Q4 2021 MEDNAX Inc Earnings Call

February 17, 2022

Hi.

Speaker 1: It's funny, you like handling all that. Ladies and gentlemen, thank you for standing by. Welcome to the Med-Nec's fourth quarter and year-end 2021 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time.

Okay.

Maybe.

Ladies and gentlemen, thank you for standing by.

It was a bad next fourth quarter and year end 2021 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time should you require assistance during the call. Please press Star then zero and an operator will assist you offline as a member.

Speaker 2: Should you require assistance during the call, please press star then zero and an operator will assist you offline. As a reminder, your conference is being recorded. I would now like to turn the conference over to Charles Lin, Senior Vice President, Finance and Strategy. Go ahead.

Under your conference is being recorded.

I'd now like to turn the conference over to Charles Lynch Senior Vice President.

<unk> and strategy. Please go ahead.

Speaker 3: Thank you operator and good morning everyone. I'll quickly read our forward-looking statements and then turn the call over to Mark.

Thank you operator, and good morning, everyone I'll quickly read our forward looking statements and then turn the call over to Mark.

Speaker 3: 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 1995. These forward-looking statements are based on assumptions and assessments made by MedNax's management in light of their experience and assessment of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate.

Certain statements and information during this conference call maybe deemed to be forward looking statements within the meaning of the federal Private Securities Litigation Reform Act of 1095 <unk>.

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 and <unk> undertakes no duty to update or revise any such statements whether as a result of new information future events or otherwise important.

Speaker 3: Any forward-looking statements made during this call are made as of today, and MedNax undertakes no duty to update or revise any such statements, whether as a result of new information, future events, or otherwise.

Important factors that could cause actual results developments and business decisions to differ materially from forward. Looking statements are described in the company's most recent annual report on Form 10-K , its quarterly reports on Form 10-Q , and its current reports on form 8-K, including the sections entitled risk factors.

Speaker 3: 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 , its quarterly reports on Form 10-Q , and its current reports on Form 8-K, including the section entitled Risk Factors.

Speaker 3: In today's remarks by management, we will be discussing non-GAAP financial metrics.

In today's remarks by management, we will be discussing non-GAAP financial metrics.

Speaker 3: A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly reports on Form 10Q, and our annual report on Form 10K, and on our website at www.mednax.com. With that, I'll turn the call over to our CEO , Mark Orden. Thanks, Charlie.

A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly reports on Form 10-Q , and our annual report on Form 10-K , and on our website at Www Dot <unk> dot com with that I'll turn the call over to our CEO Mark Gordon.

Thanks, Charlie and good morning, everyone also with me today are Mark <unk>, our CFO , Dr. Mack Hinson, who leads pediatrics and after Jim Swift, our Chief Development Officer.

Speaker 4: Also with me today are Mark Richards, our CFO , Dr. Matt Hinson, who leads pediatrics, and Dr. Jim Swift, our Chief Development Officer. Our fourth quarter results were in line with our expectations and reflect a strong recovery from a rough prior year period. Total births at the hospitals where we provide NICU services were up 5% on a same unit basis and our NICU days were up 5.6%

Our fourth quarter results were in line with our expectations and reflect a strong recovery from a prior year period total births at the hospitals, where we provide NICU services were up 5% on a same unit basis and our NICU days were up five 6% our payer mix was favorable year over year and in fact for the full year reflects a slightly favorable comparison.

Speaker 4: Our payer mix was favorable year over year and in fact for the full year reflects a slightly favorable comparison to pre-pandemic levels. You'll see that we recorded a significant amount of funds from the CARES Act during the quarter, which reflects the applications we submitted for the periods in 2020 when operations were disrupted during the COVID pandemic.

To pre pandemic levels Youll see that we recorded a significant amount of funds from the cares act during the quarter, which reflect the applications. We submitted for the periods in 2020, when our operations were disrupted during the Covid pandemic.

Speaker 4: As we've done in the past, we've provided details in our filings of the contributions of these funds to revenue and adjusted EBITDA in order for you to make a proper comparison to your own project.

As we've done in the past we've provided detailed in our filings with the contributions of these funds to revenue and adjusted EBITDA in order to you to make a proper comparison to your own projections.

We also achieved solid results in 2021 versus pre pandemic levels compared to 2019, our same unit volumes for the year as a whole grew by roughly 1%. Despite a two 5% decline in the first quarter of last year, perhaps just as important our 2021 results don't fully reflect that.

Speaker 4: We also achieved solid results in 2021 versus pre-pandemic levels. Compared to 2019, our same unit volumes for the year as a whole grew by roughly 1%, despite a 2.5% decline in the first quarter of last year. Perhaps just as important, our 2021 results don't fully reflect the many improvements we made in our business during the year, particularly in our efficiency.

The improvements we made in our business during the year, particularly in our efficiency.

Speaker 4: As we've discussed in the past, our transition of our revenue cycle operations to R1 provides us with meaningful savings and these began to be seen only in Q3 of last year.

As we've discussed in the past our transition of our revenue cycle operations to our one provides us with meaningful savings and these began to be seen only in the in Q3 of last year.

Speaker 4: We're also now fully done with our transitional service agreements related to past sales of our anesthesia and radiology businesses. This finally enables full focus on our core. And while it's a below the line item, we expect that our recent refinancing transactions will reduce our ongoing interest expense in 2022 by more than $30 million compared to 2021.

We're also now fully done with our transitional service agreements related to past sales of our eyes.

<unk> and radiology businesses. This finally enables full focus on our core.

And while it's a below the line item, we expect that our recent refinancing transactions will reduce our ongoing interest expense in 2022 by more than $30 million compared to 2021.

All told we have now completed our budget process for 2022 and based on that process. We are now reaffirming our expectation that absent any major external events adjusted EBITDA for 2022 will be at least $270 million with revenue in the $2 billion range.

Speaker 4: All told, we have now completed our budget process for 2022, and based on that process, we are now reaffirming our expectation that absent any major external events, adjusted EBITDA for 2022 will be at least $270 million with revenue in the $2 billion range.

Speaker 4: Mark will walk through some of the major components of this outlook, but for those of you keeping models as you make comparisons to our 2021 results, keep in mind that these results include meaningful contributions from CARES funds, which totaled $26 million in revenue and $16.5 million in adjusted EBITDA.

Mark will walk through some of the major components of this outlook, but for those of you keeping models as you make comparisons to our 2021 results keep in mind that these results include meaningful contributions from <unk> funds, which totaled $26 million in revenue and $16 5 million in adjusted EBITDA.

Speaker 4: So what are we focused on today? On the cost side, much of the work we did in 2021 and here in early 2022 has been focused on efficiency in our GNA, in the support of our affiliated practices and in our balance sheet. And we believe that there are additional efficiencies we can achieve this year and beyond. But we've also laid out the groundwork for growth.

So what are we focused on today on the cost side much of the work we did in 2021 and here in early 2022 has been focused on efficiency and our G&A and the support of our affiliated practices and in our balance sheet and we believe that there are additional efficiencies we can achieve this year and beyond but.

But we've also laid out the groundwork for growth in our core our growth is led by Dr. Jim Swift and in 2022, we will be laser focused on our biggest relationships and how we can strengthen and expand them along with other opportunities in and around our core markets.

Speaker 4: In our core, our growth is led by Dr. Jim Swift, and in 2022, we will be laser-focused on our biggest relationships and how we can strengthen and expand them, along with other opportunities in and around our core markets.

Speaker 4: In pediatric primary and urgent care, following our initial acquisition of Nightlight Houston in early 21, and then our investment in partnership with BraveCare earlier this month, we announced our entry into a second market with the acquisition of Nightlight Orlando. This acquisition gives us an immediate strong presence in Florida with 13 clinics that we will rebrand as pediatrics and expand to include both primary and urgent care.

In pediatric primary and urgent care following our initial acquisition of Nightlight Houston in early 'twenty, one and then our investment in and partnership with Brave care earlier. This month, we announced our entry into a second market with the acquisition of Nightlight. Orlando. This acquisition gives us an immediate strong presence in Florida with 13 clinics that we will rebound break excuse me.

We will rebrand as pediatrics and expand to include both primary and urgent care.

We will also implement brave carries an operating platform that gives patients and their parents a truly seamless experience when they visit.

Speaker 4: We will also implement BraveCare's IT and operating platform that gives patients and their parents a truly seamless experience when they visit.

Speaker 4: I want to welcome the entire Nightlight Orlando team to the pediatrics family.

Want to welcome the entire Nightlight Orlando team to the Pediatrics family.

We continue to see clear strategic value in developing a robust network of pediatrics primary urgent care clinics at a high level looking at our geography of existing services, we see an opportunity for us to have well more than 100, pediatrics clinics across our footprint and the addition, nightlight Orlando.

Speaker 4: We continue to see clear strategic value in developing a robust network of pediatric primary and urgent care clinics.

