business with obviously, great people that I even higher.

Let's let's work together with the team and focus on it.

And even in the sales process.

Two for me back to Swift and the team to be working so closely together means when there's an opportunity we jump on immediately and the whole organizations involved is no last time, you can imagine a sale process to be that responsive has got to bear fruit. So I would go on and on about saying that we're finding efficiencies and in many ways.

And.

And you can probably hear my voice funded more than a little exciting when I speak to the hedge with hospital systems and they talk about how much they rely on us now and how much they would like to expand our relationship but we haven't had the bandwidth to the focus to be able to really work day in day out on that.

As you know we can do that now and we are doing.

I appreciate it thank you.

Our next question from Gary Taylor with JP Morgan. Please go ahead.

Hi, Good morning, I had a couple of questions first is we're just thinking.

Thinking about valuing the company in calculating.

Enterprise value or through any adjustments, we need to make to the balance sheet outside of the $885 million of radiology proceeds are there any under.

Unearned cares act received or any accelerated payments on the balance sheet, we need to reverse out.

Hey, Gary It's Charlie no.

Those are what you would look at.

I think as we mentioned related to that to the REIT transaction, we don't anticipate any any tax implications related to those proceeds so that's a good proxy might.

Minus fees and expenses for what you would expect to receive on the carrier side. The only the only funds we have applied for or received or what we've talked about which is that roughly $14 million. We got in this quarter and something less than that in Q2, we didn't take any accelerated payments or anything like that.

Thanks, and then my other question Mark I, just want to make sure I understand what you're saying about.

The 270 million.

Run rate I think you are saying.

You won't necessarily guide for that in 21, but you're expecting as you exit the year to be at that run rate excluding.

Transformational expenses adjusted for seasonality et cetera that is that correct.

Well it would you say at the end of the year I think my only hedges like every other company on the planet I don't know, it's unlikely that on January onest. The pandemic switch will be will be switched off so I'm, saying that that if you hit endemic wasn't affecting our business.

He described how it has.

Dan I think we should be able to achieve that $270 million run rate I have seen a forecast of a good amount lower I scratch my head and I don't see any sign of that and I think that combined with its with if you look at what we were able to do in the third quarter.

And and project that out along with the changes that we're making and we are making the changes now and I'm not like seven months from now.

We see no reason have you won't be able to hit that number unless we get covered from the outside and as I said, obviously, we don't forecast.

Okay.

A steep decline in birth rates, if that were to happen that would that would make a difference.

As I said in the last call I will tell you that we are as a business is also growing at a time when things are choppy and people are concerned about birth rates and they're not sure where they are I do think that provides a buying opportunity for an organization that has a smart and careful long term approach to.

To our business, so I think that.

We don't hope for a lower growth rate.

But but there are opportunities that come in a in a choppy or time and where we are here to take advantage of them.

Appreciate that just a quick follow up on the restructuring and transformational expenses, which have been pretty material. The last couple of years certainly worth this quarter.

Well are you yet in a place to sort of talk about how those how and when those ramp down so we can.

Start thinking about a true EBITDA performance without the noise of excluding a material amount of expenses.

Hey, Hey areas Mark Richards.

Yes, I would we are in the process of ramping that down and you know I would expect very brewing on in 2020.

2021 excuse me.

That that effort and the related costs will be moving to zero. In fact is that January or February.

Probably in that range, maybe some residual that'll that'll flow through in the early part of 2021, but but not not material and certainly nothing to the level that you saw here in the third quarter.

Okay. Thank you very much.

Sure.

And next we'll go to a Whit Mayo with yes. Please go ahead.

Hey, Thanks for the question if I look at the EBITDA reported in the quarter and take out the 8 million Procures acted gets me to.

65, historically mednax is or call it 27% of the full year EBITDA in this quarter, which would imply kind of a 240 million dollar base.

Base, So I'm just trying to come up with a starting point to think about how we build up to the 270 and if theres any headway.

Headwinds or Tailwinds that we should consider in terms of you know.

