Q1 2021 MEDNAX Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the bed tax first quarter 2021 earnings conference call.
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I'll now turn the conference call over to your host Charles Lynch. Please go ahead.
Thanks, operator, and good morning, everyone and welcome to our earnings call.
With me today are Mark <unk>, CEO, and Mark <unk>, our CFO I'll quickly read our forward looking statements and I won't get into the call.
Certain statements and information during this conference call may be deemed to be forward looking statements within the meaning of the federal private Securities Litigation Reform Act of 99.
These forward looking statements are based on assumptions and it may be.
And asset management and.
And as Theyre experiencing historical trends current conditions expected future developments and other factors and they believe the appropriate.
Any forward looking statements made during this call on <unk> today, and then that kind of takes no duty to update or revise any such statements whether as a result of new information future events or otherwise.
Important factors that could cause actual results developments and business decisions to differ materially from forward. Looking statements are described in the company's most recent annual report on form 10-K.
On a reported on form 10-Q and and.
And current reports on form 8-K, including the sections entitled risk factors.
And today's remarks by management, and we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures and the most comparable GAAP measures can be found on this mornings earnings press release on a quarterly reports on and Q and our annual report on form 10-K.
I'll turn the call over to Margaret.
Thanks, Charlie and good morning, everyone on.
Along with Charles joining me this morning on Mark Richards and Dr. <unk>, Dr. Jim Swift, Dominic and Rihanna.
And John Thank you.
My comments this morning and will be in three areas and results. We reported this morning and to what we do as a company and how we're strengthening and reshaping Max I'm of course pleased with our results for the quarter, which were ahead of what we could have foreseen. When we talk to you in February our patient volume strengthened through the quarter ramping up to <unk>.
And into April and.
I'm sure. Most of you saw the statistics published by the CDC, which indicated a sharp downturn and nationwide birth and the fourth quarter of 2020.
And you know we experienced the same trajectory at the end of last year, but to a significantly lesser degree. We believe this reflects the typical profile of the hospitals, where we provide neonatology services, which tend to be larger and bigger market and with extensive labor and delivery services, including robust neonatal ICU.
It may also reflect our geographic footprint, which has had which has a heavier weighting and faster growing states and markets.
Cash flow into the first quarter and for the roughly 400 hospitals and that make up our own growth statistics. This downward trajectory and growth did not continue adjusting for the leap year total births at the hospitals, where we provide NICU services were essentially unchanged from Q1, which is better than what we reported in late 2020.
Lastly, while it's too early and make a final call and the improvement in our payer mix. So far suggests.
And with the volatility we experienced in November and December couldn't have been more covenant on them.
To give you one quick insight into how this rebound and try and impacted our results our revenues for the quarter. Excluding the care's money. We reported was over $30 million ahead of our internal expectations, which translated into meaningful year over year growth and adjusted EBITDA versus the expectation, we shared with you and fed.
Curious that it could easily be down versus 2020.
Looking ahead to our full year 2021 expectations, we expect that our 2021, adjusted EBITDA will be at or above $220 million I'll explain.
I thought last quarter, there were looking closely at our 2019 adjusted EBITDA of 265 million before the pandemic as a debt available benchmark for how our business is recovering as well as backing out our estimate is 2020 impact of the pandemic was roughly $40 million to $50 million.
If you look at the first quarter of 2021, and our adjusted EBITDA of $45 million was still below the first quarter of 2019, and when we reported it and that's when we also reported $50 million and adjusted EBITDA.
And when you exclude the roughly $4 million and <unk>.
Contribution from the cares funds, we recorded this quarter, we were roughly 18% below Q1 and 2019.
So well certainly pleased with our result is still clear that we're not back to normal and and in fact, and our first quarter results reflect a similar run rate of COVID-19 impact to what we experienced last year.
I don't think distribute surprising given the unique nature of the services, we provide and the time line of this COVID-19 impact and it's as much of our patient volume and based on patency and trial growth timing.
Lastly, I'll add that our operating results for the past two quarters have been unusually volatile. So we're also mindful of is still uncertain nature of how fast we're consistently we'll see things recover.
Now I've talked for a couple of quarters about my confidence that we can achieve a run rate of $270 million and adjusted EBITDA. Once we move past the impact of.
COVID-19 pandemic.
And a result, bolster our confidence and we will reach and exceed that run rate.
But I'm, not causing and just because we saw better trends over the past couple of months on confident because we continue to push our operating plans and because we are should be shaping how we do things here.
Our singular focus and net net is to reinforce our position as the foremost provider of women's and children's health care and the markets, we serve and to do so efficiently and at the best part and will be convenient to the patients we serve as well to the payers and health systems, we work.
So let me talk about what we've been focused on and speak to you about our core pediatrics and obstetrics medical groups.
It's all about the patient.
And experts began carrying from mothers and babies and the most challenging times over 40 years ago, the only absolutely imperative and our founder and board member Dr. Mendell prescribed has been.
Take great care of the patient.
Much of my time and spent with our clinicians hospital partners.
Respective partners and of course with my team and I can attest to this unwavering commitment.
There is an unshakable conviction internet access and we always take great care of the patients everything else will follow.
And that's easier said than done to take the best care to patients the mothers babies and children.
It requires a lot of work and investment for us.
We have to recruit and retain the final physicians and clinicians second to do this we try to provide more support for our affiliated clinicians and anyone else in our field sales.
Third we have formula and independent research organization and our field of medicine.
Including complex newborn screening, one and for babies and the U S. Our patients from US we have more knowledge and data and these areas than anyone else and since our care is provided on the court at the very local level, we have to provide more support for our affiliated clinicians and each market.
Where we are and then anyone else.
Finally, with me and that all and bleed and our fuel for example, one of the most critical and active parts of our organization and our clinical support for this.
And this group along with our full support and make sure that we can continue to advance our skill and knowledge for the sake of our patients.
And two weeks as we did even during the depths and the pandemic last year, we will be holding our annual medical directors meeting from over 2000, clinicians will actively participate and we'll learn from research and quality and clinical experts.
On top of these areas, we provide system support recruiting support and every other kind of health to allow our clinicians to again take great care of the patients.
This long winded tour of what we do is what I believe makes us the choice among our nation's hospitals. This is what makes us a leading price of <unk>.
And it's a great medical rep.
This is what makes us the leading referral choice of physicians, who want their patients to be and our care during their most difficult minutes days and weeks.
I've spoken about our drive to employ our practice data and dashboards to improve patient access and it has and continues to be of paramount importance to us.
Steady drumbeat, we want to be certain that a patient who needs care from one of our affiliated physicians and get that care.
And Im sure anyone on this call from relate to our medical appointment process can win or lose loyalty and we know with business leaders and owners. The effect that this can have on volume so.
So we're working with all of our practices to help them make scheduling is driven and efficient as we can making sure that appointments are cash immediately rescheduling non showed backfill and cancellations using our scheduling tools to open additional slots staggering staff outreach and referral management, they're all part that was necessary.
Asian.
We've already seen improvement and many practices, particularly in terms of higher percentages of kept appointments and reductions and no shows and this focus is also helping us to share best practices and create benchmarking capabilities. So we can measure how effective are down and it has on practice scheduling and every measurable factor beyond just the post COVID-19.