Speaker 4: At a high level, looking at our geography of existing services, we see an opportunity for us to have well more than 100 pediatrics clinics across our footprint. And the addition of Nightlight Orlando moves us quickly in that direction, bringing our total footprint today to 21 clinics.

Moves as quickly in that direction, bringing our total footprint today to 'twenty one clinics.

Speaker 4: Keep in mind that this only represents two markets, Houston and Orlando, which both offer clear room for expansion. So I hope you see the opportunity for us as we move toward the addition of clinics in all of our top markets.

Keep in mind that this is only represents two markets Houston, and Orlando, which both offer clear room for expansion. So I hope you see the opportunity for us as we move towards the addition of clinics and all of our top markets.

Is very real.

Speaker 4: We'll continue to look at a combination of acquired and de novo clinics, and on the de novo side, we now have in place plans for new clinic development in three additional markets. Our expectation is that we can move toward opening of these clinics before the end of this year. And in the meantime, we'll be adding to our development plans while also contemplating growth through additional acquisitions.

We will continue to look at a combination of acquired and de Novo clinics and on the de Novo side. We now have in place plans for new clinic development in three additional markets. Our expectation is that we can move toward opening of these clinics before the end of this year and in the meantime, we will be adding to our development plans, while also contemplating growth through additional acquisition.

Yeah.

Now let me talk about our brand we are most excited to be moving towards operating under a unified pediatric brand pediatrics is a well known and of course very respected name nationwide and we've used it within most of our affiliated practices for years and in many cases decades moving forward our affiliated practices in primary and urgent care.

Speaker 4: Now let me talk about our brand. We are most excited to be moving towards operating under a unified pediatrics brand. Pediatrics is a well-known and of course very respected name nationwide and we've used it within most of our affiliated practices for years and in many cases decades. Moving forward, our affiliated practices and primary and urgent care clinics will operate as pediatrics. Of course, the practices won't lose their current identity as that will sit right beside the pediatric's name.

<unk> will operate as pediatrics of course, the practices won't lose their current identity as that will sit right beside the pediatrics name.

While <unk> will continue to be a public company named Pediatrics will be the name all of our partners now just as importantly, we wanted to be the name that all of our patients and their families know entrust to signify a core commitment our new pediatric logo patients three interlocking rings, representing our dedication to women's children's and babies.

Speaker 4: While Mednex will continue to be our public company name, Pediatrics will be the name all of our partners know. Just as importantly, we want it to be the name that all of our patients and their families know and trust.

Speaker 4: To signify our core commitment, our new pediatric logo features three interlocking rings representing our dedication to women's, children's, and babies' health.

Yes.

We recently added to our senior team, a new chief marketing and Communications Officer, who is already propelling the transformation and reinforcing our brand is branding process can help strengthen our existing relationships open new opportunities for us and drive the growth we're looking to achieve for our organization.

Speaker 4: We recently added to our senior team a new Chief Marketing and Communications Officer who is already propelling a transformation in reinforcing our brand. This branding process can help strengthen our existing relationships, open new opportunities for us, and drive the growth we're looking to achieve for our organization. We do not want to remain health care the norm.

We do not want to remain healthcare's best kept secret.

I will now discuss another important milestone we've achieved over the past year, we've focused heavily on our environmental social and governance goals early in 2021, we formed a robust ESG committee chaired by our Chief compliance officer as well as our newly appointed senior director of diversity equity and inclusion.

Speaker 4: I'll now discuss another important milestone we've achieved. Over the past year, we've focused heavily on our environmental, social, and governance goals. Early in 2021, we formed a robust ESG committee chaired by our Chief Compliance Officer, as well as a newly appointed Senior Director of Diversity, Equity, and Inclusion.

Speaker 4: I serve as a very active member of this committee, and through this committee we are making explicit our commitments to ESG policies, developing additional formal policies where necessary, and ensuring that our reporting and external scoring fully reflects MedNAC's leading position as a healthcare provider and conscientious organization.

<unk> has been a very active member of this committee and through this committee, we are making explicit our commitment to ESG policies, developing additional formal policies, where necessary and ensuring that our reporting and external scoring fully reflect <unk>, leading position as a health care provider and conscientious organization.

Thanks to this committee's work over the past year I am happy to say that we've improved our average ISS ESG quality score from over six to three and I'll remind you. This is on a scale of one to 10 and lower is better.

Speaker 4: Thanks to this committee's work over the past year, I'm happy to say that we've improved our average ISS ESG quality score from over 6 to 3. And I'll remind you this is on a scale of 1 to 10 and lower is better.

More important than just these scores I fully believe that our continuing commitment to the principles of ESG can help make <unk> the employer of choice a trusted partner to hospitals and clinicians across the country and a public company that can meet the highest standards of you our shareholders.

Speaker 4: More important than just these scores, I fully believe that our continuing commitment to the principles of ESG can help make Mednax the employer of choice, a trusted partner to hospitals and clinicians across the country, and a public company that can meet the high standards of you, our shareholders.

I'll end with a comment about surprise billing many have asked what effect the legislation in the interim final rule published last fall, we will have us well, we're 95% in network with significant diversification of contract and overall strong payer relationships as a result, our direct exposure to changes in the arbitration process for out of network cases.

Speaker 4: I'll end with a comment about surprise billing. Many have asked what effect the legislation and the interim final rule published last fall will have on us.

Speaker 4: Well, we're 95% in-network with significant diversification of contracts and overall strong payer relationships. As a result, our direct exposure to changes in the arbitration process for out-of-network cases is limited. However, if the IFR stands as is, payers could use this as a weapon during contract renewals.

<unk> is limited however.

However, if the ifr stands as payers could use this as a weapon during contract renewals.

Speaker 4: There have been many lawsuits and bipartisan pushback, and I've personally led a strong communications effort directly with agencies and legislators. We hope to see some modifications to the IFR before arbitration processes begin in April .

There have been many lawsuits in bipartisan pushback and I've personally led a strong communications effort directly with agencies and legislators we hope to see some modifications to the ifr before arbitration processes began in April .

Speaker 4: As a result of all this, I can't possibly quantify what, if any, effect this will have on us. To that end, our outlook for 2022 doesn't reflect any such speculation either.

As a result of all this I can't possibly quantify what if any effect. This will have on us to that and our outlook for 2022 doesn't reflect any such speculation either.

What I will say, though is that we know how to manage through change and we have many management levers in our cost structure to offset change.

Speaker 4: What I will say, though, is that we know how to manage through change, and we have many management levers in our cost structure to offset.

Above all else our commitment as always is to maintaining our highest priority of supporting our affiliated practices and ensuring that they can provide the highest quality care to their patients.

Speaker 4: Above all else, our commitment as always is to maintaining our highest priority of supporting our affiliated practices and ensuring that they can provide the highest quality care to their patients. Now I'll turn the call over to Mark for additional financial details.

Now I'll turn the call over to Mark for additional financial details.

Thanks, Martin and good morning, everyone.

Speaker 5: I'll add some more details to our outlook for 22, including how our recent activity is incorporated into that outlook.

I'll add some more details to our outlook for 'twenty, two including how our recent activity is incorporated into that outlook.

Speaker 5: As Mark noted, we expect our revenue in 22 to be approximately $2 billion. This outlook reflects expected revenue growth over 2021 that's about evenly divided between same unit growth and contributions from new contracts, sales, and acquisitions. Again, keep in mind for comparison purposes that our 21 revenue includes 26 million in CARES funds.

As Mark noted, we expect our revenue in 'twenty two to be approximately $2 billion.

This outlook reflects expected revenue growth over 2021, that's about evenly divided between same unit growth and contributions from new contract sales and acquisitions again keep in mind for comparison purposes that our 'twenty, one revenue includes $26 million and carriers.

Funds.

On the cost side, we expect the combination of our direct support expenses, which I'll define as practice salaries and benefits as well as practice supplies and other operating expenses to.

Speaker 5: On the cost side, we expect a combination of our direct support expenses, which I'll define as practice salaries and benefits, as well as practice supplies and other operating expenses, to represent a comparable percentage of revenue to what we saw in 21.

To represent a comparable percentage of revenue to what we saw in 'twenty one.

On the G&A side, our overall spend in Q4 of $59 million was down about $8 million sequentially, which primarily reflects sequential reductions in certain administrative costs as well as RCN savings related to our agreement with our one.

Speaker 5: On the G&A side, our overall spend in Q4 of $59 million was down about $8 million sequentially, which primarily reflects sequential reductions in certain administrative costs.

Speaker 5: as well as RCN savings related to our agreement with R1.

Additionally, during the second half of 'twenty, one we completed the support services related to the TSA arrangement attached to the sale of our anesthesia organization.

Speaker 5: During the second half of 21, we completed the support services related to the TSA arrangement attached to the sale of our anesthesia organization.

With those support activities now behind US we believe there are additional efficiencies we can realize in 2022.

Speaker 5: With those support activities now behind us, we believe there are additional efficiencies we can realize in 2022.

