Q4 2020 MEDNAX Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Med next fourth quarter 2020 earnings Conference call. At this time of all parties are in a listen only mode. Later, we will conduct the question and answer session. The instructions will be given at that time. If you should require assistance during the call. Please press Star then zero net as a reminder, this call is being recorded.
I'd now like to turn the conference over to our host Mr. Charles Lynch. Please go ahead Sir.
Thank you and good morning, everyone. Thanks for joining our call.
Through our forward looking statements and the inventory turn the call over to Mark.
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 1095.
These forward looking statements are based on assumptions and assessments made by <unk> 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 forward looking statements made during this call are made as of today.
The next 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 on the company's most recent annual report on form 10-K, and quarterly reports on form 10-Q, and the 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 on this morning's earnings press release, our annual report on form 10-K and on the investors section of our website located at midnight.
With that I'll turn the call over to our CEO Mark <unk>.
Thanks, Charlie and good morning, everyone.
Also joining me on today's call on Mark <unk>, our CFO and Dr. Mack Hinson, President of our pediatrics and obstetrics medical.
When I spoke to you we have to Q3 I expressed confidence on our earnings power of once we move past the impact of the Covid pandemic and net of run rate of $270 million on adjusted EBITDA is achievable is remains my view as I will shortly discuss.
In the fourth quarter, while our hospital growth rates were down three 3% on NICU volume was down just over 6%.
Combination with the 200 basis point of payer mix decline. This was more pronounced in November and December and this led to a decline in adjusted EBITDA on the fourth quarter compared to the third.
And while we haven't provided specific guidance for the quarter. We did suggest on on our last call that on appropriate baseline would be something similar to Q3.
Our fourth quarter results of course, we're short of that based on net payer mix shift.
It was the top end to a very tough year.
As a brief note January of results showed improvement in both volume and mix year over year versus the fourth quarter and Mark will also give some details there but at this point, we're certainly not extrapolating that one months of experience out further into 'twenty one.
And since like many other companies affected by Covid, we can possibly call the turn nor pinpoint where we might be the such a broad possible range of outcomes, we will not be providing guidance for 2021 at this time.
But when we think about 2021, we first consider our 2019 EBITDA of $265 million.
The less the roughly 40% of $50 million, we estimate as the effects of Covid and last year's birth rate declines.
That gets us to a baseline.
We also consider operational efficiencies corporate efficiencies organic and acquired growth and market focused strategies, some of which we expect to contribute this year and some in 'twenty two and beyond.
Mark and I will be talking about all of these today and any of the factors that make me optimistic on our post Covid earnings power is actually greater non load before IPO.
We believe our total focus on the women and children services will pay off with.
We're positioning our organization to be efficient and successful and to be an even better partner to our patients to our payers and to the health systems, we work with.
So where are we focused above all else, we are positioning <unk> as a leading provider of women's and children's healthcare of the markets we serve.
To do that and since we are already a leader in Canada. The babies children and mothers most of need we are doing all we can to drive the enhanced and patient access.
First our practice analytics I spoke of drilling on our last call had been rolled out enabling much better understanding and oversight of the practice level, our scheduling and patient volume management tools.
Well with this enhanced understand.
We are also expanding of our telehealth services to ensure that when you need <unk>, we will be there.
And that neither of Covid sleet, nor snow will stop us.
Second we need to broaden the range of services, we provide in each of our markets. We are identifying and filling me and all of our core of pediatric subspecialties for the sake of our patients on our hospital partners.
The that through acquisitions of new practices sales driven growth or recruiting.
I will also let you in on the Med <unk> secret debt, we won't keep secrets.
I'm proud of we spend a great deal of money and time on independent clinical research clinical training and seminars.
This area along with all of our clinical need is.
Led by Dr. Curt Picker and its sole mission is to support our affiliated doctors and.
And to enable the debt possible care through better database knowledge.
This is one of our affiliates affiliated clinicians want in their practices.
And third in keeping with our commitment to lead the women's and children's of care I'm excited to announce the addition of a blend of pediatric urgent and primary care to our core pediatric services.
Given our great bench strength of pediatricians, and the clinicians and our markets.
I think it's only natural to help families as the go to group of babies children's maternal needs.
So whether it's for a code of Sprague immunizations, our tests of consultation or Super convenient and expert primary care, we want families to turn to us because they trust us and know they can rely on us.
And they should because bill no we cannot only handle day to day needs, but we on our hospital partners can handle anything slight growth that way.
What do you want your loved ones to benefit from all we do at net backs.
Today, we are announcing that the begin this effort, we are requiring nightlight pediatric urgent care of Houston, Texas.
Nightlight is small at night.
This minority and women owned and led eight unit practice will be the foundation of our multi market growth plans in this space.
The nightlife Ceos of lighting, Brian and medical director, Dr. Anastasia genitals will join Mednet as executives in charge of this area reporting directly to me, Matt and Dr. Jim Swift, our Chief Development Officer.
All of the especially evolve, particularly given my background in multi site real estate in both health care and retail and since we view this as the new and enhanced service of our hospital partners, Matt Jim and our other senior market leaders, we'll be working together to tailor what we do the best serve our patients from hospitals and our core markets.
Of course note that we're jumping into this without a big splashy acquisition.
We believe our existing operations team in our major markets of size to be able to oversee our growth in this area since of the clearer extension of our core.
Beyond patient access we are working to be as efficient as possible.
Also we had the urgent care primary care telehealth and broader patient access is perfectly and of value based approach to care.
We have been determined for over 40 years to take great care of the patient in every way every day the combination of the efforts on describing only further of this.
We're equally focused on efficiency from a corporate standpoint, because the more efficiently. We can run amendments of the business the better will be of supporting on practices and partners. So Mark will also give some details about where we think we can go in terms of our corporate expenses.
So here at the onset of 2021, I'm inviting you to consider our post Covid company when we combine our core practices operational improvements with the strategies and growth additions I've just outlined as.
As well as the efficiencies that Mark will further detail.
But also consider all of the linked to a very strong balance sheet cash position and cash flow.
The strong combination of factors that give me increased confidence on our earnings power and the opportunity to move meaningfully beyond the $270 million and adjusted EBITDA that we've referenced while still being able to consider other shareholder friendly uses of our capital.
With that I'll turn the call over to Mark Richards to provide more detail mark Thanks, Mark and good morning, everyone.
I'll add some details of our fourth quarter results and then speak to the notable headwinds on a tailwind as we've contemplated as we look at 2021 lastly, I'll touch on of our financial position on the capital available to us for the future allocation.
Turning to the quarter at the top line, our net revenue declined by $42 million of just over 9% year over year and by $44 million compared to the third quarter.
I'll point out that we recorded only a very small amount of revenue from the provider relief fund established by the cares Act during the quarter.
Same unit volumes declined six 6% year over year, which compares to a four 3% year over year decline in the third quarter.
We provided a brief table on our press release with some volume detail.
But a lot of couple of points for color.
First during the fourth quarter volume declines were more pronounced in November and December than they were on October.
Which for many of our service lines of appears to coincide with the surge in COVID-19 cases across the country.
A likely negative impact this had on patient arguments on our office based services as well as on selected the pediatric services, we provide in the hospital.
Second our NICU days were down by a greater amount of total worse at the hospitals, where we provide <unk> coverage.
This reflects modest year over year declines on both the rate of admission in the NICU and the average length of stay.
And third and our office based practices.
The pediatric cardiology volumes were the most impacted during the quarter, while MSM volumes were down only slightly compared to last year.
On the pricing side, the most significant factor of the fourth quarter was payer mix, which shifted roughly 200 basis points towards the government payers compared to last year.
And the impacted our topline negatively by roughly $10 million.
On the expense side.
I want to share a few thoughts that can demonstrate both the variability in our cost structure in the active steps we've taken to enhance our efficiency.
First our practice level salary wage and benefit expense was down by $15 $3 million of just over 5% year over year.
This reduction mostly reflects the variability in our practice based compensation structures, primarily bonus expenses.
In fact in our G&A expense was down $4 $5 million year over year.
Despite the fact that we incurred approximately $5 million of transitional service expense primarily related to the sale of American anesthesiology earlier in 2020.
The reimbursement for those expenses as reflected in our investment and other income line item. So there is a minimal impact to our adjusted EBITDA, but they do inflate our reported G&A expense.
I'll also make a similar point looking at our results on a sequential basis compared to third quarter of 2020.
Overall, our revenue declined by roughly $44 million.
<unk> adjusted EBIT declined by about $14 million.
Keep in mind that a significant component of these declines with the cares Act funds, we recorded in the third quarter, which contributed $14 million on revenue and $8 million and adjusted EBITDA.
And which did not recur in any meaningful way in the fourth quarter.
Now turning to 2021 as Mark mentioned, we saw some improvement in trend in January versus the fourth quarter of 2020.
Our same unit revenue declined by five percentage year over year, we've seen unit volume was down by roughly 6% of.
Offset a bit by net pricing growth.
Keep in mind. The January 2021 had two less office space than in 2020.
Which reduced our same unit volume by just over two percentage points.
Additionally, our payer mix by volume was about 100 basis points unfavorable year over year versus 200 basis points in the fourth quarter.
So overall, while same unit revenue continued to show a decline in January.
It was less significant than what we reported for the fourth quarter of 2020.
Lastly, our NICU days declined by three 2%.
As of six 3% year over year decline in the fourth quarter.
Looking at 2021 as a whole I think the Mark gave a lot of detail on the tailwind we're contemplating <unk>.
<unk>, our organic growth plans M&A expectations and patient access of enhancements across our office based practices and in telehealth.
I want to add to that some color on our expectations for G&A.
As Youll see on our reported results our G&A for the year was $249 million or 14, 4% of revenue.
This is of somewhat distorted figure since it includes roughly $18 million and PSA related expenses, we incurred.
In 2021, we do anticipate the dollar of decline in the G&A as.
As compared to 2020, even though we will still be incurring additional PFA expenses.
And based on the additional efficiencies. We believe are available to us we view our future state G&A profile is moving below 13% of revenue.
So the G&A reductions, we expect to achieve in 2021 represent not only of potential tailwind for this year, but an additional potential tailwind beyond 2021, as we move toward that future state and possibly further.
Based on the pace of revenue growth over the coming several years.
In terms of specific headwinds our 2020 adjusted EBITDA includes a $14 million benefit from the cares Act. We proceed.
While we may receive additional funds in 'twenty and 'twenty one.
We're conservatively not anticipating any material contributions to adjusted EBITDA This year.
Second wave, we've contemplated a modest negative impact of pricing based on a number of fee schedule and coding updates finalized by CMS through late last year and.
And finally.
As I've highlighted already.