You know in a normalized environment, where you would be versus the pandemic you know where your your budget was and where you are now costs that you know anything that may help us sort of bridge the gap would be would be helpful. Thanks.

Yeah, Hey, Whit, it's Charlie I can give you a couple of things and Mark alluded to this in his prepared remarks. When you. When you look at that 65 that doesn't include the care as mine.

That's effectively gives you a fairly broad depiction of our operations right now as impacted by the volume trends. We've seen this year related to the panda and over and above that when you look at the contribution from the carriers dollar we received this quarter.

You can see to that even including those at the top line and I think the flow through into EBITDA you know is.

Comparable to what you would have seen if we had sufficient volume to get there you know our same unit revenue was still down slightly year over year, which is you know somewhat less than our trend in same unit revenue for the past several years. So that's the most important thing that while we're pleased with how much we've seen volumes come back.

I can parse the return to normal they are not back to normal and that had an impact in flow through to the EBITDA that Mark mentioned now the two seven days is predicated on a view of normalized normalized performance.

The last thing I would bring up as just a different reference point is when you look through the.

The pro forma financials, we provided for 2019, it's on our website, you'll see that for the full year 29 team for continuing operations, we had adjusted EBITDA of $260 million to $161 million. So that too is a relatively appropriate baseline to think about for last year, which was not impacted by the penta.

And with Mark the other thing that I would say over the last several months with the reorganization of the of the company and everything that went on the sales process that I described as an outgoing forward sales prices. This was somewhat interrupted so indeed in the third quarter you still have significant expense.

That was as Mark Richard said will be mostly gone by the beginning of the 21.

And add the overhead changes that I that I described will be in place in 21. So there was a lot of spending in the third quarter that we won't we don't expect to see in 21, coupled with that.

An effective sales, which you didnt see in the third quarter of this year, because again I would say the bus proceedings in the third quarter that pace was not as robust as we expected to be I think Bart maybe more specifically, meaning our normal sales marketing and business growth process, yet or not the radiology sale process yet.

No. That's all just just to be clear Charlie I think you were you were suggesting that if we look at the care's contribution that's a decent representation of.

Outperformance may have been in the absence of the pandemic is that a fair characterization.

It's structurally that's what I met with my other point is relevant to this.

Yeah.

I think we would have anticipated.

Negative same unit revenue growth in a normalized environment and.

By that I mean, the funding we received through the cares Act did not fully.

Replace what we experienced in lost revenue related to volumes.

Okay. That's helpful and maybe one other question just scanning the queue. It does look like you've got a model.

Closures around payer mix and subsidies and subsidies looked like they were up 10 million year over year and I know that's the normal course of business, but I guess, maybe just remind us how this works with your hospital partners how much visibility you have into.

Sustaining those type of increases and maybe what the trigger points are.

For.

Where are you.

Yeah I saw you mentioned in your note wit, and just a quick clarification there.

You know for that contract an administrative fee revenue was up 10 million year over year. The majority of that increase is related to new business contracts signed and the like that include some level of.

Admin fees.

Only about 3 million represent the same unit comparison year over year. So that that's really where you saw the increase in that and you know those are all negotiated.

Contractual structures. So that's just part of the new businesses that we sign we see that as part and parcel of how we're providing services on those contracts.

And with its Mark Ordan I also go back to what I referred to and Mack described in more detail.

This company for.

It's existed did not have in my opinion anything likely a good dashboard to be able to look at at the at the factors that contributed to the results and its ambulatory practices and other other places in the organization several months ago again long before I got here. It was a strong effort to create.

The analytics and data analytics, so that we could really looked at all the financial movements in our revenue in our practices to think about the comparison with that practices are versus whats employed elsewhere.

I don't know how you can move results without those analytics those analytics didnt exist before they were first rolled out starting about a month ago.

So.

I'm, just trying to give you and everybody understanding that that.

That would is running efficiently. We can we can you know, it's very hard to drive the car with no dashboard and no windshield and and and I actually I would say admired what people were able to do without that but with that we can look at scheduling what they're looking at a host of things.

And and be able to move the needle where in the past. All you can do is go in and we did people well so.

So.

It's just a.