We believe that these efficiencies can more than offset normal inflationary and growth related increases in G&A expenses.

Speaker 5: We believe that these efficiencies can more than offset normal inflationary and growth-related increases in G&A expenses.

Such that with that our outlook for 'twenty to adjusted EBITDA, We expect a dollar decline and our G&A year over year from $263 million in 'twenty, one to approximately $250 million.

Speaker 5: such that within our outlook for 22 adjusted EBITDA, we expect a dollar decline in our G&A year over year from 263 million in 2021 to approximately 250 million.

Speaker 5: This combination of expected revenue and operating expenses yields our outlook of modest margin expansion and thus adjusted EBITDA growth in excess of our expected revenue growth in 2022.

This combination of expected revenue and operating expenses yields our outlook of modest margin expansion and thus adjusted EBITDA growth.

In excess of our expected revenue growth in 'twenty two.

For those of you keeping models. Please keep in mind that our 21 adjusted EBITDA includes contributions from cares Act funds, which added approximately $4 million in the first quarter of 'twenty, one and $11 8 million in the fourth quarter of 'twenty one.

Speaker 5: For those of you keeping models, please keep in mind that our 21 adjusted EBITDA includes contributions from CARES Act funds, which added approximately 4 million in the first quarter of 21 and 11.8 million in the fourth quarter of 21.

Speaker 5: Your baseline growth assumptions should not include these contributions.

Your baseline growth assumptions should not includes these contributions.

Speaker 5: Below the adjusted EBITDA line, I'm happy to report the closing earlier this month of a comprehensive refinancing of our capital structure.

Below the adjusted EBITDA line I am happy to report the closing earlier this month of a comprehensive refinancing of our capital structure.

In connection with the refinancing we redeemed our $1 billion six in a quarter 2027 notes.

Speaker 5: In connection with the refinancing, we redeemed our $1 billion, six and a quarter, 2027 notes and issued 400 million in new five and three-eighth notes to 2030.

And issued $400 million in new five and three year three eights notes due 2000 through 2030.

And a $250 million term loan and evolved into a $450 million credit facility.

Speaker 5: and a $250 million term loan and evolved into a $450 million credit facility. Alongside the use of the

Alongside the use of our cash on our balance sheet we.

Speaker 5: We also reduced our total borrowings to approximately $750 million.

We also reduced our total borrowings to approximately $750 million.

Speaker 5: and our overall leverage profile to below three times adjusted EBITDA on a trailing 12-month basis.

And our overall leverage profile to below three times adjusted EBITDA on a trailing 12 month basis.

With this refinancing we also lowered our weighted average interest rate on borrowings at closings from 600, a quarter to under 4%.

Speaker 5: With this refinancing, we also lowered our weighted average interest rate on borrowings at closings from six and a quarter to under 4%. And our annualized debt service expense is now reduced by more than half.

And our annualized debt service expense is now reduced by more than half.

In all we believe this refinancing provides <unk> with an efficient capital structure that offers optimal flexibility and liquidity for the foreseeable future.

Speaker 5: In all, we believe this refinancing provides MedNax with an efficient capital structure that offers optimal flexibility and liquidity for the foreseeable future.

Lastly, as a reminder, med Max normally has a relatively low contribution to full year adjusted EBITDA in the first quarter due to the restart of payroll taxes 401, K contributions and other factors.

Speaker 5: Lastly, as a reminder, Mednax normally has a relatively low contribution to full-year adjusted EBITDA in the first quarter due to the restart of payroll taxes, 401k contributions, and other factors.

Speaker 5: Based on these factors, we would expect that our first quarter contribution of adjusted EBITDA in 22 will be in the range of 16 to 17 percent of full year adjusted EBITDA, which is consistent with what we experienced in 21. With that,

Based on these factors, we would expect that our first quarter contribution of adjusted EBITDA in 'twenty two will be in the range of 16% to 17% of full year adjusted EBITDA.

Which is consistent with what we experienced in 'twenty one.

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

Thanks, Marc we are ready for any questions.

Speaker 4: Thanks, Mark. We are ready for any questions.

Speaker 2: Thank you and ladies and gentlemen, if you wish to ask a question, please press the 1, then 0 on your telephone keypad. You will hear a tone indicating that you've been placed into queue and you may remove yourself from the queue at any time by repeating the one.

Thank you and ladies and gentlemen, if you wish to ask a question. Please press the one.

And then zero on your telephone keypad, you will hear a tone, indicating that <unk> been placed into queue and you may win Louisiana at any time.

Your line is now open man if you're on a speakerphone. Please pick up your handset before pressing the numbers.

Speaker 2: If you're on a speakerphone, please pick up your handset before pressing the number. And please limit yourself to one question. Again, if you have a question, please press star.

Please limit yourself to one question again, if you have a question. Please press <unk> one zero at this time.

Speaker 2: And our first question is from the line of Kevin Fischbeck from Bank of America, please go ahead.

And our first question is from the line of Kevin Fischbeck from Bank of America. Please go ahead.

Great. Thanks, I appreciate the comments on product.

Speaker 5: Great. Thanks. I appreciate the comments on surprise billing.

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Speaker 5: I guess would just love to hear your thoughts on have there been any initial evidence from payers that they're trying to take advantage of this regulation in your initial conversations we're contracting over the next year and

I guess would just love to hear your thoughts on.

Have there been any initial evidence from payers that theyre trying to take advantage of this regulation.

Your initial conversations with contracting over the next year and.

To the extent for those of US who are worried that this could be an issue.

Speaker 5: To the extent, for those of us who are worried that this could be an issue, is there a time period where you would say, you know, if we don't really see it in the numbers by.

Is there a time period, where you would say if we don't really see it in the numbers by Q2, Q3, Q4 or that it really won't be an issue just try to think about when this overhang might be lifted.

Speaker 5: Q2, Q3, Q4, then it really won't be an issue. Just trying to think about when this overhang might be lifted.

Well I'd say a few things one is.

Speaker 4: Well, I'd say a few things. One is we've seen...

We've seen a verb.

Speaker 4: a variety of, we have a variety of inputs. We have, we've had many contracts that have continued to be renewed at higher rates than before. We have other, other payers who were saying they want to see how things shake out before they determine how things will be renewed. So, so far it's, it's really been a mix and I would say.

<unk>.

A variety of inputs. We have we have had many contracts that are continue to be renewed at higher rates than before and we have other other payers, who were saying they want to see how things shake out before they determine how things will be renewed so so far it's really been a mix and I would say.

Speaker 4: relatively limited. I think that most people like us are waiting to see whether the exact IFR is in effect when the arbitration process starts or whether it will be somewhat modified. I do know that the administration and the various agencies have taken very seriously the comments that they've received.

Relatively limited I think that most people like us are waiting to see whether the whether the exact ifr isn't.

As an effect when the arbitration process starts or whether it'll be somewhat modified I do know that the administration of the various agencies have taken very seriously to comments that they've received and.

Speaker 4: and I hope that that will lead to some modifications.

And I hope that that will lead to some modifications. So I think in advance of that.

Speaker 4: So I think in advance of that, it's hard to speculate about how things will go. We have so many contracts. We have hundreds of contracts with varying terms.

Hard to speculate about how things will go we have so many contracts we have hundreds of contracts with varying terms. So it's not like you would see something immediate no matter what happens.

Speaker 4: So it's not like you would see something immediate no matter what happens. So it's hard to answer that whether we'll know in Q2 where things are or it would take longer to shake out. I would guess that if there were changes, they would be more coming in longer term than in 22. But it's hard to speculate until we know more.

It's hard to answer that Glenn and we'll know in Q2, we are things are or that would take longer to shake out I would I would guess that.

If there were changes they would be more coming in longer term then and then in 'twenty two but it's hard it's hard to just wanted to speculate until we know more.

Thank you. The next question is from Matthew Borsch from BMO. Please go ahead.

Speaker 2: Thank you. The next question is from Matthew Bush from BMO. Please go ahead.

Alright.

Good day.

Hi.

You're cutting out can you can you try it again, it's hard to hear you.

Speaker 4: You're cutting out can you can you try it again you it's hard to hear you

Im sorry, I don't know that any matter.

Speaker 6: I'm sorry, I don't know if that's any higher if you can't hear it, just just get me. But my question is, are you assuming no impact whatsoever from surprise billing for this year?

Okay.

If you can't hear it just just get me back.

My question is are you assuming no impact whatsoever from surprise billing for this year.

And our numbers that we've discussed we're not assuming any impact from surprise billing.

Speaker 4: in our numbers that we've discussed, we're not assuming any impact from surprise billing.

So what we just talked about.

Sorry.

So but.

Speaker 4: So in our numbers, in the two seven days that we are throughout.

On our numbers in the $2 seven days.

That we are throughout.

Speaker 4: there's no effect from surprise billing. If you're asking if I expect any effect from surprise billing, it's too early to tell. What I do expect.