There will likely be some timing lag between the wind down of our TSA agreements and our ability to reduce the expensing expenses, we're incurring under those agreements with an average of DNA line item.
There's one last item for those of you keeping models I do with the highlights.
Seasonality of our operating results.
Particularly given the unusual nature of last year's pandemic impact.
But also with an emphasis on the quarterly results from continuing operations for 2020 that we provided last fall.
<unk>.
As most of you know <unk> normally has a relatively low contribution of full year of adjusted EBITDA from the first quarter.
Due to the restart of payroll taxes 401 cash contributions and other factors. Additionally.
Additionally, since last year's first quarter reflects only a partial impact from Covid, we expect that adjusted EBITDA from the first quarter of 2021 will be lower than our adjusted EBITDA from the first quarter of 2020, which was $33 1 million.
Lastly, I'll touch on our financial position of cash flow profile.
This should be far more straightforward now that all of the significant transaction activity of 2020 is behind us.
On the balance sheet side, we completed the sale of <unk> radiology solutions in December for roughly $865 million of net proceeds in.
It is early in January of this year, we redeemed our $750 million of $5 quarter of senior notes for $764 million of cash.
Based on our cash on hand at the end of December.
And that redemption at the end of January we had 1 billion of debt, representing our 2027 notes at approximately $370 million of cash from the net debt of just over 690 day.
And our go forward interest expense.
Should be approximately $16 million per quarter, assuming no material borrowings on our revolver.
In terms of cash flow of our historical experience has been that we convert somewhere in the range of 60% to two thirds of our adjusted EBITDA to GAAP operating cash flow.
And our annual recurring capital expenditures should be under $25 billion. This year.
This expected free cash flow in 2021.
Combined with our existing cash on hand, and borrowing capacity under the revolver.
Our buys us with significant available capital for both contemplated on the contemplated acquisitions as well as any shareholder friendly uses we may consider in the future.
With that I will now turn the call back over to Mark.
Thanks Mark.
I think we are now ready to.
Taking the questions.
Thank you, ladies and gentlemen, you do wish to ask a question. Please press one event zero on your telephone keypad you.
You can withdraw your question at any time by repeating the one zero command.
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Well, we'll go here because of the line of a J rice with credit Suisse. Please go ahead.
Hey, guys. Thanks for taking my question. This is Rob Moon on for a J rice.
I guess just to start.
Regarding birth rates and then I guess the disconnect with the lower NICU days.
Are you seeing any impact in your mind from maybe a hesitation at the start of the pandemic for people too.
In March of their families at that point or are you seeing some type of avoidance from hospitals.
The the.
The impact of the pandemic and kind of the concerns around safety in those areas.
What are you seeing in terms of how you can explain some of these trends.
Well, it's mark.
Start off net.
The Mac and kind.
Kind of fill in from us from his perspective.
We try like every ever as a company that's been affected by Covid to figure out how much of its attributable to what to what.
And sort of anecdotally, we all think about the factors that you've considered and wonder.
How much of that at play.
And how much of people waiting to waiting for the vaccine before they'll continue with net.
On their family plan.
So it's.
It's hard to quantify that's why we've been careful to say that that the there were a whole bunch of things that happen in 'twenty, one, including the decline in the birth rate, we can't forecast, where that's going it's certainly not the dire to clients that debt.
Many people in the last half of last year, we're expecting that people would talk about of double digit declines.
And we.
We don't have any.
Evidence to show.
Why the NICU days would be different than the with the birth rate because theres. So many cross currents during the pandemic, having said that and of Mac is.
No.
The neonatologist by background.
Today is in very close touch with other are net gains out of hospital partners from Act of if you have anything else you want to add just.
Just a couple of things one is sort.
No change on our carbon requiring the admission standards haven't changed at all.
And then secondly on the question about the hospital partners any hesitance with hospitals.
<unk>.
Really minimal diversion of the NICU bids in response to Covid and the.
The ball there was much more of that that turned out not to be needed in the spring. The hospitals did not react similarly by of diverting Nicky beds to potential COVID-19 adult beds and.
And the second sort of parts of the surge here.
Great. Thanks, guys I guess, just one more.
On the surprise billing legislation in late 2020 that was enacted.
What's the risk there too the impact on on your claims and then also on your future negotiations with payers, how should we think about that kind of size that.
Well look we're very aware of.
The.
We are we operating overwhelmingly of network, we don't think that the surprise billing is going to be a major factor for us we have we support the effort too.
Avoid surprise billing, we think it's better for everybody.
We don't consider that.
A major issue for us and again, where we are.
We're comfortable with our relationships with other carriers.
So.
We feel okay about it.
And then maybe if I could sneak in on one last one.
The commercial mix decline in the fourth quarter.
Do you expect this was partially due to the comps or is this more related to the high unemployment rate or do you think it has to do with working families may be delaying burst at the early onset of the pandemic and Thats why youre not getting as much commercial mix there.
Some of the work from people, who had made those decisions.
It's a good it's a good the sneak in question.
I think it's probably the we think we get anybody to guess is good that it's more of the the.
The second choice debt.
Because of the high unemployment rate people are not on on health plan to the levels of they were before us in the turning to.
Two government of private pay.
But we can't be certain if this was a.
The fourth quarter phenomenon that we didn't see early in the fourth quarter of it started to started to worsen during the fourth quarter and is the bulk of market I mentioned there was some relief in the.
In the in January.
So we don't know the debt does or does the trend here or not but we would assume debt because of fewer people being on on the health plans.
Great. Thank you guys really appreciate the time.
Okay.
The next you can go to the line pardon me and next we'll go to Ralph Giacobbe with Citi. Please go ahead.
Thanks, Good morning.
Yes, I understand the the Covid uncertainty, but your commentary on the <unk> EBITDA being down year over year from that 33 million reported last year and I guess bridging the.
$270 million normalized run rate.
Granted on a normalized environment I think it's still tough to read of.
Just hoping you can give.
<unk> share more details on how you bridge that and your conviction around that $2 70, plus on normalized.
Sure.
Of that 1100 hours on this the on this subject of preparing for today and in running and running the business. So let me make a few observations first the the first quarter of 2020 was a pre COVID-19 quarter.
And it was a relatively robust quarter you fast forward to the first quarter of.
<unk> of 'twenty, one and we are still in the in the midst of the pandemic. So it's hard to it's hard to go from the first quarter of.
Last year to the first quarter of this year, it's hard to make it the Patterson, we would not projected.
Guiding you, where we think the first quarter is going to come out since we simply don't know as far as the 270 is concerned.
In my comments too.
Two what we did in 2019, so what we did.
$265 million of EBITDA in 2019, and you look at and you look at where we are today you would take the strip out the effects of Covid debt gets you to of baseline now at some point we are optimistic.
Hopeful that COVID-19 will be in the rearview mirror at that point, we see no reason that we shouldnt be at the 2019 level of or beyond we will be a fully focused company just on our womens and childrens business, we will be a leaner on.
All of our management time to spend on running our core business, which was not the case.
The company in 2019 in addition.
<unk> talked about several of the initiatives that we have in place.
Many of which will have an effect on our operations on our results in 2021.
So certainly post Covid, we think that we should easily be at the since the easily because nothing in life is easy, but we should certainly be at that $270 million level, but we also see because of the things that we talked about on the call that debt.
We should be able to grow meaningfully beyond that.
I would say from my experience I have never been in a situation, where you take strong fundamentals and marry them with total dedicated focus.
And you don't get you don't get better results as I, just highlighted one being operating the company without analytics without understanding what's really going on in the practice level.
The month by month of the week by week.
The hard and can manage the company. So in your minds on I think of any really really well managed company.
And they know what's going on on day to day on the company, but we do now, but we didn't before so just the ability to be able to manage the company more effectively Mac has a terrific operations team that's now no longer flying blind.
That's just a bit.
To me as an operator, it's a very powerful example of what you can do that the company simply wasn't able to do before.
Matt can comment on it but the addition of but of telehealth.
It is not just the to sound good and since our current.
Idea of giving people greater access to bad debt. So when somebody calls for an appointment then we have another arrow in our quiver of an SBU.
Matt to talk about it because.
So all of us as a driver of efficiency and that's the driver of results.
Yes happy to comment on the I think on a couple of funds of one it's an efficiency.
Aspect because our specialists are resource constrained resource we have highly specialized physicians.
There are some limited number of them and our ability to get them in front of patients and vice versa patients in front of them is.
Is enhanced by being able to debt virtually.
And certainly we saw during the initial phases of peddled at as we stood of telehealth.
Markedly increased our telehealth visits over 2019 and that rate of telehealth visits has continued to be consistent even with the waxing and waning in the ups and downs of Covid. So we've continued to do that and I think part of the work in front of US is to continue to develop.
Our scalable model to enhance the because.
It's important to respect one is patients are thinking differently about how they access there and if we're not able to offer patients of virtual experience when that's appropriate and what they're looking for they will go to providers, who do that but then secondly, and in the pediatric data there really compelling day.
It does show that where you have of telehealth relationship, particularly in your outline areas you increased your hurdles to your own physicians into your on hospital partners.
And this allows us the telehealth with the enhanced telehealth is not just reacted to the patients that we would normally see but it allows us to expand our geographic boundaries far beyond what we've been able to do.
In the normal patients seem to come and see you in offline.
Okay. That's helpful and I guess, just my quick follow up though you talked about sort of the 33 million of sort of a robust number from one Q 'twenty.
It didn't have sort of the impacts of Covid and it I guess when I look back historically, you would generate somewhere around high teens to 20% of earnings typically in the first quarter is there something different going forward in terms of the seasonality of sort of just the business line you're in now as opposed to historically that we need to consider because.
Again bridging to that 270 would suggest of that 33, I mean, it would only represent about 12% of.
Of total annual earnings.
Any help there in terms of considering that seasonality net.
Hey, Robert It's Charlie.
The first.
I don't think were in a position today, where we're trying to bridge from from the first quarter of this year to what we see as underlying underlying earnings power of that $2 70 number and that's why we tried to.
While we're not providing guidance give you some baseline thoughts about how we're looking at underlying earnings power, while still layering on.
Some estimation of the.
The impacts of our business last year and today from the Covid pandemic.
There might be.
Two bridges in there that you would think of in terms of the seasonality.
We will probably end up revisiting that somewhat Ralph.
It does continue to exist just for the for the normal practical reasons of different cost restarts in the first quarter of the year for us but against the <unk>.
Revenue base, that's about half the size and it was the prior to the divestitures of anesthesia and radiology.
The radiology.
We'll revisit that and see if that remains an appropriate view on a normalized environment of the first quarter contribution to the full year.
But we did want to make the point related to the first quarter of 2020.
When we're looking.
And make sure that everyone is squared away.
Appropriately looking at the first half of last year within their models.