Coverage, we've recently seen.
We also recently welcomed a new leader and telehealth to make us to help make that board are truly active part of what we offer our patients. We all know that a physical visit is not only needed where possible and.
And we will make our telehealth process fluid.
And our patients and attract new patients.
This efficiency and effectiveness also applies to our growth plans and our sales and business development team has re engineered a focused market by market approach is driven by local intelligence and relationships.
We've also added resources to this team to make sure that we're highly integrated not just in identifying and winning new business, but providing services quickly and seamlessly to the partners, who put their trust in us and and pediatrics affiliated physicians.
And my view, we lacked until now to other major ingredients to propel US forward first on our patient relationships have not extended past our subspecialty practices, we need to make sure that as we can and when a patient needs to see a physician and non network. They can do so as quickly and easily as possible.
And we're moving forward and pediatric urgent care to develop plans for expansion of their businesses and markets, where we have a significant presence and we will expand with our brand named pediatrics.
We believe that providing pediatric primary and urgent care and patient friendly dedicated clinics will allow us to give patients easier access to the exceptional specialists across our organization when they need it and we will also help strengthen our relationships with the communities, where we provide services and with our hospitals.
Thanks.
And maybe most significantly we believe nobody nobody knows how to care for babies and children and mothers like we do and we want on fully extend the types of relationships. We currently have.
When a mother and trial and want to find the best primary and urgent care.
Practice, our assets should be and will be right here with us and pediatrics.
Second our brands Pediatrics, and obstetrics and are not widely known and we do believe our hospital partners and very well and more importantly, they know that they can rely on us for what we can do for their patients.
Patients learn about us and count on us at the most challenging time and then they move on.
Our prospective practices and clinicians do not only who we are and what we provide as a plot and career path.
To address this.
And all of our work, we've launched a marketing campaign and it's obvious key theme and trust.
And I'm going to be widespread and they're completely authentic and feature only our own doctors, who speak about why people should trust them and trust us.
We will continue to reach out to reinforce the very unique and importance of pediatrics and obstetrics and.
And hospitals, pediatrics, and obstetrics and trust lifesaving and World class conditions.
Clinicians.
Our brand will be known for that.
I'll finish this morning, where I started and we're working to ensure that med NEC and can be the best possible partner to the patients we serve and to the physicians payers and health systems, we work with all driven by our mission to take great care to patients while at the same time, taking great care of the business.
This isn't always easy, but we have a long track record track record and working hard the best solution when we need to.
With that I'll turn the call over to <unk> to provide some more details.
It's Marc and good morning, everyone.
I'll add some details from our first quarter results, including some of the French maintained versus 2019 that Mark mentioned.
And cash on some of our G&A expectations as we move through the second quarter.
Lastly, I'll touch on our financial position as it stands today.
Turning to the quarter at the top line, our net revenue grew by $5 5 million or just over 1% year over year, we recorded about $8 million and revenue from the provider relief fund established by the cares Act during the quarter.
Overall.
Same unit revenue increased by three 5% year over year.
Or a three 6% after excluding the additional calendar day in February 2024, the 2020 leap year.
Same unit volumes declined two 5% year over year or one 4% adjusted for the leap year.
Impaired to a six 6% year over year decline and the 2024th quarter.
The table on our press release provides some detail breaking down our hospital based versus office based patient volumes and I'll add a little more color.
As Mark mentioned patient volumes and improved throughout the quarter such that we saw same unit growth and March across all of our service lines with the exception of take you and pediatric hospitalist services.
Second our NICU days for the quarter as a whole were down slightly more than total births at the hospitals, where we provide <unk> coverage.
This reflects a modest year over year decline and average length of stay and partially offset by a year over year increase and a rate of admission.
I know that at the rate of admission was an area of interest for many years ago. Following our fourth quarter release, So I'll point out that in Q1, our admit rate reverted to its historical level after being modestly lower through the latter part of 2020.
Lastly, I'd like to address our 2021 volume relative to 2019.
Our first quarter same unit volume was down approximately 3% as compared to the same period and 2019.
With hospital based volume down to a greater degree and office and its volume.
We will continue to look at this two year comparisons throughout this year and central lightweight and comparisons to 2020 will not be relevant based on the pandemic related disruptions, we experienced last year.
On the pricing side.
Had a couple of favorable items. In addition to our usual rate growth, which has been typically and the 1% to 2% range based on managed care and administrative fee revenues.
First the carriers' revenue, we recorded added a little under 2% to our pricing.
Second as we detailed on our press release, our payer mix was 110 basis points favorable compared to 2020.
Which added roughly an additional $5 million and revenue or a little more than 1% pricing growth on the quarter.
On the expense side, our practice level salary wage and benefit expense was up by $2 $7 million were about 85 basis points year over year.
This increase mostly reflects variable incentive compensation tied to practise level revenues, partially offset by.
Decrease and malpractice expense, which was higher in 2020.
Our G&A expense was down nearly $1 million year over year.
Despite incurring approximately $5 million of costs related to transitional services, we provided to the buyers of our anesthesia and radiology and medical groups.
The reimbursement for those expenses is reflected and our investment and other income line items.
So there is minimal impact to our adjusted EBITDA, but those costs you wouldn't wait a reported G&A expense.
And then near term I'll note that while the radiology and TSA arrangement has concluded we do anticipate that we will continue providing services under our anesthesiology PSA at least through the second quarter of this year.
You should expect a similar expense and reimbursement dynamic and the second quarter.
We expect to wind down the anesthesiology TSA services sometime after the second quarter.
And which point, we will also be able to begin winding down the expenses, we're incurring and move toward that future state expectation for G&A.
Again.
There may be some period of time, when we're still incurring some of those expenses, but not being reimbursed for that.
Lastly, our balance sheet reflects a reduced leverage profile and strong liquidity position, we ended the quarter with $270 million and cash and net debt of $730 million, implying leverage just north of three times.
With that now I'll turn the call back over to Mark.
Thanks Mark.
We are ready to take questions.
Surely.
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Well first go to the line of that pardon me, Kevin Fischbeck with Bank of America go ahead. Please.
Okay great.
No.
Just wanted to understand a little bit.
The way that Youre thinking about Bob.
Volume coming back for the rest of the year I know you guys.
You talked about COVID-19, having an impact on on volume just trying to see if we could tease out exactly how much you've thought about that and.
And the fact that day.
Volume and the non hospital setting and coming back faster is that a bullish time for from birth coming back or is that really more just.
Your question of how quickly you're growing that business.
The penetration here.
Stan.
And a big indicator or not.
And Kevin it's Mark I'll start by saying that we have.
I talked about volatility and we've seen and less.
Two quarters volatility, obviously with an upward trend.
So we're trying to see where all of this shakes out.
And as I mentioned because of the markets we serve and.
And the and since we set tends to be and larger hospitals with level three and level four Nick Hughes, we think that that helps.
What we do and an otherwise sluggish.
Sluggish period.
I am not making.
Bullish pronouncements.
And that we don't have a basis to see we are certainly working day.
The operating initiatives that we've talked about and on our most and our ambulatory practices. We think will obviously increase.
Volume and efficiency, so that book that would have it.