No effects from surprise Bill if youre, asking if I expect any effects from surprise billing, it's too early to tell what.

But I do expect.

Speaker 4: is that there'll be some modification to the IFR based on all the comments that I know that the agencies have received. And in conversations with the agencies, which are admittedly one way, but I've had them directly, I think that they do understand the reason for the comments they've received, and I'm hopeful that there'll be some change.

Is that there'll be some modifications to the to the ifr.

Based on all the comments that I know that that the agencies will receive.

And in conversations with the agencies, which admittedly one way, but I've had them directly I think that they do understand the reason for the comments they received and I am hopeful that there be some change.

Okay.

Thank you and our next question is from Ryan Daniels from William Blair. Please go ahead.

Speaker 2: Thank you. And our next question is from Ryan Daniels from William Blair, please.

Thanks, Ryan Daniels. Thanks for taking the question I guess I just wanted to focus on the workforce pressures and I guess that this past year. We've heard numerous stories of the tough recruiting market and higher than wanted turnover. So just kind of curious how that's progressed throughout the remainder of the year for you guys and even on the inflationary front just kind of wondering if you're experiencing.

Speaker 7: Ryan Daniels. Thanks for taking the question. I guess I just want to focus on the workforce pressures. And, you know, I guess this past year we have heard numerous stories of the tough recruiting market and, you know, higher than wanted turnover. So just kind of curious how that's progressed throughout the remainder of the year for you guys. And, you know, even on the inflationary front, just kind of wondering if you experienced any headwinds there, and if so, kind of what are you doing to curb those hurdles?

Any headwinds there and if so kind of what are you doing to curb those hurdles.

We haven't so far experienced.

Speaker 4: We haven't so far experienced anything that's material. We certainly face the same pressures. As a matter of fact, yesterday, our entire human resource team and recruiting team was together, and we were talking exactly about this.

Anything that's material, we certainly face the same pressures that yesterday our entire.

Human resource team and recruiting team together and we were talking exactly about this so there's been more pressure to to have.

Speaker 4: So there's been more pressure to have a.

Speaker 4: and other ways to staff than is typically the case, but we haven't experienced the kind of pressures that we know others have.

Locums.

Other other ways to staff than is typically the case, but we haven't experienced the kind of pressures that we know others have.

Speaker 4: It is a tough environment, and everything that we read in the paper affects us like everybody else. We just haven't seen it to the extent that others have so far.

Not so far it is a tough environment and.

And everything that we read in the paper affects us like everybody else. We just haven't seen it to the extent that it has had so far.

Cool thanks for that and if I could just ask one quick follow up on the <unk> acquisition, just kind of curious do you have any update on the integration and how that's progressing and I guess when you might expect to be fully integrated.

Speaker 7: Cool, thanks for that. And if I could just ask one quick follow up on the brave care.

Speaker 7: Just kind of curious, too, if you have any update on the integration and how that's progressing, and I guess when you might expect to be fully integrated, any information that you have on that would be appreciated.

Any information that you have on that would be appreciated thanks guys.

Yes.

Speaker 4: Yeah, well, we're in the process of integrating their technology into our existing platforms, which we think will be done over the coming months. And that will immediately affect the patient-facing experience in our clinics in both Houston and in Orlando. And then as we open new clinics, they'll all have the BRAVE technology and processes embedded in their operations.

We're in the process of integrating their technology into our existing platforms, which we think which we think will be done.

Over the next over the coming months and that will that will immediately affect the patient facing experience in our clinics in both Houston and in Orlando and then as we open as we open new clinics.

The brave brave technology and processes embedded in their operations.

Speaker 2: Thank you. The next question is from Whit Mayo from SVB Lyric. Please go ahead.

Thank you. The next question is from Whit Mayo from SBB Leerink. Please go ahead.

Hey, Thanks, good morning.

Just looking at the receivables in the quarter it jumped maybe 15% sequentially in the balance sheet reserve looks largely unchanged I presume. This is just maybe some some timing issues. If you could just may be flush that out for us it would be helpful.

Speaker 5: Just looking at the receivables in the quarter, it jumped maybe 15% sequentially and the balance sheet reserve looks largely unchanged. I presume this is just maybe some timing issues. If you could just maybe flush that out for us, it'd be helpful. Hey.

Hey, Mark Richard Good morning.

Speaker 3: Yeah, we've got a couple of things. Our DSO at the end of the year went up by three days. Our accounts receivable has crept up a little bit. This was fully expected. We transitioned our...

Yes, we've got we've got a couple of things our DSO at the end of the year went up by three days, our accounts receivable has crept up a little bit.

This was fully expected.

Transitioned our.

Speaker 3: RCM function In the latter part of 21 and we expected that in connection with this transition We'd have some delays in terms of both billing and collections So snapshot December 31. That's that's the case what we've seen over the past six weeks and spend is

RCM function.

In the latter part of 'twenty, one and we expected that in connection with this transition we would have.

Have some delays in terms of both billing and collections.

So snapshot December 31 that that's the case, what we've seen over the past six weeks and spend is.

Speaker 3: a bring down of those and a reversion back to what I would call a stabilized DSO and kind of unbilled AR bucket.

A breakdown of those in <unk>.

Reversion back to.

What I would call a stabilized DSO and kind.

Kind of Unbilled AAR bucket so.

Speaker 3: that that wasn't a complete shock to us with. Yeah, no, no, I figured that was probably it, just wanted to double check. And looking at the 10Q there were, or 10K I should say, there were some disclosures around the newborn screening and something about CMS guidance, not sure what to make of that. There was certainly a decline in the number of screenings in the hospitals performing screenings. Can you just maybe help us understand, you know, what's happening and to put this into perspective? Okay.

That wasn't.

A complete shock to us with yet.

Yes.

Figured that was probably just.

I wanted to double check and.

Looking at the 10-Q, there were 10-K I should say there were some disclosures around the newborn screening and something about CMS guidance not sure what to make of that there were certainly a decline in the number of screenings in the hospitals performing screenings can you just maybe help us understand.

What's happening and to put this into perspective. Thanks.

Yes. It is.

Speaker 8: Yeah, I would. It's Charlie, you know, in early.

Charlie.

In early 2021, CMS did make some selected changes to the.

Speaker 8: 2021 CMS did make some selected changes to the to the coding inputs for newborn hearing screens that did have some impact on.

The coating inputs for newborn hearing screens that did have some impact on our revenue in different areas related to our hearing screening programs.

Speaker 8: our revenue in different areas related to our hearing screening programs.

Speaker 8: So that's what you see in that disclosure because, you know, while we didn't really discuss it in great detail during 2021.

So that's what you see in that disclosure because.

While we didn't really discuss it in great detail during 2021 it did have.

Speaker 8: It did have, you know, some some headwind impact on revenue we derived through the hearing screen programs. We were certainly able to absorb that across the overall business as you can see through the year, but that's where you see that impact as well as some of the operational changes we've made in different instances of pulling back on different hearing screen programs, you know, to put it in to put it in perspective.

Some some headwind impact on revenue, we derived through the hearing screen programs, we were certainly able to absorb that across our overall business as you can see through the year, but that's where you see that impact as well as some of the operational changes we've made in different instances of pulling back on different hearing screening programs to put it in to put it in perspective.

While our national hearing screening programs.

Speaker 8: while our national hearing screening programs...

Speaker 8: represent a significant geographic footprint. From a financial standpoint, it's not a hugely significant business for us. It tends to be corollary to our neonatology practices and the like. But nonetheless, it warranted being discussed there because in hindsight it did have a headwind effect for us during 2021, which by extension will not.

<unk> represented a significant geographic footprint from a financial standpoint, it's not a it's not a hugely significant business for us it tends to be a corollary to our neonatology practices and the like.

But nonetheless, it was warranted being being discussed there because.

In hindsight it did have a headwind effect for us during 2021, which.

By extension, we will not persist in 'twenty two.

Thank you. Our next question is from Cao key.

Speaker 2: Thank you. Our next question is from Talkey from Stifle. Please go ahead.

Michael Please go ahead.

Hi, Good morning. My first question is on the G&A Guide.

Speaker 9: Hey, good morning. My first question is on the GNA guy. You know, you got a $250 million. That's about 12.5% of revenue, kind of below your target of 13%. I think you mentioned some additional saving opportunities there. Could you give us more details on what these are? And could you maybe quantify the ROR ICM transaction? What kind of opportunity on the expense side do you

You guided $250 million, that's about 12, 5% of revenue kind of below your target of 13% I think you mentioned some additional saving opportunities there could you give us more details on what these are and could you maybe quantify the ICM transaction what kind of level.

The opportunity on the expense side do you expect in 'twenty two.

Yes, I'll start on the.

Speaker 4: Yeah, I'll start on the general comments about overhead. I would say that now that we are.

General comments about overhead I would say that now that we are.