On a related solely to continuing operations for our business and non occluding radiology the line.
Specifically, we don't have a different seasonal forecast than net of the path as Charlie said, we'll look at it but right now there's no reason for us to expect a different pattern.
Alright fair enough. Thank you.
Thank you.
And next we'll go to Kevin Fischbeck with Bank of America. Please go ahead.
Great. Thank you.
Wanted to dig in a little bit more to the IND.
Initial guidance that you were giving so I guess, you're saying kind of.
The 65 minus 45, the kind of two <unk> as your kind of normalized base that you would go from.
From there to think about.
You gave from Nike.
That is the number.
But obviously you have been doing corporate initiatives to take out costs et cetera, since 2019, I don't know.
What kind of thing that's done and thats kind of in that analysis.
What you've already done.
Put it on that and then builds from there with what youre going to do prospective but it wasn't clear to me exactly how to think about what.
And by the end of that.
Right.
No Ken.
I fully understand so let me just the.
Explain our thinking a little bit 2020.
Such a terminal year of so many different things happen. In addition to the pandemic that is hard for us to tie 2022, 2021 and said there's a clear path. There were just too many large events obviously.
Dominated by the pandemic, but other corporate events, obviously and transition of events and expenses along with that that we would say it's hard to say how does the 2020 lead to 2021.
We're not giving guidance or even informal guidance. We're just trying to help you understand how we think about it and so we look back at the last year. When there wasn't all of that tunnel and the net 2019, and then we say okay. One of the things that we changed in 2000, and we're changing in 'twenty, one and how we operate to <unk>.
US the conviction debt debt beyond the.
The pandemic, we should at least be at that $270 million level. So so less of the birth of birth rate.
It comes tumbling down.
Something else happens on the Covid sits on the roads like the storm of sitting over the Midwest.
We think that zone.
We should certainly be at that level, when we spoke about it at the.
On our third quarter call.
We said just that debt when COVID-19 when the effects of Covid lift and without a precipitous decline in the birth rate, we should be at that level, our thinking hasnt changed the only difference now is that COVID-19 for all of us.
Sticking around longer than we hope.
So we.
We are hopeful about the vaccine or hopeful that in July of everybody's vaccinated, we hope that debt people bounce back, but we can't call. It any differently than you or anybody else can so again. This is not guidance. It's just trying to give you a window into how we think and why we have somewhat of a conviction debt.
The the way, we're managing the business today.
On top of of what was done in 2019.
Good yield the kind of results that we're describing.
Okay.
It would of Bruce.
Yes.
You are saying that.
Okay.
Yes.
With normalize next year.
With the a reasonable.
For next year.
All else equal yes.
It's really COVID-19, that's kind of stopping you from from reaching that Singapore. The wasn't clear on the Euro can you talk about <unk>.
The multiyear targets seem likely.
But like the getting back to the earnings power is not that.
In your view necessarily of multiyear target of less COVID-19 or some of the disruption.
That's correct, what I would what I was saying what I was saying of the $2 70 on a multi year targets of post COVID-19.
The Covid target what I was saying of that in addition to that we think we can be meaningfully above debt as the the fruits of a lot of what we're talking about really really pan out of I mentioned, the the are moving too.
Urgent care and primary care.
Thats, not something thats going to affect us.
Our bottom line results immediately so we think that that's a moment of anything telehealth and other things, which we took over time can propel us well past the.
$270 million number.
Okay and then it is all of those.
Confusing with things like the TSA et cetera.
You gave your 13% G&A kind of target.
Might take a couple of years to get there.
How does that compare to kind of.
An apples for apples 2019 G&A number.
Hey, Kevin It's Mark Richards.
If you look at the.
Call it our P&L for.
2019, we were at about $244 million in G&A.
Looking at where we are now in 2020 of $248 million. Once again that concludes call it $18 million of transition services related expenses debt debt.
Mark sitting down on another line item at of the accounting so so in terms of $20 million.
We expect which was more in the 14 plus percent range, we would expect moving into 2021 to be sub 13, knowing that the.
The timing of when we transition.
Our back office services on the anesthesiology any of them too on the radiology side, we're still performing services there.
At the intersection of.
That wind down of costs related the services, we should be below 13% on G&A.
Okay. That's helpful. But just wanted to follow up on that.
Earlier, I hope that helps on yes.
Yes.
Definitely helpful I guess one.
Last question here.
On.
The earlier about surprise billing the hill it sounds like you guys or not.
Worried about that I guess, Nicky was specifically one of the categories.
Like out in the in the Bill there.
And therefore, it seems like an area of that Congress thought that there was the savings.
To be generated from.
I mean, obviously your back of the biggest market share with whom the.
So I guess, it's kind.
On a square that.
I don't think of any color you can provide about maybe where you think your rates are versus the market average. So that is why you don't think that there's the.
An issue or any other color you can provide there at the y.
They wouldn't be pressure on rates going forward.
As I can't say why why it was worried of the way. It was in the legislation I would certainly say debt you could say that debt.
If the if there was the surprise bill is in the NICU World.
It can have a real the effect on the patient so I can understand calling that out of an area of where.
Where people would be people would be sensitive, but I'd just reaffirm and has had before since we are since we're so overwhelmingly operate of net.
We don't see it as a.
We don't see it as of.
As a major issue.
We're not we're not at all opposed to the.
The legislation.
So you don't see year in network.
The average in network rates for some of the providers.
Provider.
You cut out a little bit Inc.
Say it again.
You don't see your in network rates as being dramatically higher than the average in network rate.
And therefore does not of lot of risk.
Some of them.
I would say we have very good relationships with payers on our our rates of our highly negotiated so so we are in network so that debt.
The limit.
Exposure to the surprise billing.
Alright. Thanks.
And next we'll go to the line of Chickering with Deutsche.
Deutsche Bank. Please go ahead.
For the follow up on Rob's question about the overall trends in theory.
If there is some sort of COVID-19 baby bust, we wouldn't start to see any of those trends until realistically mid December January and February.
They give us commentary on the script about volume is down 6% in January of any chance you can give us specifically how NICU volumes did in December January and how it looks from February.
So as you referenced better systems you have in place now as you look at your pipeline for growth trends at least in the near term how do you think these trends continue.
Yes.
Hey, Tito Australia.
Couple of points on the NICU volumes I think mark might have mentioned this on the call for the month of January our NICU days were down low.
Range of about 3% so the that compares to the six points.
Just over 6% for the for the December quarter and within the December quarter.
We're somewhat worse on the Midland part of the quarter.
So in terms of the timing.
The month of January showed some.
The improvement in trend versus what we experienced late in the late in 2020.
Okay.
And then the follow up on Rob's question on the different angle can you just help us sort of quantify sort of some of these gives and takes as the bridge of fourth quarter to first quarter again, I'm not asking you the breach of first quarter to the whole year.
But normally youre looking at midnight of historically.
It's about 80% of fourth quarter EBITDA. The implied impact is is like 55%. So should we think about seasonality, 20% the COVID-19 the remaining sort of 25% impact.
Okay.
It's hard the reason we didn't give one of the reasons, we didn't give guidance on I said, we roughly estimate the difference because of the because of Covid and the birth rate as those of two things that we can't we just can't predict right now.
So I wasn't saying that the delta was because of Covid I was saying of the combination of Covid and the anniversary. So it's very hard this year to provide the bridge that you are looking for and we would we would love to we would love to provide we'd love to know if it's just a difficult comparison on.
Temptation, which we saw on other companies do is to say really nothing about 'twenty, one and saying that we can't call. It that debt. There are just too many variables. So we're focused on moving to new post COVID-19 whenever post COVID-19 is.
So I can't provide additional additional detail I wish I wish we could okay.
Okay.
The only thing I would add Peter if you look at the the pace of EBITDA trend in 2020 for our continuing operations of that $33 million in the first quarter.
Represented about 15% of full year adjusted EBITDA.
And keep in mind too that the first quarter.
<unk> had a fairly limited impact to our business from the Covid pandemic, which really occurred in late March. So maybe that's a good reference point for you to think about as well and on getting back to the earlier question too.
Relative to how you guys might have looked at the contribution from Q1 to the whole year of the past.
Okay.
One more sort of sort of.
Quick final question.
How much cares Act did you recognize in the fourth quarter.
It was less than $2 billion.
So if you assume it's just too much of $1 make it easy.
The fourth core EBITDA was sort of 13, 5% sort of down 1% year over year sort of carries that adjusted.
It seems the revenues were down nine 5%. So that's really good cost control. The you guys did can you just refresh us as the thing about practice of salaries what is the variable versus fixed just as we help think about the macro environment in 2021.
We know how to model if there is volatility within the other things you can't control of birth trends, how much of that will flow through of variable versus fixed.
I think we gave a couple of points that are useful and keep in mind that mark referenced to less than $2 million is at the top line. So any contribution to EBITDA will be significantly less than that in the fourth quarter.
We did reference looking year over year the.
No.
Total revenue declines in the range of 40 something million dollars.
Our practice level at WMD declined and the <unk>.
The teams are G&A declined in the mid single digit millions, including.
The burden within G&A of our TSA expenses.
So I think that gives the subset of of variability in the practice level of cost structure as well as action items within our corporate.
In non clinical expenses that were affected there so and we did we did think that there was a meaningful amount of cost flex.
To be appreciate it in the quarter.
Great. Thanks, so much.
And next week on the line of Ryan Daniels with Ryan. Please go ahead.
Hey, guys. We got in for I guess, the start off you talked about kind of your geographic diversification of the business I was wondering.
How are these volume declines kind of shook out.
Different areas of the large concentrations of declines in certain areas or.
Particularly healthy areas or I guess, if you can provide some color on the right.
Well it was weak at different times during the year, we sort of different effects.
Which sort of like what happened in the country. We saw a different times when COVID-19 was harder hitting in some areas more restricted window of warm restrictions in some areas has been harder hit we couldnt pinpoint a inc.
The correlation so I would say just like.
The other businesses when when people on local warnings of the positivity range with high it effect the it affected behavior, we can unfortunately.
Right exactly.
So the.
So, but it's not the case the 2021 part of the country lagged in the other part.
It didnt that moved around during the year.
Got it so no real trend to kind of call out in Q4 in that front.
Yes.
As a reason that nobody wants to pandemic right.
It has it has a massive of an effect in an uncharted attack.
So you're absolutely right.
Sure.
Yes, that's fair and then I guess just.
Subtraction of a little bit.
<unk> talked about how your renewed focus on women's health could walk from potential for maybe sort of accelerated growth in the future. Obviously, it's very murky right now due to COVID-19 and address the changing of the business, but wondering if there was any early successes on that front on the stuff you've done two debt.
It would lead you to believe that would take place in the future.
Yes.