I I can't put numbers to it now I look forward to the coming quarters, putting numbers to it but.

From my experience elsewhere, that's what gives me confidence that it's.

It can be different here.

No. That's that's helpful sounds like Theres, a number of cumulative positive forces there. So I appreciate it thanks guys.

Sure. Thank you.

Our next question is from Kevin Fischbeck with Bank of America. Please go ahead.

Great. Thank you.

Wondering if you could provide a little bit of color [noise] payer mix for the quarter it sounds like.

Saying that.

Yeah, there really wasn't a major change in there but.

Any different than payer mix between the core MCU business on the other services that we provide.

Hospital it can't get there thanks.

Thanks impacting yeah, and that's kind of the current.

Yeah, Hey, Kevin its Charlie no, we haven't seen anything like that.

You know.

Mark Richards mentioned that looking at the mix in the quarter. If it looks like fluctuations are at a pretty steady mean over the last several years and that's indeed, what it what it looked like.

So.

Week, we didn't see anything in there that looks like a change in trend and that trend for the past probably four or so years as you know in our payer mix and keep in mind for pediatrics and et cetera. So we're really looking at a largely binary mix between Medicaid.

And non government.

As it's been on a slightly favorable trends.

Generally flat, but slightly favorable for this quarter.

Over the last quarter, it just looks a little bit unfavorable but there are fluctuations around that or that norm. So we're not in a place where we're where we can see a change in trend, we'll see how things develop but it really looks like a normal fluctuations.

Okay.

I guess [laughter].

Any any has been exactly on the on the payer rates it sounds like that would normally have update.

And I think about as far as Medicaid rate updates in the current environment.

No nothing to call out.

Okay.

And then I guess, maybe finally.

When you think about be a cost cuts that you guys are.

Talking about kind of ramping into future quarters how.

How much more is kind of debt, we realized versus where their Q3 amount realized.

Well good amount I mean.

I guess the good news for the organization as a decent amount of that was in there was a non payroll expense were able to eliminate a lot of things.

Without a without.

[laughter] chipping away at the organization and obviously many cuts were made before.

So I think that in.

And there are a host of opportunities in non payroll area as well.

Well beyond a consulting in terms of the size of the organization. We've made changes that is largely the changes we've made are done and the Ana I.

I would expect that they've done so you'll start to see those in the fourth quarter and beyond.

Okay.

Okay.

Our next question is from Ryan Daniels with William Blair. Please go ahead.

Hey, guys next week on for Ryan that could take in my question I.

I guess, so you kind of touched upon that.

The call, but historically, you've pointed to kind of like historically, 3% growth.

Maybe a goal of getting that kind of 6% area. I know you said that's from prior management.

Just like what would be like kind of the moving parts.

To kind of get to that mid single digit levels that no mostly targeting organic is that going to be a little bit more.

Acquisition, and then I guess like what kind of birth rate itself.

You know in that in that general area to get to that area.

Okay.

I can't give you a precise answer but let me try to help you.

Mark.

Hi.

We expect a choppy birth rate, we don't expect it to be up or materially down so with that as background.

And not being able to predict any better than you can with the effective.

Cove it might be the putting those two things aside I think is all of the above meaning that we are very focused.

We are very we have a series of regional leaders regional Presidents report up to two terrific operating executives, who report directly to Mac and to me as Matt said, we have a very flat organization, so to be able to work with our practices and our hospitals to look for new opportunities, which I would call organic growth within the.

System, where all of that and I think we have a terrific team to to to do that.

To meet the heads of our mid Atlantic group or a group that in Texas. They not only have a greater understanding of operation. They have a terrific relationship with our hospital leaders.

And again I'm only bragging about them not about maybe.

Hi, guys on certain days.

So I'd say that that gives us a huge opportunity inorganic growth in terms of tuck ins same thing we have a terrific sales and business development team. That's out there theyve established long relationships with practices, it's not completely under our control because somebody has to decide that they want to sell but I think that the more that they see that we are totally focused on the business.

And then it's all of US. So we don't recently the team has been working on have an opportunity a major opportunity in ER and ER and then FM.