Speaker 4: you know, fully focused on just pediatrics, and as I mentioned in my remarks, a reminder that we no longer are providing services under a TSA for either anesthesiology or radiology, we think that that will enable us to operate more efficiently over time and find ways to save money. So I think that

Fully focused on just pediatrics and as I mentioned in my remarks, a reminder, that we no longer providing services under the TSA for either.

The allergy radiology, we think that that will enable us to operate more efficiently over time and find ways to to to save money. So.

I think that that will be a constant draw.

Speaker 4: that that will be a constant drum beat. And I think there's always ways to find ways to do things in a more streamlined.

I think always ways to find ways to do things in a more.

Our streamlined fashion.

Speaker 10: Mark, do you want to talk about R1? Sure. Sure. And, you know, with respect to, call it future, future savings relative to our RCM outsourcing initiative, the rollout

Mark you want to talk about our one sure sure.

With respect to.

Call it future future savings relative to our RCM outsourcing and this should have the rollout.

Speaker 3: of that initiative was stacked in phases.

Of that initiative.

<unk> was stacked in phases.

Speaker 3: Such that towards the end of last year, effectively all of our back end functions and our hospital front end functions were moved over to R1 with coming in 22, the remaining component of this transition, which is our ambulatory front end functions. So, the economics associated with that second transition are down the road probably mid to late 22.

Such that towards the end of last year effectively all of our backend functions and our hospital front end functions.

Moved over to R. One.

With.

Coming in 'twenty two the remaining component of this transition, which is our ambulatory front end functions. So the economics associated with that second transition are down the road probably mid to late 2002.

I also make a comment.

Speaker 4: I also make a comment going back to the question about whether an effective surprise billing would be how it would affect our 270 number for this year.

Going back to the question about weather.

And effective.

<unk> billing would be how it would affect our $2 70 number for this year.

Speaker 4: While the effect of surprise billing, any effect of surprise billing, is not in that number, also not in that number are the changes that we could make and the levers that I referred to before in our operations.

While that while the effect of surprise billing any effect of surprise billing does not in that number also is not in that number are the changes that we can make and the levers that I referred to before in our operations. So that if there was a change from surprise billing. We believe we have many ways to offset it which is why we.

Speaker 4: so that if there was a change from surprise billing, we believe we have many ways to offset it, which is why we are confident that we'll be above 270.

We are confident in our debt will be above 270.

Got you that's very helpful could you give us an idea of the current investment pipeline on the pediatric primary care urgent care side. How many projects are you kind of currently evaluating in terms of de Novo curious what typical project how long does it take you and you'll get the clinic to stabilization.

Speaker 9: Got you, that's very helpful. Could you give us an idea of the current investment pipeline on the pediatric primary care and urgent care side? How many projects are you currently evaluating? And in terms of de novo, cures for a typical project, how long does it take to get the clinic to stabilize?

We are looking at several markets and in each of those markets. We're looking at several locations as I referred earlier.

Speaker 4: We are looking at several markets, and in each of those markets, we're looking at several locations. As I referred earlier, in Houston and Orlando, where we have 8 and 13 clinics respectively, we have enormous room to grow just in those markets.

And Houston, and Orlando, where we have $8 13.

Clinics, respectively, we have enormous room to grow just in those markets. So we have we have.

Speaker 4: So we have somebody I've worked with for years who's a nationwide expert in real estate. And in several of our markets, we see very similar opportunities. We are restricting ourselves to the markets where we already are and where we have a strong presence in the pediatric and hospital community.

A somebody I've worked with for years as a nationwide expert in real estate and in several of our markets, we see very similar opportunities.

We are restricting ourselves to the markets, where we already are and where we have a strong presence in the pediatric and hospital and hospital community.

Speaker 4: You asked about an individual clinic, I would say in orders of magnitude, it's a couple of million dollars to open a clinic, including the startup costs, and they should usually get to a contribution level in around 18 months to 24 months.

You asked about the individual clinic I would say in orders of magnitude.

Couple of million dollars to open a client, including including the startup costs.

And.

They should usually get too.

Our contribution level in around 18 months to 24 months.

Thank you and again if you do have a question. Please press.

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London Zero.

Yeah.

And at this time there are no further questions in queue.

Great operator, everybody. Thank you very much. Thank you for your continued support.

Speaker 4: Great. Operator, everybody, thank you very much. Thank you for your continued support.

Yes.

Thank you and ladies and gentlemen that does conclude our conference for today. Thank you for your participation and for using AT&T teleconference Service you may now disconnect.

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Yes.

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Ending now please hang up.

[music].

Ladies and gentlemen, thank you for standing by.

Speaker 2: Ladies and gentlemen, thank you for standing by to the bed next fourth quarter and year in 2021 earnings conference call at this time all participants are in a listen only mode later we will conduct the question and answer session and instructions will be given at that.

The bed next fourth quarter and year end 2021 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time should you require assistance during the call. Please press Star then zero and an operator will assist you offline as a reminder.

Speaker 2: Should you require assistance during the call, please press star then zero, and an operator will assist you offline. As a reminder, your conference is being recorded. I would now like to turn the conference over to Charles Lentz, Senior Vice President, Finance and Strategy. Please go ahead, Mr. Lentz. Thank you.

Your conference is being recorded I would now.

I'd like to turn the conference over to Charles Lynch Senior Vice President Finance and strategy. Please go ahead.

Speaker 8: Thank you, operator, and good morning, everyone. I'll quickly read our forward-looking statements and then turn the call over to Mark.

Thank you operator, and good morning, everyone I'll quickly read our forward looking statements and then turn the call over to Mark <unk>.

Speaker 8: 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 1995. These forward-looking statements are based on assumptions and assessments made by Mennax's management in light of their experience and assessment of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate.

Certain statements and information during this conference call maybe deemed to be forward looking statements within the meaning of the federal Private Securities Litigation Reform Act of 1095.

Speaker 8: Any forward looking statements made during this call are made as of today, and MedNax undertakes no duty to update or revise any such statements, whether as a result of new information, future events, or otherwise.

Speaker 8: 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 , its quarterly reports on Form 10-Q , and its current reports on Form 8-K, including the section entitled Risk Factors.

In today's remarks by management, we will be discussing non-GAAP financial metrics.

Speaker 8: In today's Remarks by Management, we will be discussing non-GAAP financial metrics.

Speaker 8: A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly reports on Form 10-Q , and our annual report on Form 10-K , and on our website at www.mednax.com. With that, I'll turn the call over to our CEO , Mark Ordon.

Thanks, Charlie and good morning, everyone.

Speaker 4: Also with me today are Mark Richards, our CFO , Dr. Matt Hinton, who leads Pediatrics, and Dr. Jim Swift, our Chief Development Officer. Our fourth quarter results were in line with our expectations and reflect a strong recovery from a rough prior year period. Total births at the hospitals where we provide NICU services were up 5% on a same unit basis, and our NICU days were up 5.6%.

With me today are Mark <unk>, our CFO , Dr. Mack Hinson, who leads pediatrics and after Jim Swift, Our Chief Development Officer, our fourth quarter results were in line with our expectations and reflect a strong recovery from a prior year period total births at the hospitals, where we provide NICU services were up 5% on a same unit basis and our Nicki.

Days were up five 6%, our payer mix was favorable year over year and in fact for the full year reflects a slightly favorable comparison to pre pandemic levels, you'll see that we recorded a significant amount of funds from the cares act during the quarter, which reflect the applications. We submitted for the periods in 2021 of our operations were disrupted during the Covid.

Speaker 4: Our payer mix was favorable year over year, and in fact for the full year reflects a slightly favorable comparison to pre-pandemic levels.

Speaker 4: You'll see that we recorded a significant amount of funds from the CARES Act during the quarter, which reflects applications we submitted for the periods in 2020 when our operations were disrupted during the COVID pandemic.

Pandemic.

As we've done in the past we've provided detailed in our filings of the contributions of these funds to revenue and adjusted EBITDA in order for you to make a proper comparison to your own projections.

Speaker 4: As we've done in the past, we've provided details in our filings of the contributions of these funds to Revenue and Adjusted EBITDA in order for you to make a proper comparison to your own project.

Speaker 4: We also achieved solid results in 2021 versus pre-pandemic levels. Compared to 2019, our same unit volumes for the year as a whole grew by roughly 1 percent, despite a 2.5 percent decline in the first quarter of last year. Perhaps just as important, our 2021 results don't fully reflect the many improvements we made in our business during the year, particularly in our efficiency.

Any improvements we made in our business during the year, particularly in our efficiency.

As we've discussed in the past our transition of our revenue cycle operations to our model provides us with meaningful savings and these began to be seen only in the in Q3 of last year.

Speaker 4: As we've discussed in the past, our transition of our revenue cycle operations to R1 provides us with meaningful savings, and these began to be seen only in Q3 of last year.

We're also now fully done with our transitional service agreements related to past sales of our eyes.