Fact of having them take up a larger part of our business. So I would say I would say that we're doing everything we can to maximize our results and in unchartered territory I might ask Matt to comment and.
To comment on any thoughts about what we're seeing and arm and our practices that.
Could help check from laser yes, I would agree with Mark I think the volatility makes it difficult to comment on.
Definitively on and on the trend historically the markets we are and.
We have been less affected by the total for granted.
Because we've tended to be and markets that the total national Barclays being down we tended to be and markets that were a little more favorable to us and certainly on the ambulatory side. There is a whole host of work.
And yet the initiatives, we've discussed before and the ability to see and real time data.
About what's happening and our ambulatory practices I think are making us significantly more efficient.
And we believe I think drive our unique patient volume.
Okay and then.
I guess as far as the TSA.
And kind of backing it out on the number but.
And that debt.
And the reimbursement will drop.
It may not be one for one.
Quickly you're cutting costs does your guidance assume that's a net.
So what does your guidance assume that there is a net drag.
From that and the back half of the year.
Yes.
We really don't have guidance out there, but but ongoing assumption is that as we wind down on the TSA there will be a residual cost component that will flow through the remainder of 2021, where we're not collecting fee.
You use for some of those stranded costs and Gabon.
All of what we have here aside from human capital.
And is really IP related costs that are under various color and Frac show. So there will be a lag it's not one for one.
But it's material materially in that range.
Yes, the only and the other thing I would add looking forward is once we're past and TSA since a lot of the work that were being doing while we are reimbursed for it and it does take a lot of our teams time and attention.
It needs to so I do think that as we move past. It we will find a lot of ways to be much more efficient and then I would also say from and enable our teams to be less distracted by by outside interest to be fully focused on on earnings.
I would expect and it's going to be a net positive.
Okay, and then Mike.
You mentioned and that price is down year over year does that and your view because last year was inflated or.
I would think about what you saw this quarter.
Yes, hi, Kevin as a med Mal Kevin I mean, we were.
Our med Mal expense was a little bit above trend and the first quarter last year on a temporary basis, though what we've pointed out is that for this quarter, we were generally and trends and Thats, where we got the tailwind for this quarter nothing unusual in 2020 one.
Okay perfect. Thank you.
One moment please.
Our next question will be from a J rice with credit Suisse go ahead.
Hi, everybody.
Couple of quick questions here, the pickup and the commercial mix.
Are you rationalizing that and basically the people that made decisions to sort of postponing spending families are starting families were tended to be people that were more commercially covered and.
And maybe therefore, a little more extensively and economy and therefore as you see it come back youre going to get that pickup and commercial and that's something that will persist or is there something about this quarter that drove that commercial mix improvement.
And what I would say it.
As I commented a.
Hey, Jay that that we now look at the results and the latter part of the fourth quarter I would say those are more of an anomaly. So so I would say that the payout.
What we see is that the payer mix is more in line with what we've expected before not that there is a difference.
A new trend so I think that that so far and it's still early in the year. If the fourth quarter was an anomaly and we would say that that we're going back to the kind of payer mix that.
And we have experienced in the past.
Okay.
Any update on the deal pipeline and acquisitions, obviously your leverage where it is you've got plenty of firepower.
I think you spent about $6 million and the first quarter is there anything to comment on what you expect for the rest of the year there.
Yes, absolutely.
And Jim to make a Dr Swift to make a couple of comments.
As I said, we are we are operating and a more organized fashion and I think and than ever before with a with obviously the first time in years, where all of our focus and growth and and pediatrics.
Pediatrics and obstetrics so we do see a very strong pipeline and.
I would say a full court press from all of us to make that happen Jimmy Michael on that yes, I think both on the acquisitive side and on the organic growth side, we've seen and the first quarter, especially on the organic growth side and acceleration in terms of a.
Contract signings with our hospital partners on the acquisitive side. The I think we will see the pipeline very full right now and the second quarter. We will have some execution on some of the current priorities and that will accelerate into the third and fourth quarter. We're not currently on our numbers on this on this right now but.
And the growth and pediatrics and obstetrics was relatively small in 2019 and in 2020. So we do think that's going to become a more meaningful part of our story going forward.
Okay, and then just last question.
I know in the prepared remarks, Youre, saying, you expect 2021, and adjusted EBITDA to be at or above.
$220 million.
Look back and it looks like and a normal more normal year, who knows what a normal years, but you get about 15% to 20% of your earnings and the business and Q1.
And if you were to apply.
The midpoint of that you'd.
And you'd probably end up with an EBITDA range, given what you reported and Q1 more on the $2 45.
<unk> million dollars range I know you said something about.
Yeah.
Given the volatility being conservative but is there anything specific that you know now that suggest.
The trend and the quarters over the course of this year might be different and the normal.
Seasonality.
Factory.
Well you.
And Alan and ahead and we've looked at it every way we can.
And are there any different shade of light.
And it's not a normal time and 2020 wasn't normal. So so we can only go by and our current trend and say and look and compare that to 2019 and say not that we're trying to be conservative but to say that we don't have a basis to project that that what we saw in 2000 and.
And in Q1 and 2021 at the start of a normal a normal pattern.
And as we've done.
A month into 2000 and into Q2, we see that that we would expect.
<unk>.
Or.
Q2, the consensus seems to be around around.
$50 million to $55 million of EBITDA, and we think that that's looking like that's about right.
So two 'twenty seems like without providing guidance seems like not a conservative number.
But a justifiable outlook.
And we don't have a reason to think that.
Yes that the quarters will follow a traditional pattern and what we've had the volatility you've had and we're coming off of what we have so that's why I wouldn't be throwing out numbers and.
2000, Fourteens and $2 50 that teams.
A bit robust.
Okay.
Alright, Thanks, a lot.
We'll go next to Brian <unk> with Jefferies Go ahead. Please.
Alright, Thanks, Jack Robert on for Brian and congrats on a good quarter.
I think I just want to piggyback on the M&A question here.
But more looking at it from a strategy perspective.
D and what you did with Nightlight.
Do you think I guess trying to understand how youre thinking about balancing tuck.
<unk> and smaller acquisitions that you can then kind of take the blueprint and push it over to the organic growth side of the equation versus maybe slightly more sizeable deals given the flexibility have on balance sheet now.
Well, we're always open to and more sizeable deal and we think that there is not.
The key to our key to net backs.
Best partner and our markets that we possibly can be.
And we think that startups with tuck ins and being able to do things that make our relationships with our hospitals really deeper and more or less.
So that's why our focus is absolutely on that to make sure that our core businesses is as strong as we can be and we're being the best possible partner and then we have a position on each of these markets.
A clinician and physician who is looking for a place to land wants it to be but wanted to be with one of our affiliated practices.
So that's that's our thrust there now.
We've spoken about for the last few quarters, we it's sort of a frustration debt that we take care of mothers and babies and then we wish them well.
And and we know that there is an enormous opportunity and many of our market weighted.
And we leaned in and pediatrics, and obstetrics and to be able to build that part of our business. So strategically we think it's a major plus to be able to be and a combination of primary and urgent care.
We think it's a natural extension of what we do we think we have more local knowledge about that and anybody else and we have the best relationships with local hospitals and anybody else. So we think thats a major strategic advantage and certainly we could do that and a combination of organic growth and and.
