Q3 2026 Pediatrix Medical Group Inc Earnings Call
Operator: Hello, and thank you for standing by. At this time, I would like to welcome everyone to the Q3 2026 Pediatrix Medical Group, Inc. earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to David Haddock, General Counsel. You may begin.
Operator: Hello, and thank you for standing by. At this time, I would like to welcome everyone to the Q3 2026 Pediatrix Medical Group, Inc. earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to David Haddock, General Counsel. You may begin.
Speaker #1: Hello, and thank you for standing by. At this time, I would like to welcome everyone to the Q3 2026 Pediatrics Medical Group, Inc. earnings conference call.
Speaker #1: unmute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star followed by the number 1 on your telephone keypad.
Speaker #1: again. Thank you. I would now like to turn the conference over to David Haddock, General Counsel, you may begin.
David Haddock: Good morning. 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 Pediatrix'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. Any forward-looking statements made during this call are made as of today, and Pediatrix 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 filings with the SEC, including the sections entitled Risk Factors. In today's remarks by management, they will be discussing non-GAAP financial metrics.
David Haddock: Good morning. 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 Pediatrix'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. Any forward-looking statements made during this call are made as of today, and Pediatrix 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 filings with the SEC, including the sections entitled Risk Factors. In today's remarks by management, they will be discussing non-GAAP financial metrics.
Speaker #2: Good morning. 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.
Speaker #2: These forward-looking statements are based on assumptions and assessments made by pediatrics' management in light of their experience and assessment of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate.
Speaker #2: Any forward-looking statements made during this call are made as of today, and pediatrics undertakes no duty to update or revise any such statements whether as a result of new information, future events, or otherwise.
Speaker #2: Important factors that could cause actual results, ts, developments, and business decisions to differ materially from forward-looking statements are described in the company's filings with the SEC.
Speaker #2: Including the sections entitled Risk Factors. In today's remarks by management, they will be focusing they will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release in the company's quarterly and annual reports and on the Pediatrics website at www.pediatrics.com.
David Haddock: A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, in the company's quarterly and annual reports, and on the Pediatrix website at www.pediatrix.com. With that, I will turn the call over to Mark Ordan, Chief Executive Officer of Pediatrix Medical Group.
David Haddock: A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, in the company's quarterly and annual reports, and on the Pediatrix website at www.pediatrix.com. With that, I will turn the call over to Mark Ordan, Chief Executive Officer of Pediatrix Medical Group.
Speaker #2: With that, I will turn the call over to Mark Ordan, Chief Executive Officer of Pediatrics Medical Group.
Mark Ordan: Thank you, David, and good morning, everyone. Also with me today is Kasandra Rossi, our Chief Financial Officer. We are pleased to report a strong quarter with adjusted EBITDA of $85 million. Same unit revenue was positive, with equal contributions from volume and pricing, even with pricing reflecting the lapping of the tailwinds we experienced from strong collection activity over the past several quarters. Our overall results for the quarter exceeded our expectations in spite of increasing costs in virtually all areas of providing great healthcare. We are narrowing the range of our full year 2026 outlook to $290 million to $300 million in adjusted EBITDA. In the quarter, we repurchased just over 3 million shares of our stock, bringing our total buyback since August of 2025 to 10 million shares and our shares outstanding to 78 million, down from 87 million at the end of the second quarter of 2025.
Mark Ordan: Thank you, David, and good morning, everyone. Also with me today is Kasandra Rossi, our Chief Financial Officer. We are pleased to report a strong quarter with adjusted EBITDA of $85 million. Same unit revenue was positive, with equal contributions from volume and pricing, even with pricing reflecting the lapping of the tailwinds we experienced from strong collection activity over the past several quarters. Our overall results for the quarter exceeded our expectations in spite of increasing costs in virtually all areas of providing great healthcare.
Speaker #3: Thank you, David, and good morning, everyone. Also with me today is Cassandra Rossi, our Chief Financial Officer. We are pleased to report a strong quarter with adjusted EBITDA of $85 million.
Speaker #3: Same-unit revenue was positive with equal contributions from volume and pricing even with pricing reflecting the lapping of the tailwinds we experienced from strong collection activity over the past several quarters.