Speaker 4: We're also now fully done with our transitional service agreements related to past sales of our anesthesia and radiology businesses. This finally enables full focus on our core. And while it's a below-the-line item, we expect that our recent refinancing transactions will reduce our ongoing interest expense in 2022 by more than $30 million compared to 2021.

<unk> and radiology businesses. This finally enables full focus on our core.

And while it's a below the line item, we expect that our recent refinancing transactions will reduce our ongoing interest expense in 2022 by more than $30 million compared to 2021.

Mark will walk through some of the major components of this outlook, but for those of you keeping models as you may comparisons to our 2021 results keep in mind that these results include meaningful contributions from cares funds, which totaled $26 million in revenue and $16 5 million in adjusted EBITDA.

Speaker 4: So what are we focused on today? On the cost side, much of the work we did in 2021 and here in early 2022 has been focused on efficiency. In our GNA, in the support of our affiliated practices, and in our balance sheet. And we believe that there are additional efficiencies we can achieve this year and beyond. But we've also laid out the groundwork for growth.

Speaker 4: In our core, our growth is led by Dr. Jim Swift, and in 2022, we will be laser focused on our biggest relationships and how we can strengthen and expand them, along with other opportunities in and around our core markets.

Speaker 4: In pediatric primary and urgent care, following our initial acquisition of Nightlight Houston in early 21, and then our investment in and partnership with BraveCare earlier this month, we announced our entry into a second market with the acquisition of Nightlight Orlando. This acquisition gives us an immediate strong presence in Florida with 13 clinics that we will rebrand as pediatrics and expand to include both primary and urgent care.

In pediatric primary urgent care following our initial acquisition of Nightlight Houston in early 'twenty, one and then our investment in and partnership with grave care earlier. This month, we announced our entry into a second market with the acquisition of Nightlight. Orlando. This acquisition gives us an immediate strong presence in Florida with 13 clinics that we will rebound break excuse me.

That we will rebrand as pediatrics and expand to include both primary and urgent care.

We will also implement brave carriers and operating platform that gives patients and their parents a truly seamless experience when they visit.

Speaker 4: We will also implement BraveCare's IT and operating platform that gives patients and their parents a truly seamless experience when they visit.

Speaker 4: I want to welcome the entire Nightlight Orlando team to the pediatrics family.

Want to welcome the entire Nightlight Orlando team to the pediatric family.

Speaker 4: We continue to see clear strategic value in developing a robust network of pediatric primary and urgent care clinics.

Quickly in that direction, bringing our total footprint today to 'twenty one clinics keep.

Is very real.

We will continue to look at a combination of acquired and de Novo clinics and on the de Novo side. We now have in place plans for new clinic development in three additional markets. Our expectation is that we can move toward opening of these clinics before the end of this year and in the meantime, we'll be adding to our development plans, while also contemplating growth through additional acquisitions.

Speaker 4: We'll continue to look at a combination of acquired and de novo clinics, and on the de novo side, we now have in place plans for new clinic development in three additional markets. Our expectation is that we can move toward opening of these clinics before the end of this year, and in the meantime, we'll be adding to our development plans while also contemplating growth through additional acquisitions.

<unk>.

Now let me talk about our brand we are most excited to be moving towards operating under a unified pediatric brand pediatrics is a well known and of course very respected name nationwide and we've used it with most of our affiliated practices for years and in many cases decades moving forward our affiliated practices in primary and urgent care.

Speaker 4: Now let me talk about our brand. We are most excited to be moving toward operating under a unified pediatrics brand. Pediatrics is a well-known and, of course, very respected name nationwide, and we've used it within most of our affiliated practices for years, and in many cases, decades. Moving forward, our affiliated practices at primary and urgent care clinics will operate as pediatrics. Of course, the practices won't lose their current identity, as that will sit right beside the pediatrics name.

<unk> will operate as pediatrics of course, the practices won't lose their current identity as that will sit right beside the pediatrics name.

Speaker 4: While Mednex will continue to be our public company name, pediatrics will be the name all of our partners know. Just as importantly, we want it to be the name that all of our patients and their families know and trust. To signify our core commitment, our new pediatrics logo features three interlocking rings representing our dedication to women's, children's, and babies' health.

While <unk> will continue to be a public company named Pediatrics will be the name all of our partners now just as importantly, we wanted to be the name that all of our patients and their families know entrust to signify our commitment our new pediatric logo features three interlocking rings, representing our dedication to women's children's and baby's health.

<unk>.

We recently added to our senior team, a new chief marketing and Communications Officer, who is already propelling the transformation and reinforcing our brand. This branding process can help strengthen our existing relationships open new opportunities for us and drive the growth we're looking to achieve for our organization.

We do not want to remain healthcare's best kept secret.

Speaker 4: I serve as a very active member of this committee, and through this committee we are making explicit our commitment to ESG policies, developing additional formal policies where necessary, and ensuring that our reporting and external scoring fully reflect MedNAC's leading position as a healthcare provider and conscientious organization.

Speaker 4: Thanks to this committee's work over the past year, I'm happy to say that we've improved our average ISS ESG quality score from over 6 to 3, and I'll remind you this is on a scale of 1 to 10, and lower is better.

More important than just these scores I fully believe that our continuing commitment to the principles of ESG can help make med next the employer of choice a trusted partner to hospitals and clinicians across the country and a public company that can meet the highest standards of you our shareholders.

I'll end with a comment about surprise billing many have asked what effect the legislation in the interim final rule published last fall, we will have us well.

Speaker 4: I'll end with a comment about surprise billing. Many have asked what effect the legislation and the interim final rule published last fall will have on us.

Well, we're 95% in network with significant diversification of contracts and overall strong payer relationships as a result, our direct exposure to changes in the arbitration process for out of network cases is limited.

However, if the ifr stands as payers could use this as a weapon during contract renewals.

As a result of all this I can't possibly quantify what if any effect. This will have on us to that and our outlook for 2022 doesn't reflect any such speculation either.

Speaker 4: As a result of all this, I can't possibly quantify what, if any, effect this will have on us. To that end, our outlook for 2022 doesn't reflect any such speculation either.

Speaker 4: What I will say, though, is that we know how to manage through change, and we have many management levers in our cost structure to offset.

What I will say, though is that we know how to manage through change and we have many management levers in our cost structure to offset change.

Above all else our commitment as always is to maintaining our highest priority of supporting our affiliated practices and ensuring that they can provide the highest quality care to their patients.

Now I will turn the call over to Mark for additional financial details.

Martin and good morning, everyone.

Speaker 3: I'll add some more details to our outlook for 22, including how a recent activity is incorporated into that outlook.

I'll add some more details to our outlook for 'twenty, two including how our recent activity is incorporated into that outlook.

As Mark noted, we expect our revenue in 'twenty two to be approximately $2 billion.

Speaker 3: As Mark noted, we expect our revenue in 22 to be approximately $2 billion. This outlook reflects expected revenue growth over 2021 that's about evenly divided between same unit growth and contributions from new contract sales and acquisitions. Again, keep in mind for comparison purposes that our 21 revenue includes $26 million in CARES funds.

Farms.

On the cost side, we expect the combination of our direct support expenses, which I'll define as practice salaries and benefits as well as practice supplies and other operating expenses.

Speaker 3: On the cost side, we expect a combination of our direct support expenses, which I'll define as practice salaries and benefits, as well as practice supplies and other operating expenses, to represent a comparable percentage of revenue to what we saw in 21.

To represent a comparable percentage of revenue to what we saw in 'twenty one.

Speaker 3: On the G&A side, our overall spend in Q4 of $59 million was down about $8 million sequentially, which primarily reflects sequential reductions in certain administrative costs.

Speaker 3: as well as RCN savings related to our agreement with R1.

Additionally, during the second half of 'twenty, one we completed the support services related to the TSA arrangement attached to the sale of our anesthesia organization.

Speaker 3: During the second half of 21, we completed the support services related to the TSA arrangement attached to the sale of our anesthesia organization.

Speaker 3: With those support activities now behind us, we believe there are additional efficiencies we can realize in 2022.

With those support activities now behind US we believe there are additional efficiencies we can realize in 2022.

We believe that these efficiencies can more than offset normal inflationary and growth related increases in G&A expenses.

Speaker 3: We believe that these efficiencies can more than offset normal inflationary and growth-related increases in G&A expenses.

Speaker 3: such that within our outlook for 22 adjusted EBITDA, we expect a dollar decline in our G&A year over year from 263 million in 21 to approximately 250 million.

Such that within our outlook for 'twenty to adjusted EBITDA, We expect that dollar decline.

Our G&A year over year from $263 million in 'twenty, one to approximately $250 million.

This combination of expected revenue and operating expenses yields our outlook of modest margin expansion and thus adjusted EBITDA growth.

Speaker 3: This combination of expected revenue and operating expenses yields our outlook of modest margin expansion and thus adjusted EBITDA growth in excess of our expected revenue growth in 2022.

In excess of our expected revenue growth in 'twenty two.