After the thrill of bad debt.
We have a very dedicated.
Sales in the growth team.
Of course directly to learn of Dr. Jim Swift to me.
And we see a lot of interest in part of practices.
Who would like to be part of Mad Max and we see a lot of interest in the hospitals, we would like us to B b.
Of the partners with them and we think debt debt when practices and.
On hospital see that all of our energy is being better partner and beam.
I've been of support service for our affiliated practices.
Debt it makes us more and more attractive so at the time like this we are not taking our foot off the gas at all because we and I think everybody knows the one of these days COVID-19 will be behind us we want to be as strong as possible as we can when the when.
When that happens.
So we that we are very optimistic we believe that the post COVID-19. This will be a very strong company.
That we're focusing on all of the right things it wasn't it wasn't for a show that I talked about our research because we know that if somebody is thinking about joining joining med <unk> sort of hospital wants us or of payer wants to know that.
Best in class.
Think the dairy ingredients that are awfully important so while we're bringing down our G&A and really being careful on expenses, we're not doing that in areas that really support our core and we consider research an independent research.
On.
Very important thing that we do and the heads of our clinical operations.
Play a very big role in how we and how we run this business. So all of it gives us a lot of optimism we hate the fact that we have to keep hurrying up and waiting.
Because of the pandemic.
But as far as we know that debt.
Yeah.
Great. Thanks, guys I appreciate you taking my questions.
And next we'll move to the lineup Whit Mayo with E Mail.
Excuse me of UBS. Please go ahead Sir.
Thanks.
I wanted to just go back to the the payer mix deterioration in the fourth quarter is this all explained by lower commercial volume or was there some rate change from fee schedule change any collect change on the collection rates I'm just trying to make sure I fully understand what developed throughout the quarter.
It's the it's the former it's the.
It's just the.
It's just.
A greater percentage of.
The government and private pay versus what we traditionally see.
There was no there was no other.
Factor.
And again.
The first question, we can only surmise on it because people were no longer on health plans.
And by the way, we assume that as the as the effects of Covid recede and people get back to normal there'll be some lag and when they get back on health plan. So.
Just.
It's not something we can project. It's just something we think is a logical assumption.
If you run out of that go to the store to spend money doesn't mean that youre back on.
On your companies.
The health plans at the same day.
But no there was no other rate change was nothing else that the.
The took place it was simply a shift in the payer mix and for what it's worth because we know a lot of people in the the healthcare business. The Payor mix decline that we felt.
What was the.
Right to the.
Base point of what other people experience too.
Okay.
It seems a little inconsistent with maybe what we hear from some of the providers cover but.
I was just going through the 10-K and I'm looking at the.
The balance sheet allowance disclosures.
In 2020, it was up to <unk>.
78% of your growth.
And in <unk>.
Higher years track.
Generally in kind of debt 70, 475% range, what's what's driving that balance sheet allowance higher minutes. It seems to imply higher reserves, but I'm not sure. If this is an optics because of.
The divestitures. So can you maybe help us understand what's going on in there.
Doug on the.
Shift in payer mix has a direct impact on our allowance.
But you didn't see.
The.
On the payer mix didn't really impact your the.
The prior three quarters. So it was all of the fourth quarter impact is what increased the reserve for the balance sheet on islands.
Mostly most of wave that's the case.
Okay.
What is the reserve for commercial vs.
Medicaid.
I don't have that in the handy.
We tend to look at it in the aggregate.
Yes.
Okay Alright.
My other question you guys filed an 8-K, some time ago, indicating that.
You don't plan on rebranding the organization back the pediatrics.
I presume that that's just a timing issue priorities have shifted we're in the middle of of a pandemic probably not the greatest idea right now it's expensive blah blah blah, but.
Mark just wanted to hear your thinking a little bit more on that decision and do you plan on reevaluating that going forward in.
How important is it over the next call of the intermediate term too.
Rebrand back to that name if at all.
Well one of the reasons you've ticked off.
Is it on is on the money and that's the money that we'll.
We will spend several hundreds of several hundred thousands of dollars to change the name.
So we are cheap and we try to manage our expenses.
And.
It sounds cool the change of name we didn't see the reason the.
The names pediatrics and obstetrics our owned by the company on a used widely by the company and.
In many of our Nick Hughes in the ambulatory practices those names of very prominent debt. We can use those names in our pediatric.
Urgent care area as well so we just didn't see a reason to spend several hundred thousand dollars to change.
Eight a corporate name when we have these of other names that are that are alive and well.
So it was really driven by that is the familiar we are going to spend time and money.
Redoing logos and things just seem the it just seemed like a waste of money. It is of no way in no way taking away from our the focus that we've described.
Not not.
On one day.
So.
So that's the that's the answer but I would hope that you would.
Take from that debt debt, we're looking at every expense.
The health are net.
It doesn't help our patients.
And eliminating it.
I noticed the other day that the few of our lights out.
Out in the in our in our conference room, and I hope the debt with somebody turning off lights to cut down on our consumption growth.
But we are where we're like a hawk of about that and I hope that when the COVID-19 passes and things are better, but feeling more plus we continue to be just the cheap as I just described.
Okay. Thanks, guys.
Next we'll go to Matt Borsch with BMO capital markets. Please go ahead.
Hi, yes, good morning.
I was just wondering are you are you expecting of Covid subside, let's say fairly rapidly here that you would get to that $270 million run rate going into 2022, and I guess, maybe my other question here.
Can you just help us think of all of it.
I know you commented on this before but on debt how would you think that the growth rate as we look forward to 2022 and beyond and how much sort of temporary things youll still be dealing or will you be just sat and moving forward at that point.
Well look.
We.
We don't know when Covid is going to end.
And neither of you, yes, we do hope.
Yes.
With interest.
President said that people will be vaccinated by July so when you say Wow people have acted on July and as pent up demand from drawing back and people.
Really want to get on planning their families and they haven't gotten younger during the pandemic. So so when we say hey that could really snapback very quickly. So we would love to think that by the end of the year.
We're in a position to say Bob.
It's behind us in the fourth quarter of its fantastic.
Because of volume come back as I said earlier, we assume that when volume comes Roaring back.
Debt the payer mix.
On the payer mix shift could could land, but we don't have a trend to look at it. This is all unchartered waters. So we yeah. We hope that we enter 'twenty two in a post COVID-19 world the debt in Q in the.
Q3, and Q4, we're seeing the lift.
And we have we have torrance that area of <unk>.
Every possible kind of including the one I. Just described we just can't tell you, which one is going to be which one is going to be reality and there is no hedging based on our operations are based on our team or based on anything else. This is purely what.
Whats the external debt that could affect us.
We havent, we havent cut anything where we think it could in any way deter us from growth. We just we're just waiting for the for the terrible cloud to lift so the so that that happens.
So yes.
Had a guest without providing guidance I would say, what we think by 2022 the year of 2022, it'll be a whole new picture and we pray that is true for <unk> from a country of the world.
But the.
The.
But I can't I can't be more specific than that we are we are optimistic and we are prepared.
Of course of course, I understand I guess my other question was.
How to think about the growth rate.
Again under the optimistic assumption and I don't expect you got low or July.
With this whole time right, but if we are going into 2022 weeks of sort of clean clean year, how do we think about the growth rate not that youre, specifically necessarily sort of.
Kind of multi year from that point, yeah I'm sorry.
I answered your first part of your question for so long the by the second part of the question of the second part of the question is with my view Hasnt changed from the over.
The last few quarters that I think we can we can achieve a mid single digits.
Mid single digits growth rate in our company that may accelerate because of some of the things that we've talked about but we think that that's a reliable that the.
It's a reliable area for us too.
Shoot for.
Net talk about things like the pediatric urgent care and other things.
I'm sort of the revenue obviously.
Please do we think about pediatric urgent care and the effect of that could have.
That could happen.
The positive effect on that but it's too early too early to predict but I would the ies I looked at the company.
As a company debt that is the.
The specialist and leader in its field and an absolutely necessary field in medicine, and I think debt, we are an attractive company for hospitals and four practices.
So we think that that growth rate can continue and is it.
Sustainable and third I think we're a company that manages its finances very carefully and enjoys a strong balance sheet. The strong cash flow. So when you put all of that together.
We have a lot of flexibility going forward.
The strength, we have the growth and we have the core business.
Got it okay. Thank you.
And next thing on the line of Bryan Keane quite okay.
The client with Jefferies. Please go ahead, hey, good.
I guess my first question just on the acquisition in the pediatric urgent care space Youre on.
Just walking us through what that model looks like so when you buy these practices do they own or operate of box is it of the.
Specialized pediatric urgent care of unit and should we expect more.
Of these and what kind of margins are we looking at on the space given that it's obviously a different line of business from what you're used to.
Well, it's the only of the first of all we announced the way of acquiring Nightlight.
It's not our it's not our plan to go out and buy a lot of companies, we could buy of small tuck in the companies in order to just grow organically by anybody by leasing space and growing that way, which is very much part of what I've done in my past.
Hopefully of a ring on.
Like Matt I can't bring medical knowledge, so I have the bring something to the table.
So we think that we think that on each of our markets and on top 20 market as of.
A tremendous need for something like this.
And.
It's something that many of most typical urgent care companies can't really provide because of the services are inherently very limit what attracted us to nightlife was not just to be able to acquire an eight unit company in Houston, Texas, but to look to acquire their know how and two very proudly welcome.
The body, Brian Dr. Gentle two two.
The <unk> that help us think through how we do this going forward and while you can.
Right to say, it's different than what we've done on the path, we think it fits.
Perfectly.
What we've done because we have an enormous concentration of the pediatricians.
In each of these markets we have an enormous.
The relationship with our hospital partners in these markets. So we think it's only a natural extension to be able to do more for the kind of patients that we serve and we are also unique because we handle the most difficult possible cases, and I think it's at.
At least intuitive that you want to go to somebody who can help you with something minor knowing that they can be there for you regardless of what what it is.
And other companies just don't have that backup the can tell you the call 911.
We have that bench and in each of our markets.
So we don't see it as the.
We don't see it as debt.
On the diversion or something different but we have lacked in the past is the relationships with with mothers of family.
And we think that that's a natural thing for Mednet and out of the Delta to say that if we can take care of you Shouldnt. We have that relationship with you for you. Your children not just the child, who was just born in a NICU your other children of them going forward.
And since we have such a close working relationship with our hospitals, we think that it's a great fit and something the Dell appreciate it too.
I appreciate that and then I guess my next question.
Looking at the disparity between the birth trends in the NICU same store that you reported I mean is there anything you guys have seen that would explain why NICU is slightly worse I mean does this just lower Nicky utilization rate for the Alt.
So like do you think telemedicine.