And yes, it was all hands on deck to make sure that the practice was comfortable that we think about the future of the practice.

Think about it but what we can do to make the doctors and other clinicians as happy as possible and and you know that.

That that involve just but everybody working together to make it as you know.

Thats getting involved when it was already 99% done so it looks like the hero, but but we'll work on it so I'd say, it's going to be a combination of organic growth and.

And and tuck in acquisitions, and and with our eyes open to other areas in.

In women's and.

And childrens health.

Health that that we think can be added.

Creatively.

Thanks definitely very helpful color.

And then kind of you discussed how internally you've been making a lot of investments in new there.

Proving analytics and things like that I was wondering if we get when we get to an area, we'll whereas you improve that you'll provide you know the street with a little bit more.

Specific data on volume you pick a date things like that.

Well I think I think.

It's always been.

March in my practice in our past lives to be to disclose as much as we possibly can so of course as we if we tell you that we're doing these things and they should bear fruit and I think we owe it to you to tell you to what extent they are bearing fruit so little bit yeah. As we as we were very confident of the of the progress.

I'll make some closing this now some of the spending that Matt described.

I still think leads to up.

Financial improvements, but very importantly, a lot of these things are just in the way.

We must do as a leading clinicians to make sure that we're always at the cutting edge practices.

Right. This is no only want to join a first rate company and hospitals only want to partner with a first rate company, we would not have gotten this memorial health system.

Contract.

If it weren't for our reputation and working on volatile. So I will tell you that when I talk about areas that we're going to cut the cut spending.

I, notably Didnt include things like research, where I think it's vital for us to to have to be a leader in that area.

And we have.

We have a physician who is our head of our clinical services as a company.

Dr., Curt Hecker and no ease of doing business person also but he said hey, we need to support our doctors.

And other clinicians.

I I listen I listened really carefully and by the way he reports.

Directly to me and but I think that that is a that.

That is a sincere selling tool to hospitals and our practices because they know that we're doing the right thing and they're only going to want to be part of a company. That's doing the right thing that focused on it. So so I'm not I don't want to commit to think that we're cutting in areas that are going to affect the quality because because we're not we will file.

We'll find other ways to cut Alternatively, the light bulb, where we do that.

Awesome. Thanks, I appreciate taking the question.

Sure Yes. Good question. Thank you.

And next we'll go to Peter Greene with Deutsche Bank. Please go ahead.

Hi, good morning, guys.

Taking my question can make some of our.

Hi, Brett quicker.

Following up on the screen for whom regard regarding corn pretty much.

Okay, all right yeah.

Moral medium.

No.

That would occur.

Revenue for the company.

And I know this is a number.

Yeah.

I apologize its mark but could you like maybe move.

Look a little bit back on the phone and its coming through garbled I.

Im getting to your question.

Can you hear me better now.

100% area.

Okay. That's.

A follow up on the $250 million, EBITDA, 2021, which I understand that.

The cobot impact.

Possible model.

Maybe I missed it but can you break out what does it split between organic revenue growth assumption for M&A to get to that number.

Yeah, Yeah, we you know I.

I think mark made a comment earlier that when we when we think about the ways to get there and it's all the above so.

Look were.

There is a reason why we don't have specific financial guidance just like every other company were going into the fourth quarter and going through our budgeting process and will be a lot more granular as we move into into 2021, but I think.

Going all the way back to the earlier this year when we when we started to discuss our financial profile. It was based off of a multiple factors between the opportunities for organic growth the opportunities for acquisitions the opportunities for cost improvements without any specific line or or contribution from each of them. So.

I think we're still thinking about it the same way in a holistic fashion without a specific contribution from X y or Z and let me add one of the reasons I said that and I was so declare that and as I was reacting to things that I read and I understand the reason for that things are bad, but I think that there was.

The thesis out there, which I totally understand if you're if the birth rate is going down and you're not and you not really grown and you're just going to sit in there how you're going to get the two seven I totally get that so so my point was hey, I don't think we're not growing I know that with our business better than we have been.

The focus that word and that that's been in the old.