Positioned as the most important thing and to get it right get the combination of primary urgent care right. So that so the wear and a great location and instead.
Facilities that are really welcome that.
And that a very patient friendly when and where were backed by systems and apps that enable you to make appointments and do the things that we all know have been vaccine.
Before the pandemic and certainly heightened.
By the pandemic.
The unscripted so Jim do you have anything on and leaving no just and we see that primary care piece fitting nicely into our sub specialty sports and the other is some specialty areas, where again, we that's more of an intermittent road in terms of care with the primary care and subspecialty care will tie that in with urgent care.
Okay, Great no that's super helpful. I think.
Next one I wanted to touch on just on that Delta between.
And and NICU days I appreciate all the color on admission rate and length of stay I guess, maybe just.
Looking back to the last quarter I know you talked about no changes and clinical protocol and so I guess with.
Three more months day.
We'll look back and reflect.
Any color you can give on that delta normalizing and perhaps.
What exactly the anomaly was in Q4.
And as Charlie Let me just give a quick.
On quite a clarity on that because I know this is a question on last quarter.
And our Raven mentioned and the percentage of deliveries and the hospital that are admitted into the NICU is and from a low to mid teens and.
And why do we discussed.
Random and mission being down a little bit.
Half of last year, and put that and perspective and the fourth quarter. Our rate of admission was down about 30 basis points. So if it was not an exorbitant difference or any kind of significant departure from trend, but it did nonetheless, depress our NICU days versus birds.
Put that in the context and.
On a on a care percentage basis, it had begun trending upward.
On the second part of the third and third quarter and the fourth but we're still below year over year and as we get on the first quarter here. It appears to be right back on the trend line.
Longer term multiyear trend line and was up year over year. So.
I hope, that's a little bit a little bit helpful. I might turn it from active and talked about protocols on the line, but just on the statistical side, that's what we saw.
Yes.
I don't think that we can point to any substantive differences on how babies.
Babies are evaluated and admitted to the NICU and it's a case by case basis based on best available evidence based medicine that our clinicians, making and bedside. So theres certainly nothing we would point to systemically.
Would be different than our normal course of business.
Yeah.
Okay, great. Thanks.
We'll next go to the line of <unk> Chickering.
With Deutsche Bank go ahead. Please.
Good morning, guys nice quarter on hybrids and challenging quarter.
A couple of questions here.
The first one is it seems a lot of assets of this business are fairly hard to manage whether its payer mix or acuity or to your point pay submissions and the NICU or length of stay and in the queue.
Looking at your first quarter guidance, you gave us and February versus what you guys. Just posted obviously huge inflection there on the most secured line pair mix youre talking about so I just wanted to see if you can give us some color on how much visibility and control do you guys have on EBITDA or is it more from macro driven store who shows up into the hospital.
Well.
I think it is.
No different than in the past I think we can look at our core business and trends and our core business.
And normally Payor mix.
As a more linear has a more linear pattern and we've seen.
So I think again that the lab to lab.
Several months saw more volatility and wear than we're accustomed to and as far as being a difficult.
And as to manage.
And the one that hit the upper right, but yes.
Your line of components, what we do.
And but I do think that it tends to be.
And especially in the major markets that were and I think it tends to be relatively predictable.
And unless we use different tactic because different tactics and both growth and and managing the business.
With the analytics that we have are they are the <unk>.
Real changes so I don't I don't think it is.
So on predictable, we obviously are subject to the the birth rate and the hospitals that we serve but beyond that I don't think other than what looks like again and anomaly and the fourth quarter.
Okay.
It's generally predictable now obviously the wildcard is COVID-19.
And.
We have aspects of our business, we are thinking and <unk>.
<unk> intensive care and other areas.
Children, Havent been getting and secondly, as they traditionally do.
Which is a good thing and overall, but not robust for our business. So we will see how that growth, we'll see how that comes back. So certainly the pandemic has a lot of varied effects on the health care company.
But beyond that.
We're trying to just run.
Steady as we can and.
And with very close contact with our net use our ambulatory practices and see to see how things are shaping up.
Okay, and then as a follow up on as you think about to revenues and costs relative to 2018 levels can you remind us how much salaries and practices increase each year and you have a contract to the doctors.
What is the mix of the pay the soccer is on fixed versus variable.
And.
That'd be great.
Yes.
And when you look at the practice level SW data at a number of components and probably the largest is the underlying salaries for the clinicians and all the practices of practices that are part and <unk>.
If there is necessarily going to be some inflationary pressure on that.
<unk> move up within the practice, there is kind of graders and you're already and alike and.
And somewhat offset by by physician turnover on retirement and life, but it does have an upward track and I would call that and then.
And the low low single digits.
The other component is variable incentive compensation and.
For pediatric for Manhattan, as a whole today.
And we can follow up and somewhat greater specifics, but that level of compensation expense and that line is significantly above $100 million.
And it moves and and tied to practise level financial results. So that's where you see us call out pretty consistently and.
The fourth quarter as we saw revenue constraints and declines that they were they were buffered quite a bit by the variable compensation expenses out here and the first quarter.
And we did see some return to growth and.
A specific call out is the is the.
And we provided relief funds that we receive better practice specific.
Those will also flow through that variable compensation expenses. So there is a layer of variability and there and we can try to call that out.
Okay and last question for me.
And I believe you guys are pricing second quarter consensus EBITDA numbers.
Fair to think about <unk> St revenues also directionally and the right way I just want to make sure that the models are probably perhaps with a lot of moving parts here. Thanks, so much.
I think I think what we're looking at it.
On any kind of preliminary basis without being specific.
Just so happens that.
Or.
Looking at consensus for Q2, and and I look.
And basically appropriate we haven't typically guidance and revenue. So I don't think I'm going to be in a position to comment on the top line right now, yes, I think more than anything what we're trying to do is to be as transparent as we can be and and where we are.
We just don't want.
Things to run ahead of themselves without our analytical basis for it so we look at.
We have a better than expected quarter and did natural tendency would be for people to say well wanted to just see how and when we annualize that and look at what you get and we just don't see the analytical underpinning for that as and as we start and into the second quarter, we see that we think we'd be.
Right around that.
Low to mid fifties.
Number which happens to be as Charles said, where consensus is falling out and again I would still say that it's way too early to think that we're out of the woods and I'm, not saying that to the tune that I'm, saying that because its wage growth that they were out of the woods, So I think that protecting and.
Anything meaningfully above.
Two twentyish area.
To us we don't see the underpinning important and.
And I can't rule it out, but we don't we don't see it so I don't want on.
And get people ahead of themselves from the results of one quarter and a volatile period.
And if there are any additional questions. Please take this opportunity now to press one and then zero on your Touchtone phone.
And speakers, we have no one else queuing up at this time you May proceed.
Great well.
Thank you everybody for your support tuning and this morning, we will.
We'll keep you posted and stay safe.
Ladies and gentlemen that will conclude your conference call for today. Thank you for your participation and for using AT&T event Teleconferencing you may now disconnect.
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Ladies and gentlemen, thank you for standing by and welcome to the bed tax first quarter 2021 earnings conference call.