B to B telemedicine going to smaller hospitals and smaller counties are smaller town is that having an impact on NICU admissions in bigger cities.
Hey, Brian It's Charlie I mean, what I'll say is that our other on I'll turn it back to our observation through through 2020 was at the beginning in the second quarter of the year.
The grade of the admission into the NICU.
I'm a headwind factor and.
As I think you know.
The rate of admissions the negative as a percentage of total versus it's been largely stable and in fact has had a very gradual rate of increase over the literally in the past several decades. So that was a departure from trend and we saw it in the second quarter of less so on the third and again on.
In the fourth quarter.
It's tough to point to specifically what that might reflect but.
Default to it being some kind of practical outcome of the pandemic and as such is not something that we would expect to continue but go back to go back to the trend in mcadoo of any of the thoughts on that side of the.
Agree with that completely the two things you would look at would be the mix of gestational ages that youre seeing presenting to Nikki and we're not seeing any.
Full change in that and then secondly is there something within the pandemic that would adjust of baby in front of you that may be required admission and those admission standards haven't changed either.
And again I think we've seen the negligible diversion of DQ beds in with your questions Hello Health.
Telehealth in the NICU helps us manage an outline maybe.
Better.
And it is on a baby to be able to make decisions that help the local care team, but it has it does not meaningfully and certainly we don't have any evidence that's meaningfully changed transfer into our units.
Got it and then last question from me.
You think about your material field business.
Obviously that gives you a little bit of of lens to future.
Admissions into the NICU, what does that look like right now.
Yeah.
Yes.
It's.
Through both the third and the fourth quarters.
On a same store basis, our MSR on the volumes were.
Not at par, but fairly close to it on a year over year basis.
Within January.
We're slightly positive so.
It's Ben.
Something we brought up on the Q3 call debt, it's difficult to draw a straight line between our.
Patient volumes and either birth trends or Nicky volume, because we don't have the perfect geographic overlap of the number of other complicating factors, but it appeared to.
Eliminate one contra indicator of the time so.
That volume base has been fairly stable and like I said.
Or at least the point in time looking at the month of January was part.
Of the barrier.
Awesome. Thank you guys.
And currently no further questions in queue.
Great well operator, thank you and thank you everybody.
We look forward to.
To talking to you in a post COVID-19 dies and growth.
You posted.
Yeah.
Q on that does conclude the call for today. Thank you for your participation and for using AT&T Teleconferencing you may now disconnect.
Yeah.
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Ladies and gentlemen, thank you for standing by and welcome to the Med next fourth quarter 2020 earnings Conference call. At this time of all parties are in a listen only mode. Later, we will conduct the question and answer session instructions will be given at that time. If you should require assistance during the call. Please press Star then zero net as a reminder, this call is being recorded.
I'd now like to turn the conference over to our host Mr. Charles Lynch. Please go ahead Sir.
Thank you and good morning, everyone. Thanks for joining our call.
Through our forward looking statements and the inventory turn the call over tomorrow.
The statements and information during the conference call may be deemed to be forward looking statements within the meaning of the federal Private Securities Litigation Reform Act of the 1995.
These forward looking statements are based on assumptions and assessments made by net active 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 forward looking statements made during this call are made as of today.
<unk> 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 on the company's most recent annual report on form 10-K, its quarterly reports on form 10-Q, and the 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 on this morning's earnings press release, our annual report on form 10-K and on the investors section of our website located at midnight.
With that I'll turn the call over to our CTO mark or debt.
Thanks, Charlie and good morning, everyone all.
Joining me on today's call on Mark Rogers, our CFO and Dr. Mack Hinson, President of our Pediatrics and obstetrics Medical group.
When I spoke to you after Q3 I expressed confidence on our earnings power. Once we move past the impact of the Covid pandemic and net of run rate of $270 million on adjusted EBITDA is achievable. This remains my view as low shortly discussed.
In the fourth quarter, while our hospital growth rates were down three 3% on NICU volume was down just over 6%.
The combination with the 200 basis point of payer mix declined. This was more pronounced in November and December and has led to a decline of adjusted EBITDA on the fourth quarter compared to the third.
And while we haven't provided specific guidance for the quarter. We did suggested on our last call that an appropriate baseline would be something similar to Q3.
Our fourth quarter results of course, we're short of that based on net payer mix shift.
It was the top and two of very tough year.
As a brief note January of the results showed improvement in both volume and mix year over year versus the fourth quarter and Mark will also give some details there but at this point, but certainly not extrapolating that one months of experience out further into 'twenty one.
And since like many of the company is affected by Covid, we can possibly call the turn nor pinpoint where we might be with such a broad possible range of outcomes, we will not be providing guidance for 2021 at this time.
But when we think about 2021, we first consider our 2019 EBITDA of $265 million.
Less the roughly $40 million to $50 million, we estimate that the effect of Covid and last year's birth rate declines.
So the two of baseline.
We also consider operational efficiencies corporate efficiencies of organic and acquired growth and market focused strategies, some of which we expect to contribute this year and some in 'twenty two and beyond.
Mark and I will be talking about all of these today and any of the factors that make me optimistic on a post Covid earnings power is actually greater non club before.
We believe our total focus on the women's and children's services will pay off with.
We're positioning our organization to be efficient and successful and to be an even better partner to our patients to our payers and to the health systems, we work with.
So where are we focused above all else, we are positioning that acts as a leading provider of women's and children's healthcare of the markets we serve.
To do that and since we're already a leader in caring for babies children and mothers. Most in need we are doing all we can to drive enhancements in patient access.
Our practice analytics I spoke of during our last call had been rolled out enabling much better understanding and oversight at the practice level, our scheduling and patient volume management tools fit well with this enhanced understand.
We are also expanding on the telehealth services to ensure that when you need <unk>, we will be there.
And that neither of Covid sleep, nor snow will stops.
Second we need to broaden the range of services, we provide in each of our markets, we are identifying and filling needs and all of our core pediatric subspecialties for the sake of our patients on our hospital partners.
Whether that's through acquisitions of new practices sales driven growth or recruiting.
I will also let you in on the Med <unk> secret debt, we won't keep secret we proudly spend a great deal of money and time on independent clinical research clinical training and seminars on.
This area.
One of them with all of our clinical needs.
Led by Dr. The current picker and its sole mission is to support our affiliated doctors.
And to enable the debt possible care through better database knowledge.
This is one of our affiliates affiliated clinicians want in their practices.
And third in keeping with our commitment to lead the women's and children's of care I'm excited to announce the addition of a blend of pediatric urgent and primary care to our core pediatric services.
Given our great bench strength, the pediatricians and the clinicians and our markets. We think it's only natural to help families. As the go to group of babies children's maternal needs.
So whether it's for a code of Sprague immunizations of our tests of consultation or Super convenient and expert primary care, we want families to turn to us because they trust us and know they can rely on us.
And then you should because bill no we cannot only handle day to day needs, but we on our hospital partners can handle anything slight growth that way.
Wouldn't you want your loved ones to benefit from all we do at net backs.
Today, we are announcing that the begin this effort, we are requiring nightlife pediatric urgent care of Houston, Texas.
Nightlight is small but Mike.
This minority and women owned and led eight unit practice will be the foundation of our multi market growth plans in the space.
The nightlife Ceos of riding, Brian and medical director, Dr. Anastasia Gentles will join Mednet as executives in charge of the this area reporting directly to me Mac and Dr. Jim Swift, our Chief Development Officer.
All of the especially involved particularly given my background in multi site real estate from both healthcare and retail and since we view this as the new and enhanced service of our hospital partners, Matt Jim and our other senior market leaders, we'll be working together to tailor what we do the best serve our patients and hospitals and our core markets.
Of course note that we're jumping into this without a big splashy acquisition.
We believe our existing operations team in our major markets of size to be able to oversee our growth in this area since of the clearer extension of our core.
Beyond patient access we are working to be as efficient as possible I.
I would also add the urgent care primary care telehealth and broader patient access is perfectly in a value based approach to care.
We have been determined for over 40 years to take great care of the patients in every way every day the combination of the efforts on describing only further of this.
We're equally focused on efficiency from a corporate standpoint, because the more efficiently. We can run mandates of the business the better will be of supporting our practice of some partners. So Mark will also give some details about where we think we can go in terms of our corporate expenses.
So here at the onset of 2021, I'm inviting you to consider our post Covid company.
When we combine our core practices of.
Operational improvements with the strategies and growth additions I've just outlined as.
As well as the efficiencies that Mark will further detail.
But also consider all of the linked to a very strong balance sheet cash position and cash flow.
The strong combination of factors that gives me increased confidence on our earnings power and the opportunity to move meaningfully beyond the $270 million and adjusted EBITDA that we've referenced while still being able to consider other shareholder friendly uses of our capital.
With that I'll turn the call over to Mark Richards to provide more detail mark Thanks, Mark and good morning, everyone.
I'll add some detail to our fourth quarter results and then speak to the notable headwinds of entailed wins, we've contemplated as we look at 2021 lastly, I'll touch on of our financial position on the capital available to us for the future allocation.
Turning to the quarter at the top line, our net revenue declined by $42 million of just over 9% year over year and by $44 million compared to the third quarter.
I'll point out that we reported only a very small amount of revenue from the provider relief fund established by the cares Act during the quarter.
Same unit volumes declined six 6% year over year, which compares to a four 3% year over year decline in the third quarter.
We provided a brief table on our press release with some volume detail.
But a lot of couple of points for color.
First during the fourth quarter volume declines were more pronounced in November and December than they were on October.
Which for many of our service lines of appears to coincide with the surge in COVID-19 cases across the country.
I'll likely negative impact this had on the patient arguments and our office based services as well as on the selected pediatric services, we provided on the hospital.
Second our NICU days were down by a greater amount of total births at the hospitals, where we provide the <unk> coverage.
This reflects modest year over year declines of both the rate of admission in the NICU and the average length of stay.
And third and our office based practices.
Pediatric cardiology volumes were the most impacted during the quarter, while MSM volumes were down only slightly compared to last year.
On the pricing side, the most significant factor of the fourth quarter was payer mix, which shifted roughly 200 basis points towards the government payers compared to last year.
And the impacted our topline negatively by roughly $10 million.
On the expense side.
I want to share a few thoughts that can demonstrate both the variability in our cost structure and the active steps we've taken to enhance our efficiency.
First our practice level salary wage and benefit expense was down by $15 $3 million of just over 5% year over year.
This reduction mostly reflects the variability in our practice based compensation structures, primarily bonus expenses.
And second our G&A expense was down $4 $5 million year over year.
Despite the fact that we incurred approximately $5 billion of transitional service expense primarily related to the sale of American anesthesiology earlier in 2020.