Speaker 3: For those of you keeping models, please keep in mind that our 21 adjusted EBITDA includes contributions from CARES Act funds, which added approximately $4 million in the first quarter of 21 and $11.8 million in the fourth quarter of 21.

Your baseline growth assumptions should not includes these contributions.

Speaker 3: Your baseline growth assumptions should not include these contributions.

Below the adjusted EBITDA line I'm happy to report the closing earlier this month of a comprehensive refinancing of our capital structure.

Speaker 3: Below the adjusted EBITDA line, I'm happy to report the closing earlier this month of a comprehensive refinancing of our capital structure.

Speaker 3: In connection with the refinancing, we redeemed our $1 billion, six and a quarter, 2027 notes and issued 400 million in new five and three-eighth notes to 2030.

In connection with the refinancing we redeemed our $1 billion six in a quarter 2027 notes and issued $400 million in new five and three year 38 notes due 2000 through 2030.

Speaker 3: and a $250 million term loan, and evolved into a $450 million credit facility. Alongside the use

And a $250 million term loan and evolved into a $450 million credit facility.

Alongside the use of our cash on our balance sheet.

Speaker 3: We also reduced our total borrowings to approximately $750 million.

We also reduced our total borrowings to approximately $750 million.

Speaker 3: and our overall leverage profile to below three times adjusted EBITDA on a trailing 12-month base.

And our overall leverage profile to below three times adjusted EBITDA on a trailing 12 month basis.

With this refinancing we also lowered our weighted average interest rate on borrowings at closings from 600, a quarter to under 4%.

Speaker 3: With this refinancing, we also lowered our weighted average interest rate on borrowings at closings from 6.25% to under 4%, and our annualized debt service expense is now reduced by more than half.

And our annualized debt service expense is now reduced by more than half.

Speaker 3: In all, we believe this refinancing provides Mednax with an efficient capital structure that offers optimal flexibility and liquidity for the foreseeable future.

In all we believe this refinancing provides <unk> with an efficient capital structure that offers optimal flexibility and liquidity for the foreseeable future.

Lastly, as a reminder, med Max normally has a relatively low contribution to full year adjusted EBITDA in the first quarter due to the restart of payroll taxes 401, K contributions and other factors.

Speaker 3: Lastly, as a reminder, Mednax normally has a relatively low contribution to full year adjusted EBITDA in the first quarter due to the restart of payroll taxes, 401k contributions, and other factors.

Speaker 3: Based on these factors, we would expect that our first quarter contribution of adjusted EBITDA in 22 will be in the range of 16 to 17% of full-year adjusted EBITDA, which is consistent with what we experienced in 21. With that,

Based on these factors, we would expect that our first quarter contribution of adjusted EBITDA in 'twenty two will be in the range of 16% to 17% of full year adjusted EBITDA.

Which is consistent with what we experienced in 'twenty one.

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

Thanks, Marc we are ready for any questions.

Speaker 4: Thanks, Mark. We are ready for any questions.

Speaker 2: Thank you, and ladies and gentlemen, if you wish to ask a question, please press the 1 then 0 on your telephone keypad. You will hear a tone indicating that you have been placed into queue, and you may remove yourself from the queue at any time by repeating the 1's.

Thank you and ladies and gentlemen, if you wish to ask a question. Please press the one.

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Speaker 2: If you're on a speakerphone, please pick up your handset before pressing the number. And please limit yourself to one question. Again, if you have a question...

Please limit yourself to one question again, if you have a question. Please press one zero at this time.

And our first question is from the line of Kevin Fischbeck from Bank of America. Please go ahead.

Speaker 2: And our first question is from the line of Kevin Fishbeck from Bank of America, please go ahead.

Great. Thanks, I appreciate the comments.

Speaker 5: Great. Thanks. I appreciate the comments on surprise billing.

<unk>.

I guess would just love to hear your thoughts on.

Have there been any initial evidence from payers that they are trying to take advantage of this regulation.

Your initial conversations with contracting over the next year and.

Speaker 5: To the extent, for those of us who are worried that this could be an issue, you know, is there a time period where you would say, you know, if we don't really see it in the numbers by.

To the extent for those of US who are worried that this could be an issue.

Is there a time period, where you would say if we don't really see it in the numbers by Q2, Q3, Q4 or that it really won't be an issue just trying to think about when this overhang might be lifted.

Speaker 5: Q2, Q3, Q4, then it really won't be an issue. Just trying to think about when this overhang might be lifted.

Speaker 4: Well, I'd say a few things. One is we've seen.

Well I'd say a few things one is we.

You've seen.

A variety of we have a variety of inputs. We have we have had many contracts that are continue to be renewed at higher rates than before and we have other other payers, who were saying they want to see how things shake out before they determine how things will be renewed so so far it's really been a mix and I would say.

Speaker 4: relatively limited. I think that most people, like us, are waiting to see whether the exact IFR is in effect when the arbitration process starts or whether it will be somewhat modified. I do know that the administration and the various agencies have taken very seriously the comments that they've received.

Relatively limited I think that most people like us are waiting to see whether the whether the exact ifr.

There is an effect, but in the arbitration process starts or whether it'll be somewhat modified I do know that the administration of the various agencies have taken very seriously the comments that they've received and.

Speaker 4: and I hope that that will lead to some modifications.

And I hope that that will lead to some modifications. So I think in advance of that it's hard to speculate about how things will go we have so many contracts we have hundreds of contracts with varying terms. So it's not like you would see something immediate no matter what happens so.

Speaker 4: So I think in advance of that, it's hard to speculate about how things will go. We have so many contracts. We have hundreds of contracts with varying terms.

It's hard to answer that but it will know in Q2, we are things are or they may take longer to shake out I would I would guess that.

If there were changes that would be more.

Coming in longer term than that in 'twenty, two but it's hard it's hard to.

Just wanted to speculate until we know more.

Thank you. The next question is from Matthew Borsch from BMO. Please go ahead.

Speaker 2: Thank you. The next question is from Matthew Bush from BMO. Please go ahead.

Alright.

Disconnect.

Hi.

Speaker 4: You're cutting out can you can you try it again you it's hard to hear you

You're cutting out can you can you try it again.

It's hard to hear you.

Im sorry, I don't know that any harder.

Speaker 6: I'm sorry, I don't know if that's any better, if you can't hear it, just just skip me. But my question is, are you assuming no impact whatsoever from supply filling for this year?

Okay.

If you can't hear it just just get me back.

My question is are you assuming no impact whatsoever from supply scaling for this year.

And our numbers that we've discussed we're not assuming any impact from surprise billing.

Speaker 4: In our numbers that we've discussed, we're not assuming any impact from surprise billing.

So what we just talked about.

Dr.

Speaker 4: So in our numbers, in the two seven days that we are throughout.

So but.

On our numbers.

In the $2 seven days.

That we are throughout.

Speaker 4: there's no effect from surprise billing. If you're asking if I expect any effect from surprise billing, it's too early to tell. What I do expect.

No in fact, some surprise bill if youre asking if I expect any effects from surprise billing.

Early to tell.

I do expect.

Is that there'll be some modifications to the to the ifr.

Based on all the comments that I know that that the agencies are received.

Okay.

Thank you and our next question is from Ryan Daniels from William Blair. Please go ahead.

Speaker 2: Thank you. And our next question is from Ryan Daniels from William Blair, please.

And for Ryan Daniels. Thanks for taking the question I guess I just wanted to focus on the workforce pressures and I got to ask.

Speaker 7: Ryan Daniels. Thanks for taking the question. I guess I just want to focus on the workforce pressures. And, you know, I guess throughout this past year, we've heard numerous stories of the tough recruiting market and, you know, higher than wanted turnover. So just kind of curious how that's progressed throughout the remainder of the year for you guys. And, you know, even on the inflationary front, just kind of wondering if you experience any headwinds there, and if so, kind of what are you doing to curb those hurdles?

This past year, we have heard numerous stories, the top recruiting market and higher than wanted to turnover. So just kind of curious how that's progressed throughout the remainder of the year for you guys.

Even on the inflationary front, just kind of wondering if you're experiencing any headwinds there and if so kind of what are you doing to curb those hurdles.

We haven't so far experienced.

Anything that's material, we certainly face the same pressures.

Today, our entire human resource team and recruiting team together and we were talking exactly about this so there's been more pressure to to have.

Speaker 4: So there's been more pressure to have.

Speaker 4: and other ways to staff than is typically the case.

Locums.

And other other ways to staff than than is typically the case, but we haven't experienced the kind of pressures that we know other tests.

Speaker 4: But we haven't experienced the kind of pressures that we know others have.

Speaker 4: It is a tough environment, and everything that we read in the paper affects us like everybody else. We just haven't seen it to the extent that others have so far.

Not so far it is a tough environment and.

And everything that we read in the paper it affects us like everybody else, we just haven't seen it to the extent that others have so far.

Cool thanks for that and if I could just ask one quick follow up on the <unk>.