At this time your telephone lines are in a listen only mode later, and we will have an opportunity for questions and answers with instructions given at that time.
If you should require assistance during the conference call. Please press Star, then zero and and AT&T specialist will assist you offline.
As a reminder, your call today is being recorded.
I'll now turn the conference call over to your host Charles Lynch. Please go ahead.
Thanks, operator, and good morning, everyone and welcome to our first quarter earnings call.
With me today are Mark <unk>, CEO and Mark Richards, our CFO I'll quickly read our forward looking statements and that will get into the call.
Certain statements and information during this conference call may be deemed to be forward looking statements within the meaning of the federal and private Securities Litigation Reform Act at 1995. These forward looking statements are based on assumptions and assessments made by them and active management and <unk>.
Their experience and is that on a historical trends current conditions and expected future developments and other factors and they believed to be appropriate and.
Any forward looking statements made during this call on <unk> today, and then that can undertake no duty to update or revise any such statements whether as a result of new information future events or otherwise and.
Important factors that could cause actual results developments and business decisions to differ materially from forward. Looking statements are described in the company's most recent annual report on form 10-K and of course.
On a reported on form 10-Q, and its current reports on form 8-K, including the sections entitled risk factors.
And 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 mornings earnings press release, our quarterly reports on and Hugh and our annual report on form 10-K.
And I'll turn the call over to Margaret.
Thanks, Karl and good morning, everyone.
Along with Charlie joining me this morning on Mark Richard Dr. Mack Hinson, Dr. Jim Swift, Dominic and Rihanna.
And John.
My comments this morning, moving in three areas. The results. We reported this morning, the essence of what we do as a company and how we're strengthening and reshaping med ex I'm of course pleased with our results for the quarter, which were ahead of what we could have foreseen when we talk to you in February.
And volume strengthened through the quarter ramping up through March and into April and.
I'm sure. Most of you saw the statistics published by the CDC, which indicated a sharp downturn and nationwide birth, and the fourth quarter of 2020 and.
And you know we experienced the same trajectory at the end of last year, but to a significantly lesser degree.
We believe this reflects the typical profile of the hospitals, where we provide neonatology services, which tend to be larger and bigger market and with extensive labor and delivery services, including robust neonatal ICU.
It may also reflect our geographic footprint, which has which has a heavier weighting and faster growing states and markets.
Cash flow into the first quarter, and roughly 400 hospitals and make up our own growth statistics, its downward trajectory and growth did not continue adjusting for leap year or total growth at the hospitals, where we provide NICU services were essentially unchanged from Q1, which is better than what we.
We reported it late 2020.
Lastly, well, it's too early and make a final call improvement and our payer mix. So far suggests that.
And with the volatility we experienced in November and December couldn't have been more covenant on them.
To give you one quick insight into how this rebound and try and this impacted our results our revenues for the quarter, excluding the tariff money, we reported with over $30 million ahead of our internal expectations, which translated into meaningful year over year growth and adjusted EBITDA versus the expectations, we shared with you on.
Worried that it could easily be down versus 2020.
Looking ahead to our full year 2021 expectations, we expect that our 2020, one adjusted EBITDA will be at or above $220 million I will explain.
I said last quarter. They were looking closely at our 2019 adjusted EBITDA of 265 million before the pin debit and the debt available benchmark and how our business is recovering as well and backing out our estimate that the two.
2020 impact of the pandemic was roughly $40 million to $50 million. If you look at the first quarter of 2021, our adjusted EBITDA of $45 million was still below the first quarter of 2019, and when we reported it and that's when we also reported $50 million and adjusted EBITDA.
And when you exclude the roughly $4 million and contribution from the cares fund we recorded this quarter, we were roughly 18% below Q1 and 2019.
So well certainly pleased with our result is still clear that we're not back to them on my own and fat and all.
First quarter results reflect a similar run rate of COVID-19 impact to what we experienced last year.
I don't think distribute surprising given the unique nature of the services, we provide and the timeliness of this COVID-19 impact and much of our patient volume and based on patency and trial growth timing.
Lastly, all ads on our operating results for the past two quarters and unusually volatile. So we're also mindful of is still uncertain nature of how fast we're consistently you will see things recover.
Now I'll talk for a couple of quarters about my confidence that we can achieve a run rate of $270 million and adjusted EBITDA. Once we move past the impact of.
COVID-19 pandemic.
Our results bolster our confidence that we will reach and exceed that run rate.
And I'm not kind of in and just because we saw better trends over the past couple of months I'm confident because we continue to push our operating plans and because we are should be shaping how we do things here.
Our singular focus that net net is to reinforce our position as the foremost provider of women's and children's health care and the markets, we serve and to do so efficiently and is the best partner, we can be to the patients we serve as well as to the payers and health systems, we work.
So let me talk about what we've been focused on and speak to you about our core pediatrics and obstetrics medical groups.
It's all about the patient.
Med and expert began carrying from mothers and babies and their most challenging times over 40 years ago, the only absolutely imperative.
Founder and board member Dr. Mendell prescribed has been.
Take great care of the patient.
Much of my time spent with our clinicians hospital partners.
Prospective partners and of course with my team and I can attest to this unwavering commitment.
There is an unshakable conviction and access we always take great care to patients and everything else will follow.
And that's easier said than done to take the best care of the patients the mothers babies and children.
Requires a lot of work and investing.
First we have to recruit and retain the findings physicians and clinicians second to do this we try to provide more support for our affiliated clinicians and anyone else and our field.
Third we have a formula to independent research organization and non field of medicine and.
Including complex newborn screening, one and for babies and the U S. Our patients from US we have more knowledge and data and these areas than anyone else.
And since our care is provided with CT and Theyre very local level, we have to provide more support for our affiliated clinicians and each market we have.
We are and then anyone else.
Finally, with me and with all the lead and our steel for example, one of the most critical and active parts of our organization is on our clinical support this group along with our full support and make sure that we can continue to advance our skill and knowledge for the sake of our patients.
In two weeks as we did even during the depths and the pandemic last year, we will be holding our annual medical directors meeting from over 2000, clinicians will actively participate and we'll learn from research quality and clinical experts.
On top of these areas, we provide system support recruiting support and every other kind of health to allow our clinicians to again take great care of the patients.
This along with it or what we do is what I believe makes us the choice among our nation's hospitals. This is what makes US a leader of <unk>.
Partners and great medical prep.
This is what makes us the leading referral choice of physicians, who want their patients to be and our care during their most difficult minutes days and weeks.
I've spoken about our drive to employ our practice data dashboards to improve patient access and it has and continues to be of paramount importance to us.
Steady drumbeat, we want to be certain that a patient who needs care from one of our affiliated physicians get that care as soon as possible and Im sure anyone on this call from relate to our medical appointment process can win or lose loyalty and we know and business leaders and on the effect that this can have on volume.
So we're working with all of our practices to help them make schedule and has driven and efficient as we can making sure that appointments are cash immediately rescheduling notion of backfill and cancellations using our scheduling tools to open and additional slots and staggering staff outreach and referral map there on.
All part and that was necessary equation.