Speaker #3: Our overall results for the quarter exceeded our expectations in spite of increasing costs in virtually all areas of providing great health care. We are narrowing the range of our full-year 2026 outlook to $290 to $300 million in adjusted EBITDA.
Mark Ordan: We are narrowing the range of our full year 2026 outlook to $290 million to $300 million in Adjusted EBITDA. In the quarter, we repurchased just over 3 million shares of our stock, bringing our total buyback since August of 2025 to 10 million shares and our shares outstanding to 78 million, down from 87 million at the end of the second quarter of 2025.
Speaker #3: In the quarter, we repurchased just over $3 million shares of our stock, bringing our total buyback since August of 2025 to $10 million shares, and our shares outstanding to $78 million down from $87 million at the end of the second quarter of 2025.
Mark Ordan: The average price of the 10 million share buyback is $23. Well, for several quarters, I have been asked why our numbers have not been adjusted because of the effect of the lapse of the ACA subsidies. As our results continue to show, we have still seen no clear negative effect to date. Turning from the quarter to what gives us increased confidence in our future are several highlights I will share. Our annual meeting of all of our practice medical directors two weeks ago had basically one agenda item, care quality. It may seem anomalous for a public company to hold such a meeting and not discuss scheduling, expenses, et cetera. However, we believe our core is about care and quality, and that is what our 300 directors came to discuss.
Mark Ordan: The average price of the 10 million share buyback is $23. Well, for several quarters, I have been asked why our numbers have not been adjusted because of the effect of the lapse of the ACA subsidies. As our results continue to show, we have still seen no clear negative effect to date. Turning from the quarter to what gives us increased confidence in our future are several highlights I will share. Our annual meeting of all of our practice medical directors two weeks ago had basically one agenda item, care quality. It may seem anomalous for a public company to hold such a meeting and not discuss scheduling, expenses, et cetera. However, we believe our core is about care and quality, and that is what our 300 directors came to discuss.
Speaker #3: The average price of the $10 million share buyback is $23. For several quarters, I've been asked why our numbers have not been adjusted because of the effect of the lapse of the ACA subsidies. our results continue to show, we have still seen no clear negative effect to date.
Speaker #3: The average price of the $10 million share buyback is $23. For several quarters, I've been asked why our numbers have not been adjusted because of the effect of the lapse of the ACA subsidies. our results continue to show, we have still seen no clear negative effect to date. increased confidence in our future, are several highlights I'll share.
Speaker #3: Turning from the quarter to what gives us practice medical directors two weeks ago had basically one agenda Our annual meeting of all of our item: care, quality.
Speaker #3: It may seem anomalous for a public company to hold such a meeting and not discuss scheduling, expenses, et cetera. However, we believe our core is about care and quality, and that's what our 300 directors came to discuss.
Mark Ordan: It was, of course, led by our clinical leadership team, and my contribution was to be proud to be among our extraordinary clinicians. I have recently reported that we take advantage of our strong financial condition to support internal growth and to be in a position to find larger potential value add outside opportunities. We continue to work on expanding our telehealth services as well as select opportunities in the OB hospitalist field. On the latter, announced coding changes are scheduled to take effect in 2027, and we will see then how this area changes in response. Of course, it is not a material part of our business at this point, and we will plan to report to you as we all learn more. We also know, of course, that the No Surprises Act IDR rules are being reviewed, and we have read about alleged abuses of the process.
Mark Ordan: It was, of course, led by our clinical leadership team, and my contribution was to be proud to be among our extraordinary clinicians. I have recently reported that we take advantage of our strong financial condition to support internal growth and to be in a position to find larger potential value add outside opportunities. We continue to work on expanding our telehealth services as well as select opportunities in the OB hospitalist field. On the latter, announced coding changes are scheduled to take effect in 2027, and we will see then how this area changes in response. Of course, it is not a material part of our business at this point, and we will plan to report to you as we all learn more. We also know, of course, that the No Surprises Act IDR rules are being reviewed, and we have read about alleged abuses of the process.
Speaker #3: It was, of course, led by our clinical leadership team and my contribution was to be proud to be among our extraordinary clinicians. I've recently reported that we take advantage of our strong financial condition to support internal growth and to be in a position to find larger potential value-add outside opportunities.