Speaker 7: Cool, thanks for that. And if I could just ask one quick follow up on the brave care.

<unk> care acquisition, just kind of curious do you have any update on the integration and how that's progressing and I guess when you might expect to be fully integrated.

Any information that you have on that would be appreciated thanks guys.

Yes.

We're in the process of integrating their technology into our existing platforms, which we think well, which we think will be done over the next over the coming months and that will that will immediately affect the patient facing experience in our clinics in both Houston and in Orlando and then as we open.

As we open new clinics.

Will all have the base, the brave technology and processes embedded in their operations.

Thank you. The next question is from Whit Mayo.

Speaker 2: Thank you. The next question is from Whit Mayo from SVB Lyric. Please go ahead.

<unk> Leerink. Please go ahead.

Hey, Thanks, good morning.

Speaker 3: Just looking at the receivables in the quarter, it jumped maybe 15% sequentially and the balance sheet reserve looks largely unchanged. I presume this is just maybe some timing issues. If you could just maybe flush that out for us, it'd be helpful. Hey, we're.

Hey, Mark Richard Good morning.

Now we've got we've got a couple of things our DSO at the end of the year went up by three days our accounts receivable.

It's crept up a little bit.

This was fully expected we transitioned our.

RCM function.

In the latter part of 'twenty, one and we expected that in connection with this transition we would have.

Have some delays in terms of both billing and collections.

So snapshot December 31 that that's the case, what we've seen over the past six weeks and spend is.

Speaker 3: a bring down of those and and a reversion back to uh, what I would call a stabilized dso and uh, kind of unbilled ar bucket, so

A breakdown of those and a reversion back to.

What I would call a stabilized DSO.

Kind of Unbilled AAR bucket so.

Speaker 3: that wasn't a complete shock to us with. Yeah, no, no, I figured that was probably it. Just wanted to double check. And looking at the 10Q there were, or 10K I should say, there were some disclosures around the newborn screening and something about CMS guidance. Not sure what to make of that. There was certainly a decline in the number of screenings in the hospitals performing screenings. Can you just maybe help us understand, you know, what's happening and to put this into perspective? Okay.

That wasn't.

A complete shock to us.

Yes.

Figured that was probably just wanted to double check and.

Looking at the 10-Q, there were 10-K I should say there were some disclosures around the newborn screening and something about CMS guidance not sure what to make of that there was certainly a decline in the number of screenings in the hospitals performing screenings can you just maybe help us understand.

Whats happening and to put this into perspective. Thanks.

Yes. It is.

Speaker 8: Yeah, I would. It's Charlie, you know, in early.

Charlie.

In early 2021, CMS did make some selected changes to the.

Speaker 8: 2021 CMS did make some selected changes to the to the coding inputs for newborn hearing screens that did have some impact on.

To the coding inputs for newborn hearing screens that did have some impact on our revenue in different areas related to our hearing screening programs.

Speaker 8: our revenue in different areas related to our hearing screening programs.

Speaker 8: So that's what you see in that disclosure, because, you know, while we didn't really discuss it in great detail during 2021.

So that's what you see in that disclosure because.

While we didn't really discuss it in great detail during 2021 it did have.

Speaker 8: It did have, you know, some headwind impact on revenue we derived, you know, through the hearing screen programs. We were certainly able to absorb that across the overall business, as you can see, through the year, but that's where you see that impact, as well as some of the operational changes we've made in different instances of pulling back on different hearing screen programs, you know, to put it in, to put it in perspective.

Some some headwind impact on revenue, we derived through the hearing screen programs, we were certainly able to absorb that across our overall business as you can see through the year, but thats, where you see that impact as well as some of the operational changes we've made in different instances of pulling back on different hearing screen programs, let's put it in to put it in perspective.

Speaker 8: while, you know, our national hearing screening programs.

While our national hearing screening programs.

Speaker 8: represent a significant geographic footprint from a financial standpoint, it's not a hugely significant business for us. It tends to be corollary to our neonatology practices and the like. But nonetheless, it warranted being discussed there because, in hindsight, it did have a headwind effect for us during 2021, which, by extension, will not

Represented.

<unk> geographic footprint from a financial standpoint, it's not a it's not a hugely significant business for us it tends to be a corollary to our neonatology practices and the like.

But nonetheless, it was warranted being being discussed there because.

In hindsight it did have a headwind effect for us during 2021, which.

By extension will not persist in 'twenty two.

Thank you. Our next question is from Cao key.

Speaker 2: Thank you. Our next question is from Tao Kee from SIFO. Please go ahead.

Michael Please go ahead.

Speaker 9: Hi, good morning. My first question is on the GNA guide. You know, you guided $250 million. That's about 12.5% of revenue. Kind of below your target of 13%. I think you mentioned some additional saving opportunities there. Could you give us more details on what these are and could you maybe quantify the ROR ICM transaction? What kind of opportunity on the expense side, do you expect to see?

Hi, Good morning. My first question is on the G&A Guide.

The opportunity on the expense side do you expect in 'twenty two.

Yes, I'll start on the.

Speaker 4: Yeah, I'll start on the general comments about overhead. I would say that now that we are.

General comments about overhead I would say that now that we are.

Fully focused on just pediatrics and as I mentioned in my remarks, a reminder, that we no longer providing services under the TSA for either.

Speaker 4: you know, fully focused on just pediatrics and, as I mentioned in my remarks, a reminder that we no longer are providing services under a TSA for either anesthesiology or radiology. We think that that will enable us to operate more efficiently over time and find ways to save money. So, I think that

The allergy radiology, we think that that will enable us to operate more efficiently over time and find ways to to to save money. So I think that that will be a constant drum.

Speaker 4: that that will be a constant drum beat. And I think there's always ways to find ways to do things in a more streamlined.

I think there's always ways to find ways to do things in a more streamlined fashion.

Speaker 10: Mark, do you want to touch that R1? Sure. Sure. And, you know, with respect to, call it future, future savings relative to our RCM outsourcing initiative, the rollout

Mark you want to talk about our one sure sure.

With respect to.

Call it future future savings relative to our RCM outsourcing and mix should have the rollout.

Of that initiative initiative was stacked in phases.

Speaker 3: of that initiative was stacked in phases.

Speaker 3: such that towards the end of last year, effectively all of our back-end functions and our hospital front-end functions were moved over to R1 with coming in 22, the remaining component of this transition, which is our ambulatory front-end functions. So the economics associated with that second transition are down the road, probably mid to late 22.

Such that towards the end of last year effectively all of our backend functions and our hospital front end functions.

Were moved over to R. One.

With.

Coming in 'twenty, two the remaining component of this transition.

As our ambulatory front end functions. So the economics associated with that second transition are down the road probably mid to late 'twenty two.

I also make a comment going back to the question about weather.

Speaker 4: I also make a comment going back to the question about whether an effective surprise billing would be how it would affect our 270 number for this year.

Unaffected.

Billing would be how it would affect our $2 70 number for this year.

While the effect of surprise billing any effect of surprise billing does not in that number also is not in that number are the changes that we can make and the levers that I referred to before.

In our operations so that if there was a change from surprise billing.

Speaker 4: so that if there was a change from surprise billing, we believe we have many ways to offset it, which is why we are confident that we'll be above 270.

I believe we have many ways to offset it which is why we are confident.

And our debt will be above 270.

Speaker 9: Got you, that's very helpful. Could you give us an idea of the current investment pipeline on the pediatric primary care and urgent care side? How many projects are you currently evaluating? And in terms of de novo cures for a typical project, how long does it take to get the clinic to stabilize?

We are looking at several markets and in each of those markets. We're looking at several locations as I referred earlier.

And Houston, and Orlando, where we have $8 13.

Clinics, respectively, we have enormous room to grow just in those markets. So we have we have.

A somebody I've worked with for years as a nationwide expert in real estate and in several of our markets, we see very similar opportunities.

We are restricting ourselves to the markets, where we already are and where we have a strong presence in the pediatric and hospital and hospital community.

Speaker 4: You asked about an individual clinic, I would say in orders of magnitude, it's a couple of million dollars to open a clinic, including the start-up costs, and they should usually get to a contribution level in around 18 months to 24 months.

You asked about the individual clinic I would say in orders of magnitude.

Couple of million dollars to open a clinic, including including the startup costs.

And.

They should usually get too.

Our contribution level in around 18 months to 24 months.

Thank you and again if you do have a question. Please press.

Speaker 2: Thank you, and again, if you do have a question, please press one, then zero.

London Zero.

Okay.

And at this time there are no further questions in queue.

Great operator, everybody. Thank you very much. Thank you for your continued support.

Speaker 4: Great. Operator, everybody, thank you very much. Thank you for your continued support.

Yes.

Thank you and ladies and gentlemen that does conclude our conference for today. Thank you for your participation and for using AT&T teleconference Service you may now disconnect.

Speaker 2: Thank you for your participation and for using AT&T Teleconferencing.

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