We've already seen improvement and many practices, particularly in terms of higher percentages of kept appointments and reductions and no shows and this focus is also helping us to share best practices and create benchmarking capabilities. So we can measure how effective are down and it has on practice scheduling and every measurable factor beyond just the post COVID-19 recovery.
We've recently seen.
We also recently welcomed a new leader and telehealth to make us to help make that Bob a truly active part of what we offer on patients. We all know that a physical visit is not only need it where possible.
And we will make our telehealth process fluid.
And our patients and attract new patients.
This efficiency and effectiveness also applies to our growth plans and our sales and business development team has reengineering focused market by market approach is driven by local intelligence and relationships.
We've also added resources to this team to make sure that we're highly integrated not just in identifying and winning new business, but providing services quickly and seamlessly to the partners, who put their trust in us and and pediatrics affiliated physicians.
And my view, we lacked until now to other major ingredients to propel US forward first on our patient relationships have not extended past our subspecialty practices, we need to make sure as well as we can and when a patient needs to see a physician and on network. They can do so quickly and easily as possible.
And we're moving forward and pediatric urgent care to develop plans for expansion and their businesses and markets, where we have a significant presence and we will expand with a brand name pediatrics.
We believe that providing pediatric primary and urgent care and patient friendly dedicated clinics will allow us to give patients easier access to the exceptional specialists across our organization when they need it and will also help strengthen our relationships with the communities, where we provide services and with our hospitals.
Thanks.
And maybe most significantly we believe nobody nobody knows how to care for babies and children and mothers like we do and we want on fully extend and types of relationships. We currently have.
When a mother and child and want to find the best primary and urgent care.
Practice, our answer should be and will be right here with us and pediatrics.
Second our brands and pediatrics, and obstetrics and not widely known and we do believe our hospital product is nowhere near and very well and more importantly, they know that they can rely on us for what we can do for their patients.
Ah patients learn about it and count on us and the most challenging time and then they move on our.
Our perspective practices and clinicians do not only on who you are and.
What we provide as they plan their career path.
To address this.
And all of our work, we've launched a marketing campaign and it's obvious key theme and trust.
And I'm gonna be widespread and they're completely authentic and feature only our own doctors, who speak about why people should trust them and trust us.
We will continue to reach out to reinforce the very unique and importance of pediatrics and obstetrics and.
And hospital, Pediatrics, and obstetrics entrust lifesaving world class conditions clinicians.
Clinicians.
Our brand will be known for that.
I'll finish this morning, where I started and we're working to ensure that med NEC and can be the best possible partner to the patients we serve and to the physicians payers and health systems, we work with all driven by our vision to take great care to patients while at the same time, taking great care of the business.
This isn't always easy, but we have a long track record track record of working hard the best solution.
And two.
With that I'll turn the call over to Mark <unk> to provide some more details.
And as Mark and good morning, everyone.
I'll add some details from our first quarter results, including some expansion maintain versus 2019 and that Mark mentioned.
And touch on some of our G&A expectations as we move through the second quarter.
Lastly, I'll touch on our financial position as it stands today.
Turning to the quarter at the top line, our net revenue grew by $5 5 million or just over 1% year over year, we recorded about $8 million and revenue from the provider relief fund established by the cares Act during the quarter.
Overall.
Same unit revenue increased by three 5% year over year.
Or a three 6% after excluding the additional calendar day in February 2024, the 2020 leap year.
Same unit volumes declined two 5% year over year or one 4% adjusted for the leap year.
Compared to a six 6% year over year decline and the 2024th quarter.
The table on our press release provided some detail breaking down our hospital based versus office based patient volumes and I'll add a little more color.
As Mark mentioned patient volumes improved throughout the quarter such that we saw same unit growth and March across all of our service lines with the exception of pick you and pediatric hospitalist services.
Second our NICU days for the quarter as a whole were down slightly more than total births.
Petals, where we provide and thank you and coverage.
This reflects a modest year over year decline and average length of stay on.
Partially offset by a year over year increase and a rate of admission.
I know that at a rate of admission was an area of interest for many years ago. Following our fourth quarter release, So I'll point out that in Q1, our admit rate reverted to its historical level after being modestly lower through the latter part of 2020.
Lastly, I'd like to address our 2021 volume relative to 2019.
Our first quarter same unit volume was down approximately 3% as compared to the same period and 2019.
With hospital based volume down to a greater degree and office based on volume.
We will continue to look at this two year comparison throughout this year and total lightweight and comparisons to 2020 will not be relevant based on the pandemic related disruptions, we experienced last year.
On the pricing side.
Had a couple of favorable items. In addition to our usual rate growth, which has been typically and the 1% to 2% range based on managed care and administrative fee revenues.
First the carriers' revenue, we recorded added a little under 2% to our pricing works.
Second as we detailed on our press release, our payer mix was 110 basis points favorable compared to 2020.
Which added roughly an additional $5 million and revenue or a little more than 1% and pricing growth on the quarter.
On the expense side, our practice level salary wage and benefit expense was up by $2 $7 million were about 85 basis points year over year.
And this increase mostly reflects variable incentive compensation tied to practise level revenues, partially offset by.
Decrease and malpractice expense, which was higher and 2020.
Our G&A expense was down nearly $1 million year over year.
Despite incurring approximately $5 million of costs related to transitional services, we provided to the buyers of our anesthesia and radiology medical groups.
And the reimbursement for those expenses is reflected and our investment and other income line items.
So theres minimal impact on our adjusted EBITDA those costs you wouldn't wait on a reported G&A expense.
And then near term I'll note that while the radiology and TSA arrangement has concluded we do anticipate that we will continue providing services under our anesthesiology PSA at least through the second quarter of this year.
You should expect a similar expense and reimbursement dynamic and the second quarter.
We expect to wind down the anesthesiology TSA services sometime after the second quarter.
And which point, we will also be able to begin winding down the expenses, we're incurring and move toward that future state expectation for G&A.
Again.
There may be some period of time, when we're still incurring some of those expenses, but not being reimbursed for that.
Lastly, our balance sheet reflects our reduced leverage profile and strong liquidity position, we ended the quarter with $270 million and cash and net debt of $730 million, implying leverage just north of three times.
With that now I'll turn the call back over to Mark.
Thanks Mark.
We are ready to take questions.
Charlie.
Ladies and gentlemen, if you do have questions. Please press, one and then zero on your Touchtone phone.
You'll hear and indications that you've been placed into the queue and you may remove yourself from the queue by repeating the one Lynch zero command.
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Well first go to the line of Dan Pardon Me, Kevin Fischbeck with Bank of America go ahead. Please.
Okay, great. Thanks.
Just wanted to understand a little bit.
You know the way that Youre thinking about Bob.
Volume coming back for the rest of the year I know you guys.
You talked about COVID-19, having an impact on on volume just trying to see if you could tease out exactly how much you've thought about that and.
And the fact that day.
Volume and the non hospital setting and coming back faster is that is that a bullish time for per berth coming back or is that really more just a question of how quickly you're growing that business.
Underpenetrated and understand.
Is there any big indicator or not.
And Kevin it's Mark.
And by saying that we have.
I talked about volatility and we've seen and Atlanta.
Two quarters volatility, obviously with an upward trend.
And we're trying to see where all of this shakes out.
We as I mentioned because of the markets, we serve and the and.