The reimbursement for those expenses as reflected in our investment and other income line items. So there is a minimal impact to our adjusted EBITDA of it you would inflate our reported G&A expense.
I'll also make a similar point looking at our results on a sequential basis compared to third quarter of 2020.
Overall, our revenue declined by roughly $44 million.
<unk> adjusted EBIT declined by about $14 million.
Keep in mind that a significant component of these declines with the cares Act funds, we recorded in the third quarter, which contributed $14 million on revenue and $8 million and adjusted EBITDA.
On which did not recur in any meaningful way in the fourth quarter.
Now turning to 2021 as Mark mentioned, we saw some improvement in trend in January versus the fourth quarter of 2020.
Our same unit revenue declined by 5% year over year withstand the unit volume was down by roughly 6%.
Offset a bit by net pricing growth.
Keep in mind. The January 2021 of two less office stated that in 2020.
Which reduced our same unit volume by just over two percentage points.
Additionally, our payer mix by volume was about 100 basis points unfavorable year over year versus 200 basis points from the fourth quarter.
So overall, while same unit revenue continued to show a decline in January.
It was less significant than what we reported for the fourth quarter of 2020.
Lastly, our NICU days declined by three 2%.
As of six 3% year over year decline in the fourth quarter.
Looking at 2021 as a whole I think the Mark gave a lot of detail of on the tailwind we're contemplating.
<unk>, our organic growth plans, M&A expectations and patient access and enhancements across our office based practices and then telehealth.
I want to add to that some color on our expectations for G&A.
As Youll see in our reported results our G&A for the year was $249 million or 14.
4% of revenue.
This is the somewhat distorted figure since it includes roughly $18 million GSA related expenses, we incurred.
In 2021.
Do you anticipate the dollar of decline in G&A as.
As compared to 2020, even though we will still be incurring additional Psa expenses.
Based on the additional efficiencies we believe are available to us we view our future state of G&A profile is moving below 13% of revenue.
So the G&A reductions.
The reductions we expect to achieve in 2021 represent not only of potential tailwind for this year, but an additional potential tailwind beyond 2021, as we move toward that future state and possibly further.
Based on the pace of revenue growth over the coming several years.
In terms of specific headwinds our.
Our 2020 adjusted EBITDA includes a $14 million benefit from the cares Act we received.
While we may receive additional funds in 'twenty and 'twenty one.
We're conservatively not anticipating any material contributions to adjusted EBITDA This year.
Second wave, we've contemplated a modest negative impact of pricing based on a number of fee schedule and coding updates finalized by CMS through weighted last year.
And finally.
As I've highlighted already.
There will likely be some timing lag between the wind down of our TSA agreements and our ability to reduce the expenses expenses, we're incurring under those agreements within our G&A line item.
There's one last item for those of you keeping models you with the highlights of <unk>.
The analogy of our operating results.
Particularly given the unusual nature of last year's pandemic impact.
But also with an emphasis on the quarterly results from continuing operations for 2020 that we provided last fall.
<unk>.
As most of you know bad Max normally has a relatively low contribution of full year adjusted EBITDA from the first cohort.
Due to the restart of payroll taxes, 401, K contributions and other factors. Additionally.
Additionally, since last year's first quarter reflects only a partial impact from Covid, we expect that adjusted EBITDA for the first quarter of 2021 will be lower than our adjusted EBITDA from the first quarter of 2020, which was $33 1 million.
Lastly, I'll touch on our financial position of cash flow profile.
This should be far more straightforward now that all of the significant transaction activity of 2020 is behind us.
On the balance sheet side, we completed the sale of <unk> radiology solutions in the December for roughly $865 million of net proceeds in.
It is early in January of this year, we redeemed our $750 million five in the quarter senior notes for $764 million of cash.
Based on our cash on hand at the end of December.
And that redemption at the end of January we had 1 billion of debt, representing our 2027 notes at approximately $370 million of cash from net debt of just over 690 day.
And our go forward interest expense.
It should be approximately $16 million per quarter, assuming no material borrowings on our revolver.
In terms of cash flow our historical experience has been that we convert somewhere in the range of 60% to two thirds of our adjusted EBITDA to GAAP operating cash flow.
And our annual recurring capital expenditures should be under $25 million this year.
This expected free cash flow in 2021.
On buying with our existing cash on hand, and borrowing capacity under our revolver provides us with the significant available capital for both contemplated on the contemplated acquisitions.
As well as any shareholder friendly uses we may consider in the future.
With that I will now turn the call back over to Mark.
Thanks Mark.
I think we are now ready to.
Take any questions.
Thank you, ladies and gentlemen, if you do wish to ask a question. Please press one event zero on your telephone keypad you.
You can withdraw your question at any time by repeating the one zero command.
Youre using a speakerphone, please pick up the handset before pressing the numbers.
Once again, it's one zero task of question.
Well, we'll go here because of the line of a J rice with credit Suisse. Please go ahead.
Hey, guys. Thanks for taking my question. This is Rob Moon on for a J rice.
I guess just the start.
Regarding birth rates and then I guess the disconnect with the lower NICU days.
Are you seeing any impact in your mind from maybe a hesitation at the start of the pandemic for people too.
In March of their families at that point or are you seeing some type of avoidance from hospitals.
Even the <unk>.
The impact of the pandemic and kind of the concerns around safety in those areas.
What are you seeing in terms of how you can explain some of these trends.
Well, it's mark.
Start off net.
The Mac can.
Kind of fill in from us from his perspective.
We try like every ever as a company that's been affected by Covid to figure out how much of its attributable to what to what.
And sort of anecdotally, we all think about the factors that you've considered and wonder.
How much of that.
And how much of people waiting to waiting for the vaccine before they'll continue with net.
On their family plan.
So it's it's hard to quantify that's why we've been careful to say that that the there were a whole bunch of things that happen in 'twenty, one, including the decline in the birth rate, we can't forecast, where that's going it's certainly not the dire decline that debt.
Many people in the last half of last year, we're expecting the people were talking to the double digit declines.
And.
We don't have any of evidence to show.
Why the NICU days would be different than the with the birth rate because theres. So many cross currents during the pandemic, having said that and of Mac is.
No.
Neonatology by background.
They are in very close touch with our on net gains out of hospital partners from ACA. If you have anything else you want to add just a couple of things. One is certainly no change on our part and if you require any admission standards haven't changed at all.
And then secondly on the question about the hospital partners any hesitance with hospitals.
The really minimal diversion of the NICU bids in response to Covid in the fall there was much more of that that turned out not to be needed in the spring the hospitals to not react similarly, but of diverting nicky beds to potential COVID-19 adult beds.
In the second third sort of parts of the surge yet.
Great. Thanks, guys I guess, just one more.
On the surprise billing legislation in late 2020 of that was enacted.
What's the risk there too the impact on on your claims and then also on your future negotiations with payers, how should we think about that kind of size that.
Well look we're very aware of.
All of it.
We we operate overwhelmingly in network, we don't think that the surprise billing is going to be a major factor for us we have we support the effort to to avoid surprise billing, we think it's better for everybody.
So we don't consider that.
A major issue for us and again, where we are.
We're comfortable with our relationships with other carriers.
So.
We feel okay about it.
And then maybe if I could sneak in one last one.
The commercial mix decline in the fourth quarter.
Do you expect this was partially due to the comps or is this more related to the high unemployment rate or do you think this has to do with working families may be delaying births at the early onset of the pandemic and that's why you're not getting as much commercial mix there.
The work from people, who had made those decisions.
It's a good it's a good the sneak in question.
I think it's probably the we think we get anybody to guess is good that it's more of the the second.
The second the second choice debt.
Because of the high unemployment rate people are not on.
On health plans to the <unk>.
Other than they were before us and they are turning to <unk>.
Two government of private pay.
But we can't be certain if this was a.
Fourth quarter phenomenon that we didn't see early in the fourth quarter of it started to started to worsen during the fourth quarter and as both Mark and I mentioned there was some relief in the.
In the in January.
So we don't know there has been the debt does or does it trend here or not but we would assume debt because of fewer people being on on the health plans.
Great. Thank you guys really appreciate the time.
Yeah.
And next we go to the line pardon me and next we'll go to Ralph Giacobbe with Citi. Please go ahead.
Thanks, Good morning.
Yes, I understand the COVID-19 uncertainty, but your commentary on the <unk> EBITDA being down year over year from that 33 million reported last year and I guess bridging the.
$270 million normalized run rate.
Granted of normalized environment I think its still tough for me the bridge I'm, just hoping you can give.
<unk> share more details on how you bridge that and your conviction around that $2 70, plus on normalized.
Sure.
<unk> of that of 1100 hours on this on this subject preparing of today and running and running the business. So let me make a few observations first the the first quarter of 2020 was a pre COVID-19 quarter.
And it was a relatively robust quarter you fast forward to the first quarter.
<unk> of 'twenty, one and we are still in the in the midst of the pandemic. So it's hard to it's hard to go from the first quarter of.
Last year to the first quarter of this year, it's hard to make it the Patterson we'd not projected.
Guiding you, where we think the first quarter is going to come out since we simply don't know as far as the 270 is concerned I referred in my comments too.
<unk>, what we did in 2019, so what we did.
$265 million of EBITDA in 2019, and you look at and you look at where we are today you would take the strip out the effects of Covid that gets you to of baseline now at some point we are optimistic.
Hopeful that COVID-19 will be in the rearview mirror at that point, we see no reason that we shouldnt be at the 2019 level of or beyond we will be a fully focused company just on women's and children's business, we will be a leaner on.
All of our management time was spent on running our core business, which was not the case.
Put the company in 2019 in addition.
I talked about several of the initiatives that we have in place.
Many of which will have an effect on our operations on our results in 2021.
So of certainly post Covid, we think that we should easily be at the since the easily because nothing in life is easy, but we should certainly be at that $270 million level, but we all of those safety because of the things that we talked about on the call that debt, we should be able to grow meaningfully beyond that.
I would say from my experience I have never been in a situation, where you take the strong fundamentals and marry them with total dedicated focus.
And you don't get you don't get better results. If I just highlight one being operating the company without analytics without understanding what's really going on in the practice of level.
On a month by month of week by week.
Roughly hard to manage the company. So in your minds on I think of any really really well managed company.
And they know what's going on on day to day on the company, but we do now, but we didn't before so just the ability to be able to manage the company more effectively Mac has a terrific operations team that's now no longer flying blind.
That's just the.
To me as an operator, it's a very powerful example of what you can do that the company simply wasn't able to do before.
Matt can comment on it but the addition of of Telehealth.
It is not just the to sound good and took down the current and the idea of giving people greater access to that mix of when somebody calls for an appointment then we have another arrow in our quiver.
Matt to talk about it because.
So all of that's a driver of efficiency and that's the driver of results.