Since we set tends to be and larger hospitals with level three and level four Nick is we think that that helps.
What we do and and otherwise sluggish.
Sluggish period.
I'm, not making a bullish pronouncements.
And that we don't have a basis to see we are certainly working.
Operating initiatives that we've talked about and on our most and our ambulatory practices, we think will obviously increase.
Volume and efficiency, so that book that would happen.
And having them take up a larger part of our business. So I would say I would say that we're doing everything we can to maximize our results and in unchartered territory I might ask Matt to comment.
To comment on any thoughts about what we're seeing and our and our practices that.
Could help check from light here, yes, I would agree with Mark I think the volatility makes it difficult to comment on.
Definitively on and on a trend.
Historically the markets we are and.
We have been less affected by the total growth rate.
Because we've tended to be and markets that total national birth rate means that we tended to be and markets that were a little more favorable to us and <unk>.
Certainly on the ambulatory side, there is a whole host of work.
And yet.
And as we've discussed before and the ability to see and real time data about what's happening and our ambulatory practices I think are making us.
Significantly more efficient.
And and we believe that I think drive our unique patient volume.
Okay and then.
I guess as far as the TSA goes I understand.
And kind of backing it out on the number but that makes him about that.
And the reimbursement will drop as the year goes on.
It may not be one for one.
You're cutting costs does your guidance assume it's a net.
Zero, what does your guidance assume that there is a net drag.
From that and the back half of the year.
Okay.
Yes.
And.
We really don't have guidance out there, but but ongoing assumption is that as we wind down on the TSA there will be a residual cost component and it will flow through the remainder of 2021.
We're not collecting fee use for some of the Australia cough.
The bulk of.
What we have seen year aside from human capital is really IP related costs that are under various contracts show. So there will be a lag it's not one for one.
But it's material materially in that range.
Yes, the only and the other thing I would add looking forward is once we're past TSA since a lot of the work that were being doing while we are reimbursed for it. It does take a lot of our teams time and attention and Ed.
As it needs to so I do think that as we move past it we will climb.
Lot of ways to be much more efficient and then I would also say and enable our team to be less distracted by by outside interest to be fully focused on on R&D. So.
I would expect and it's gonna be a net positive.
Okay, and then might be flat.
And you mentioned up on down year over year, but that and your view because last year was inflated or.
I would think about what you saw this quarter.
Yes, hi, Kevin as a med Mal Dr. Kevin we were our med Mal expense was a little bit above trend and the first quarter last year on a temporary basis. So what we pointed out is that for this quarter. We were generally on trends and that's where we got the tailwind for this quarter nothing unusual in 2021.
Okay perfect. Thank you.
One moment please.
Our next question will be from a J rice with credit Suisse go ahead.
Hi, everybody.
Couple of quick questions here, the pickup and the commercial mix.
Are you rationalizing that and basically the people that made decisions to sort of postpone spending families are starting families were tended to be people that were more commercially covered and.
And maybe therefore, a little more expensive.
And on me and therefore as you see it come back youre going to get that pickup and commercial and that's something that will persist or is there something about this quarter that drove that commercial mix improvement.
And what I would tell you.
And as I commented on a.
Hey, Jay.
And we now look at the results and the latter part of the fourth quarter and sales were more of an anomaly. So.
So I would say that the payor.
What what we see that the payer mix is more in line with what we had expected before not that there is a difference.
A new trend so I think.
So far and it's still early in the air and the fourth quarter was an anomaly and we would say that that we're going back to the kind of on payer mix that we.
And we have experienced in the past.
Okay.
Any update on the deal pipeline and acquisitions, obviously with your leverage where it is you've got plenty of firepower.
Thank you spent about $6 million and the first quarter is there anything to comment on what you expect from the rest of the year there.
Yes, absolutely.
Jim to make a Dr Swift to make a couple of comments.
As I said, we are we're operating on a more organized fashion and I think than ever before with was obviously the first time in years, where all of our focus and growth and and.
Pediatrics and obstetrics and so we do see a very strong pipeline and.
I would say a full court press from all of us to make that happen and Jim you might want to yes, I think good both on the acquisitive side and on the organic growth side, we've seen in the first quarter, especially on the organic growth side and acceleration in terms of contract signings with our hospital partners on the acquisitive side.
We will see the pipeline vertical right now and the second quarter will have some execution on some of the current priorities and that will accelerate into the third and fourth quarter. We're now calling on our numbers on this on this right now but.
And as <unk> and <unk>.
Growth in pediatrics, and obstetrics was relatively small and 2019 and into 2020. So we do think thats going to become a more meaningful part of our story going forward.
Okay, and then just last question.
I know and prepared remarks, Youre, saying, you expect 2021, and adjusted EBITDA to be at or above.
$220 million.
Look back and it looks like on a normal more normal year, who knows what a normal years, but you get about 15% to 20% of your earnings and.
On the business and Q1.
You were to apply.
The mid point of that.
Probably end up with an EBITDA range, given what you reported and Q1 more on the $2 45.
And range I know you said something about you.
Just given the volatility would be conservative but is there anything specific that you know now that suggest.
You know the trend and the quarters over the course of this year might be different than the normal season.
Seasonality.
Factory.
Well I mean, yes.
You hit the nail on the head and we've looked at it every way we can.
We're a different shade and white.
And looking at it.
And on time and 2020 wasn't normal. So so we can only go by on our current trends and say.
And look and compare that to 2019 and not.
And I think we're trying to be conservative, but to say that we don't have a base.
To project that.
And what we saw in 'twenty and then.
Q1, 2021 at the start of a normal a normal pattern.
But as we've gone.
A month into 'twenty and into Q2, we see that yes, we would expect I see that.
Or.
Q2, the consensus seems to be around.
Around.
$50 million to $55 million of EBITDA, and we think that that's looking like that's about right. So two 'twenty seems like without providing guidance seems like not a conservative number.
But a justifiable outlook.
And we don't have a reason to think that.
Yes, that's a quarter that we will follow a traditional pattern and what we've had the volatility you've had and we're coming off of what we have so that's why I wouldn't be throwing out numbers and.
And $2 40 to $2 50 that that seems.
A bit robust.
Okay.
Alright, Thanks, a lot.
We'll go next to Brian <unk> with Jefferies Go ahead. Please.
Alright, Thanks, Jack and Robert on for Brian and Congrats on a good quarter.
I think I just want to piggyback on the M&A question here.
But more looking at it from a strategy perspective.
D and what you did with Nightlight.
Do you think I guess trying to understand how youre thinking about balancing tuck.
<unk> and smaller acquisitions that you can then kind of take the blueprint and push it over to the organic growth side of the equation versus maybe slightly more sizeable deals given the flexibility have on balance sheet now.
Well, we're always open to and more sizeable deal and we think that there's not.
The key to our key to net net is the best partner and our markets that we possibly can be.
And we think that starts with Takeda and being able to do things that make our relationships with our hot growth really deeper and more or less.
So that's why our focus is is.
Absolutely on that to make sure that our core businesses is as strong as we can be and it would be and the best possible partner and then we have a position on each of these markets.
Clinicians and physician who's looking for a place to land and lots of debate, but wanted to be and with one of our affiliated practices.
So that that's on a thrust there now.
And we've spoken about for the last few quarters, we it's sort of a frustration that we take care of mothers and babies and then we wish them well.
And we know that there's an enormous opportunity and many of our markets.
And we lead and pediatrics and obstetrics and to be able to build that part of our business. So strategically we think it's a it's a major plus to be able to be and a combination of primary and urgent care.
We think it's a natural extension of what we do we think we have more local knowledge about that and anybody else and we have the best relationships with local hospitals and anybody else. So we think that's a major strategic advantage and.
Certainly we could do that and a combination of organic growth and acquisitions. The most important thing and to get it right get the combination of primary urgent care right. So that so the wear and a great location and.
And facilities that are really welcoming that a very patient friendly when we are where we are backed by systems and apps that enable you to make appointments and do the things that we all know has been vaccine.
And before the pandemic and certainly heightened.
By the pandemic.
The unscripted surgeon and you have anything on and leave and I don't hear no just and and we see that primary earpiece fitting nicely into our sub specialty sport and the other sort of specialty areas, where again, we that's more of an intermittent road in terms of care with the primary care and subspecialty care will tie that in with urgent care.
Okay, Great no that's super helpful. I think.
Next one I wanted to touch on chest on that Delta between.
And and NICU days I appreciate all the color on admission rate and length of stay I guess, maybe just.
Looking back to the last quarter I know you talked about no changes and clinical protocols and I guess with three.
And three more months day.
I'll look back and reflect.
Any color you can give on that delta normalizing and perhaps.
What exactly the anomaly was in Q4.
And this is Charlie let me just give a quick.
Quite a clarity on that because I know this is a question on last quarter.
And our Raven mentioned the percentage of deliveries and the hospital that are admitted to the NICU is and from the low to mid teens and.
And why do we discussed.
Graham and mission being down a little bit.
Back half of last year, and put that in perspective, and the fourth quarter. Our rate of admission was down by 30 basis points. So if it was not an exorbitant difference or any kind of significant departure from trend, but it did nonetheless depressed our NICU days versus birds. So I just want to put that into context.
On a on a care for stat basis, it has begun and trending upward.
From the second quarter third and third quarter, and the Florida, but was still below year over year and as we've got on the first quarter here. It appears to be right back on the trend line.
Longer term multiyear trend line and was up year over year. So.
And I hope, that's a little bit a little bit helpful. I might turn on massive protocols on the line, but just from the physical side that's always on.
Yeah.
I don't think that we can point to any substantive differences on how kit babies are evaluated and admitted to the NICU and the case by case basis based on best available evidence based medicine that organizations, making and bedside. So theres certainly nothing we would point to systemically there that would be different than our normal course.
Systems.
Okay.
Okay, great. Thanks.
We'll next go to the line of <unk> Chickering.
With Deutsche Bank go ahead. Please.
Good morning, guys nice quarter on a very challenging quarter.
A couple of questions here.
The first one is seeing is a lot of the assets of this business are fairly hard to manage whether its payer mix or acuity or to your point pay specials, and the NICU or length of stay and in the queue.
I was looking at your first quarter guidance, you gave us and February versus what you guys. Just posted obviously a huge inflection there on the most secured line impairments youre talking about so I just wanted to see if you can give us some color on how much visibility and control.
Does have on EBITDA or is it more from macro driven sort of who shows up into the hospital.
Well.
I think it is.
No different than and the path I think we can look at our core business and trends and our core business.
And normally Payor mix.
As a more linear has a more linear pattern and then we've seen.
So I think again that the lab the lab.
Several months saw more volatility and wear than we're accustomed to and as far as being a difficult.
Business to manage and auto.
And one that hit the upper right, but yes.
Your line component, what we do.
And but I do think that there tends to be.
And especially in the major markets that we're in and I think it tends to be relatively predictable.
And unless we use different tactic because of different tactics, and both growth and and managing the business.
With the analytics that we have are they are the real changes. So I don't I don't think it is.
It's not that it's so unpredictable, we obviously are subject to the the birth rate and the hospitals that we serve but beyond that I think.
I think other than what looks like again and anomaly and the fourth quarter.
Okay.
It's generally predictable now obviously the wildcard is COVID-19 and we have aspects of our business, we're thinking and pediatric intensive care and other areas.
Children, Havent been getting and cyclically as they traditionally do which is which is a good thing overall, but not robust for our business. So we will see how that goes on.
And how that comes back so certainly the pandemic has a lot of varied effects on the health care company.
But beyond that.
And we're trying to just run as steady as we can and with very close contact with our net use our ambulatory practices and see to see how things are shaping up.
Okay, and then as a follow up on as you think about revenues and costs relative to 2018 levels can you remind us how much salaries and practices increase each year and we have a contract you have with doctors.
What is the mix of the pay the soccer is on fixed versus variable.
That'd be great.
Yes.
When you look at the practice level SW day as number of components and probably the largest is the underlying salaries for the clinicians and older.
And so the practice that are part and <unk>.
There is necessarily going to be from inflationary pressure on that.
Clinicians move up within the practice, there is greater and you're already and the light and.
And somewhat offset by by physician turnover on retirement and life, but it does have an upward track and I would call that and then.
And the low low single digits.
<unk>.
The other component is variable incentive compensation and.
For pediatric for men Act as a whole today.
And we can follow up and somewhat greater specifics, but that level of cash.
Compensation expense and that line is significantly above $100 million.
And it moves and and tied to practise level financial results. So that's where you see us call out pretty consistently and.
And the fourth quarter as we saw revenue constraints and and declines that they were they were buffered quite a bit by the variable compensation expenses out here and the first quarter.
And we did see some return to growth and it.
And specific call out is the is the.
We provided relief funds that we receive better practice and specific.
We will also flow through that variable compensation expenses. So there is a layer of variability and there and we've been trying to call that out.
Okay and last question for me.
And I believe you guys are pricing second quarter consensus EBITDA numbers.
Fair to think about <unk> St revenues also directionally and the right way I just want to make sure that the models are probably perhaps with a lot of moving parts here. Thanks, so much.
I think I think what we were looking at it.
On any kind of preliminary basis without being specific.
And just so happens that.
Or.
Looking at consensus for Q2 and and look.
And basically appropriate we haven't typically guided to revenue. So I don't think I'm going to be in a position to Bob to comment on the top line right now, yes, I think more than anything what we're trying to do is to be as transparent as we can be and and where where we just don't want.
Things to run ahead of themselves without our analytical basis for it so we look at.
We have a better than expected quarter and did natural tendency would be for people, who say well why don't we just see how and when we annualize that and look and what you get and we just don't see the analytical underpinning for that as and as we.
We started and into the second quarter, we see that we think we'd be.
Right around that.
Low to mid fifties.
Number which happens to be as Charles said, we're where consensus is falling out and again I would still say that it's way too early to think that we're out of the woods and I'm, not saying that to be to be cumulus and saying that because there's wage growth that they were out of the woods. So I think that projecting.
Anything meaningfully above.
Two twentyish area.
To us we don't see the underpinning.
And Doug I can't rule it out, but we don't we don't see it so I, though I don't want to.
And when you get people ahead of themselves from the results of one quarter and a volatile period.
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