Yes, I'm happy to comment on that I think on a couple of funds so wanted to the efficiency.
Aspect because our specialists are resource constrained resource we have highly specialized physicians.
There is a limited number of them and our ability to get them in front of patients and vice versa patients in front of them.
Is enhanced by being able to debt virtually.
And certainly we saw during the initial phases of Covid as we stood up telehealth.
The markedly increased our telehealth visits over 2019 and that rate of telehealth visits has continued to be consistent.
Even with the waxing and waning in the ups and downs of kind of it. So we've continued to do that and I think part of the work in front of US is to continue to develop.
On a scalable model to enhance the because.
It's important to respect one is patients are thinking differently about how the excess here.
And if we're not able to offer patient of virtual experience when that's appropriate and what they're looking for they will go to providers, who do that but then secondly in the pediatric data there really compelling data to show that where you have of telehealth relationship, particularly in your outline areas you increased your hurdles to your own <unk>.
<unk> and to you on the hospital partners.
And this allows us the telehealth, it's enhanced health is not just reacted to the patients that we would normally see but it allows us to expand our geographic boundaries far beyond what we've been able to do.
In the normal patients, who will come and see you on our line.
Okay. That's helpful and I guess, just my quick follow up though.
Talked about sort of the 33 million of sort of a robust number from one Q 'twenty, but didn't have sort of the impacts of COVID-19 and it I guess when I look back historically, you generate somewhere around high teens to 20% of earnings typically in the first quarter is there something different going.
The forward in terms of the seasonality of sort of just the business line you're in now as opposed to historically that we need to consider because again bridging to that 270 would suggest of that 33, I mean, it would only represent about 12% of.
Of total annual earnings.
Any help there in terms of considering that seasonality. Thanks.
Hey, Rob the fifth Charlie.
The first.
I don't think were in a position today, where we're trying to bridge from from the first quarter of this year to what we see as underlying the underlying earnings power of that $2 70 number and that's why we tried to.
While we're not providing guidance give you some baseline thoughts about how we're looking at underlying earnings power, while still layering on some estimation of the impact of our business last year and today from the Covid pandemic.
There might be.
Two bridges in there that you would think of in terms of the seasonality.
We will probably end up revisiting that somewhat Ralph.
It does continue to exist just for the for the normal practical reasons of different cost restarts in the first quarter of the year for us, but again say.
Revenue base, that's about half the size and it was the prior to the divestitures of anesthesia and and.
In radiology.
We'll revisit that and see if that remains an appropriate view on a normalized environment of.
First quarter contributions of the full year.
But the but we did want to make the point related to the first quarter of 2020.
When we're looking at.
And make sure that everyone is squared away.
Appropriately looking at the first half of last year within their models.
The related solely to continuing operations for our business and non including radiology and the line.
Specifically, we don't have a.
On a different seasonal forecast than net of the patent is true.
Harley said well, we'll we'll look at it but right now there's no reason for us to expect a different pattern.
Alright fair enough. Thank you.
Thank you.
And next we'll go to Kevin Fischbeck with Bank of America. Please go ahead.
Great. Thanks.
Wanted to dig in a little bit more to the <unk>.
Initial guidance of fewer.
So I guess youre, saying kind of.
The 65 minus 45, the kind of two <unk> as your kind of normalized base that you would go from.
From there to think about.
You gave 19 of the as the.
The number.
But obviously you have been doing the corporate initiatives to take out costs et cetera.
The 19 I don't know.
You were kind of thing that's done and Thats kind of in that analysis boards take what you've already done and put it on that and then builds from there with what youre going to do perspective, but it wasn't clear to me exactly how to think about what.
And by the end of that that day.
Bob.
No Ken.
I fully understand so let me just the.
Explain on taking a little bit 2020.
The subject.
There are so many different things happened. In addition to the pandemic that is hard for us to tie 2022, 2021 and said there's a clear path. There were just too many large events, obviously dominated by the pandemic, but other corporate events, obviously and transition of events and expenses along with that that we would say it's hard.
They have kind of 2020 lead to 2021.
So, we're not giving guidance or even informal guidance. We're just trying to help you understand how we think about it and so we look back at the last year. When there wasn't all of that tunnel and the net 2019 and then we take it one of the things that we've changed in 'twenty.
And we're changing in 'twenty, one and how we operate to give us the conviction debt debt beyond the.
The pandemic, we should at least be at the $270 million level.
So so.
The birth of birth rate.
It comes tumbling down on.
If something else happens on the Covid sits over the storm of sitting over the Midwest.
We think that at some point, we should certainly be at that level. When we spoke about it at the.
In our third quarter call.
We said just that debt when COVID-19 when the effects of Covid lift and without a precipitous decline of the birth rate, we should be at that level, our thinking hasnt changed the only difference now is that COVID-19 for all of us.
As sticking around longer than we hope so.
We are hopeful about the vaccine we're hopeful that in July of everybody's vaccinated, we hope that debt people bounce back, but we can't call. It any differently than you or anybody else can so again this is not guidance.
Just trying to give you a window into how we think and why we have so much conviction that the the way we're managing the business today.
On top of what was done in 2019.
Should yield the kind of results that we're describing.
Okay.
It would of route.
Yes, I guess, the you're saying that again.
Again COVID-19.
With normalized next year.
With the a reasonable target for next year on.
All else equal just it's really COVID-19 at the kind of stopping you from from reaching that single day wasn't clear on the Euro can you talk about 13% of.
Multiyear targets seem likely.
But getting back to some of the earnings power is not that.
In your view necessarily of multiyear target of less COVID-19 or some of the disruption.
Sure.
Thats correct, what I would what I would.
Good thing, but at the same.
And the $2 70 on a multi year targets of post Covid. It's of post Covid target what I was saying that in addition to that we think we can be meaningfully above that as the the fruits of a lot of what we're talking about really really pan out I mentioned, the the are moving too.
The.
Urgent care and primary care.
That's not something that's going to affect us.
Our bottom line results immediately so we think that that's among the many think telehealth and other things, which we took over time can propel us well past the.
The $270 million number.
And then it's a little confusing with things like the TSA et cetera. When you. When you gave your 13% G&A kind of target. It does sound like Mike might take a couple of years to get there.
How does that compare to kind of.
An apples for apples 2019 G&A number.
Hey, Kevin It's Mark Richards.
If you look at the.
Call it our P&L for the.
2019, we were at about $244 million on G&A.
Looking at where we are now in 2020 of $248 million. Once again that concludes call. It 18 million of transition services related expenses debt.
Net.
Mark sitting down on another line item of the accounting so so in terms of 2019.
On.
We expect which was more in the 14 plus percent range, we expect moving into 2021 to be sub 13, knowing that.
The timing of when we transition.
Our back office services on the Anesthesiology, Ian too on the radiology side, we're still performing services there.
As the intersection of.
That wind down of costs related those services, we should be below 13% G&A.
Okay. That's helpful. Maybe one last question just wanted to follow up on that.
Earlier, I hope that helps on.
Yes.
Definitely helpful. I guess, one last question here.
Uh huh.
The question earlier about surprise billing ease of it sounds like you guys or not.
Worried about that I guess Nicky was specifically.
One of the categories that was baked out in the in the Bill.
And therefore, it seems like an area of that Congress thought that there was the savings.
<unk> generated from.
I mean, obviously you guys are the biggest market share with whom the so I guess, it's kind of square that.
Yes, I don't think of any color you can provide about maybe where you think your rates are versus the market average. So that is why you don't think that there is the issue.
An issue or any other color you can provide there at the y.
There wouldn't be pressure on the rates going forward.
And then I can't say why why it was worried of the way. It was in the legislation I would certainly say debt you could say that debt.
If there was a surprise bill is in the NICU World.
The kind of a real the effect on the patient so I can understand calling that out as an area of where.
Where people would be people would be sensitive, but I'd just reaffirm what I said before since we are since we are so overwhelmingly operate and net.
Work, we don't see it as a.
We don't see the the.
As a major issue.
With that we're not at all of opposed to the.
The legislation.
So you don't see European network.
The average in network rates for some of the provider.
You cut out a little bit Inc.
Say it again.
You don't see your in network rates as being dramatically higher than the average in network rate.
And therefore, there's not a lot of them.
Right.
Okay.
I would say we have very good relationships with other payers on our on our rates of our pilot negotiated. So so we are in network so that debt.
The limit.
Exposure to surprise billing.
Okay alright. Thanks.
And next we'll go to the line of <unk>.
And with the Deutsche.
Deutsche Bank. Please go ahead.
For the follow up on Rob's question about overall trends in theory.
If there is some sort of COVID-19 baby bust, we wouldn't start to see any of those trends until realistically mid December January and February.
They give us commentary on the script about volume is down 6% in January of any chance you can give us specifically how NICU volumes did in December January and how it looks from February.
You referenced better systems you have in place now as you look at your pipeline for birth trends at least in the near term how do you think these trends continue.
Yes.
Hey day to Australia, I can give you a couple of points on the NICU volumes I think mark might have mentioned this on the call for the month of January our NICU days were down.
Range of about 3% so the that compares to the six points.
Just over 6% for the for the December quarter and within the December quarter.
Of those trends were somewhat worse on the Midland part of the quarter. So in terms of the timing.
The month of January showed some.
The improvement of trend versus what we experienced late in the late in 2020.
Okay.
And then the follow up on Rob's question on the different angle can you just help us sort of quantify sort of some of these gives and takes as the bridge of fourth quarter to first quarter again, I'm not asking you the bridge of first quarter to the whole year.
But normally you can't <unk> historically.
It was about 80% of fourth quarter EBITDA. The implied impact is is like 55%. So should we think about seasonality.
1% of the Covid, the remaining 25% impact.
Okay.
It's hard the reason we didn't give one of the reasons, we didn't give guidance and I said, we roughly estimate the difference because of the because of Covid and the birth rate as those of two things that we can't we just can't predict right now so.
I wasn't saying that the delta was because of Covid I would say of the combination of COVID-19 in the anniversary. So it's very hard this year to.
<unk>. The bridge that you are looking for and we would we would love to we would love to provide we'd love to know it.
Just a difficult comparison on temptation, which we saw on other companies do is to say really nothing about 'twenty one of them, saying that we can't call it that day.
There's just too many variables. So we're focused on what we can do post COVID-19 whenever post COVID-19 is.
So I can't provide additional additional detail I wish I wish we could okay.
Okay.
The only thing I would ask Vito. The if you look at the base of EBITDA trend in 2020 for our continuing operations and of that $33 million in the first quarter.
Represented about 15% of full year adjusted EBITDA.
And keep in mind too that the first quarter.
<unk> had a fairly limited impact to our business from the Covid pandemic, which really occurred in late March. So maybe that's a good reference point for you to think about as well and on getting back to the earlier question too.
Relative to how you guys might have looked at the contribution from Q1 for the whole year of the past.
Okay, I'll just sort.
One more sort of quick.
Quick follow up question.
How much cares Act did you recognize in the fourth quarter.
It was less than $2 billion.
So if you assume it's just too much on the dollars make it easy.
Fourth quarter, EBITDA was sort of 13, 5% sort of down 1% year over year sort of carrier Xactly adjusted it.
Same store revenues were down nine 5%. So that's really good cost control you guys did can you just refresh us as the thing about practice of salaries what is the variable versus fixed just as we help think about the macro environment. In 2021, just so we know how to model. If there is volatility within the other things you can't control growth trends.
How much of that will flow through of variable versus fixed.
I think we gave a couple of points that are useful and keep in mind that mark referenced to less than $2 million is at the top line. So any contribution to EBITDA would be significantly less than that in the fourth quarter.
But we did reference looking year over year the.
The.
Total revenue declines in the range of 40 something million dollars.
Our practice level at WMD declined.
In the mid teens, our G&A declined in the mid single digit millions, including.
The burden within G&A of our TSA expenses. So I think that gives us some sense of of variability in the practice level of cost structure as well as action items within our corporate.
In non clinical expenses that were affected there so and we did we did think that there was a meaningful amount of cost flex.
To the appreciate it in the quarter.
Great. Thanks, so much.
And next thing on the line of Ryan Daniels with Ryan. Please go ahead.
Hey, guys freak out in for Ryan I guess at the start off you talked about kind of.
The geographic diversification of the business.
Wondering.
How volume of client kind of shook out.
Different areas of the large concentrations of decline in certain areas or.
Particularly healthy areas or I guess, if you can provide some color on that.
Well it was weak at different times during the year, we sort of different effects.
Which sort of like what happened in the country. We saw of different times, when COVID-19 was harder hitting in some areas more restricted the new of warrant restrictions in some areas has been harder hit we couldnt pinpoint a inc.
The correlation so I'd say just like.
The other businesses when when people on local warnings of the positivity rate with high it effect of it affected behavior, we can't Unfortunately.
Right exactly.
So the.
So, but it's not the case the 2021 part of the country land and the other part.
It didnt that moved around during the year.
Got it so no real trend to kind of call out in Q4 in that front.
Yes.
As a reason that nobody wants to pandemic right.
It has it has a massive of an effect in an uncharted of attack.
So yes, absolutely.
Sure.
Yeah, That's fair and then I guess just.
Subtracting the a little bit.
<unk> talked about.
The higher renewed focus on women's health could walk from potential for maybe sort of accelerated growth in the future. Obviously, it's very murky right now due to COVID-19 and just the changing of the business.
Wondering if there was any early successes on that Roger stuff you've done two debt would lead you to believe that would take place in the future.
Yes.
After the thrill that debt.
We have a very dedicated.
Sales and growth team.
Reported directly to Dr. Jim Swift and to me.
And we see a lot of interest in part of practices.
Who would like to be part of Mad Max and we see a lot of interest in the hospitals, we would like us to be the.
Of the partners with them and we think debt debt when.
When practices and.
On hospitals see that all of our energies to being better partners being.
I've been of support service for our affiliated practices.
Debt it makes us more and more attractive so at the time like this we are not taking our foot off the gas at all because we and I think everybody knows the one of these days COVID-19 will be behind us we want to be the strongest possible as we can when the when that happens.
Are we that we are very optimistic we believe that the post COVID-19. This will be a very strong company.
That we're focusing on all of the right things. It wasn't it wasn't for show that I talked about our research because we know that if somebody is thinking about joining joining med <unk> from a hospital wants us or of payer wants to know that we are best in class.
On the dairy ingredients that are awfully important so while we're bringing down on G&A and really being careful on expenses, we're not doing that in the areas that really support our core and we consider research an independent research.
Sure.
Very important thing that we do and the heads of our clinical operations.
Play a very big role in how we and how we run this business. So all of it gives us a lot of optimism we hate the fact that we have to keep hurrying up and waiting.
As the pandemic.
But as far as we know that that's it.
Yeah.
Great. Thanks, guys I appreciate you taking my question.
And next well move to line of Whit Mayo with E Mail.
Excuse me of UBS. Please go ahead Sir.
Yes. Thanks.
I wanted to just go back to the the payer mix deterioration in the fourth quarter is this all explained by lower commercial volume or was there some rate change from fee schedule change any collect change in the collection rate. So I'm just trying to make sure I fully understand what developed throughout the quarter.
It's the it's the former it's the.
It's just the.
But it's just.
A greater percentage of of.
The government and private pay versus what we traditionally see.
There was no there was no other.
Factor.
And again.
The first question, we can only surmise that it's because people are were no longer on health plans.
And by the way from what it's worth we assume that as the as the effects of Covid recede and people get back to normal there'll be some lag and when they get back on health plan.
Just.
It's not something we can project. It's just something we think is a logical assumption.
If you run out of that go to a store to spend money doesn't mean that youre back on.
On your companies.
The health plans at the same day.
But no there was no other rate change was nothing else that the.
That took place it was simply a shift in payer mix and for what it's worth because we know a lot of people in the the health care business. The Payor mix decline that we felt.
So it was right to the <unk>.
Basis point of what other people experience too.
Okay.
It seems a little inconsistent with maybe what we hear from some of the providers cover but.
I was just going through the 10-K and I'm looking at the.
The balance sheet allowance disclosures in the.
In 2020, it was up to <unk>.
78% of your gross <unk>.
And in <unk>.
Higher years track.
Generally in kind of debt 70, 475% range, what's what's driving that balance sheet allowance higher minutes. It seems to imply higher reserves, but I'm not sure. If this is an optics because of.
The divestitures. So can you maybe help us understand what's going on in there.
The.
Shift in payer mix has a direct impact on our allowance.
But you didn't see.
The.
On the payer mix didn't really impact your the prior three quarters. So it was all of just the fourth quarter impact is what increased the reserve for the.
The balance sheet on islands.
Mostly most of wave that's the case.
Okay.
What do you what is the reserve for commercial versus Medicare.
Medicaid.
I don't have that in the handy.
We tend to look at it in the aggregate.
Yes.
Okay Alright.
My other question you guys filed an 8-K, some time ago, indicating that.
You don't plan on the rebranding the organization back the pediatrics.
I presume that that's just the.
Timing issue priorities have shifted we're in the middle of of a pandemic probably not the greatest idea right now it's expensive blah blah blah, but.
Mark just wanted to hear your thinking a little bit more on that decision and do you plan on reevaluating that going forward and you know.
How important is it over the next call of the intermediate term too.
Rebrand back to that name if at all.
Well one of the reasons you ticked off.
Is it on is on the money and of the money.
It will spend several hundreds of several hundred thousand dollars to change the name.
So we are cheap.
We try to manage our expenses.
And.
Sounds cool the change of name we didn't see the reason the names pediatrics and obstetrics our owned by the company on a used widely by the company and in many of our Nick Hughes in the ambulatory practices those names of very prominent debt.
You can use those names in our pediatric.
Urgent care area as well so we just didn't see a reason to spend several hundreds of dollars to change.
Eight a corporate name when we have the other names that are that are alive and well.
So it was really driven by that is the familiar we are going to spend time and money.
Doing logos and things just seem to it just seemed like a waste of money. It is in no way in no way taking away from our the focus that we've described.
Not not.
One day.
So.
So that's the that's the answer but I would hope that you would.
I think from that debt debt, we're looking at every expense.
Health or the <unk>.
Doesn't help our patients.
And eliminated.
I noticed the other day the few of our lights.
Out in the in our in our conference room, and I hope the debt with somebody turning off lights to cut down on our consumption growth.
But we arent where.
We're like a hawk of about that and I hope that when Covid passes and things are better and we're feeling more plus we continue to be just as cheap as I just described.
Okay. Thanks, guys.
Next we'll go to Matt Borsch with BMO capital markets. Please go ahead.
Hi, yes, good morning.
I was just wondering are you are you expecting of Covid subsides, what say fairly rapidly here that you would get to that $270 million run rate going into 2022, and I guess, maybe my other question here.
Can you just help us think of all day.
I know you've commented on this before but on the.
How would you think that the growth rate as we look forward to.
<unk> thousand 22, and beyond and how much sort of temporary things youll still be dealing or will you be just.
And moving forward at that point.
Well look.
We.
We don't know when Covid is going to end and neither of the U. Yes, we do hope.
We watched with interest the president said that people will be vaccinated by July.
Our people of acted on July and as pent up demand from drawing back on people.
Really want to get on planning their families and they haven't gotten younger during the pandemic. So so when we say hey that could really snapback very quickly. So we would love to think that by the end of the year.
We're in a position to say Wow, it's the.
Behind us in the fourth quarter is fantastic.
Because volume come back as I said earlier, we assume that when volume comes Roaring back.
Debt the payer mix.
On the payer mix shift could could land, but we don't have a trend to look at this as all unchartered waters. So we yeah. We hope that we enter 'twenty two in a post COVID-19 world that the debt in Q in the Q3 and Q4, we're seeing the lift and we have we have charts that are net of every possible.
Including the one I just described we just can't tell you, which one is going to be which one is going to be reality and there is no hedging based on our operations are based on our team or based on anything else. This is purely.
Whats the external debt that could affect us.
We havent, we havent cut anything where we think it could in any way deter us from growth. We just we're just waiting for the for the.
Terrible cloud to limit so the so that that happens.
So yes.
Had a guest without providing guidance I would say well hey, we think by 2022 the year of 2022, it'll be a whole new picture and we pray that is true for <unk> from a country of the world.
But the.
But I can't I can't be more specific than that.
We are we are optimistic and we are prepared.
Of course of course, I understand I guess my other question was how the.
Think about the growth rate again under the optimistic assumption and I don't expect you got low or July.
With this whole time right, but if we are going into 2022 weeks of sort of clean clean year, how we think about the growth rate not that youre, specifically necessarily but sort of.
Kind of more from that point yeah.
Alright.
I answered your first part of your question for so long on the <unk>.
Second part of the question of the second part of the question is is my view Hasnt changed from the over the last few quarters that I think we can we can achieve a mid single digits.
The mid single digits growth rate in our company that may accelerate because of some of the things that we've talked about but we think that that's a reliable that the.
That's a reliable area for us too.
Shoot for.
The net talk about the pediatric urgent care and other things.
I'm proud of it.
Revenue obviously.
We think about pediatric urgent care of the effects of debt can have.
That could happen.
The real positive effect on that but it's too early too early to predict but I would the ies I looked at the company.
As a company debt debt.
As a.
Listed leader in its field.
On an absolutely necessary.