Speaker #3: We continue to work on expanding our telehealth services as well as select opportunities in the OB hospitals field. On the latter, announced coding changes are scheduled to take effect in 2027, and we will see then how this area changes in response.
Speaker #3: Of course, it is not a material part of our business at this point, and we'll plan to report to you as we all learn more.
Speaker #3: We also know, of course, that the no surprises act IDR rules are being reviewed. And we have read about alleged abuses of the process.
Mark Ordan: Pediatrix submits claims that we believe are right down the middle of the spirit and letter of the process rules. We do not have an outsider determine, in their view, what is a proper claim. We determine that ourselves. We do not expect the process to be a headwind for us, since it is designed to balance fairly the interests of payers and acute care providers who follow the rules. I will close by returning to quality. Dr. Medel founded Pediatrix with a clear charge, take care of the patient. That is what our patients and our hospital partners expect of us. Whenever we can find ways to improve, we do. We do this only because we have, by far, the nation's largest team of world-class clinicians in our sector of women's and children's health. I will now turn to Kasandra.
Mark Ordan: Pediatrix submits claims that we believe are right down the middle of the spirit and letter of the process rules. We do not have an outsider determine, in their view, what is a proper claim. We determine that ourselves. We do not expect the process to be a headwind for us, since it is designed to balance fairly the interests of payers and acute care providers who follow the rules. I will close by returning to quality. Dr. Medel founded Pediatrix with a clear charge, take care of the patient. That is what our patients and our hospital partners expect of us. Whenever we can find ways to improve, we do. We do this only because we have, by far, the nation's largest team of world-class clinicians in our sector of women's and children's health. I will now turn to Kasandra.
Speaker #3: Pediatrics submits claims that we believe are right down the middle of the spirit and letter of the process rules. And we do not have an outsider determine in their view what is a proper claim.
Speaker #3: We determine that ourselves. We do not expect the process to be a headwind for us, since it is designed to balance fairly the interests of payers and acute care providers who follow the rules.
Speaker #3: I'll close by returning to quality. Dr. Madel founded Pediatrics with the clear charge. Take care of the patients. That is what our patients and our hospital partners expect of us.
Speaker #3: Whenever we can find ways to improve, we do. And we do this only because we have by far the nation's largest team of world-class clinicians, and our sector of women's and children's health.
Speaker #3: I'll now turn to Cassandra.
Kasandra Rossi: Thanks, Mark, and good morning, everyone. Our consolidated revenue increased by just under 2%, driven by non-same unit activity, primarily recent acquisitions and same unit growth of 60 basis points. Same unit patient service volumes were up about 30 basis points, driven by MFM services, partially offset by declines in other neonatology services, primarily newborn nursery. NICU days were stable as compared to the prior year. Same unit pricing was also up by 30 points, driven by a favorable payer mix, an increase in hospital admin fees, and increased patient acuity, primarily in neonatology. As expected, and as Mark stated, we have begun to lap the strong tailwind from improved collection activity, which is flowing through as a decrease in pricing this quarter.
Kasandra Rossi: Thanks, Mark, and good morning, everyone. Our consolidated revenue increased by just under 2%, driven by non-same unit activity, primarily recent acquisitions and same unit growth of 60 basis points. Same unit patient service volumes were up about 30 basis points, driven by MFM services, partially offset by declines in other neonatology services, primarily newborn nursery. NICU days were stable as compared to the prior year. Same unit pricing was also up by 30 points, driven by a favorable payer mix, an increase in hospital admin fees, and increased patient acuity, primarily in neonatology. As expected, and as Mark stated, we have begun to lap the strong tailwind from improved collection activity, which is flowing through as a decrease in pricing this quarter.
Speaker #1: Thanks, Mark, and good morning, everyone. Our consolidated revenue increased by just under 2 percent, driven by non-same-unit activity, primarily recent acquisitions, and same-unit growth of 60 basis points.
Speaker #1: Same-unit patient service volumes were up about 30 basis points, driven by MFM services. Partially offset by declines in other neonatology services, primarily newborn nursery.
Speaker #1: NICU days were stable as compared to the prior year. Same-unit pricing was also up by 30 points, driven by favorable payer mix and increase in hospital admin fees and increased patient acuity primarily in neonatology.
Speaker #1: As expected, and as Mark stated, we've begun to lapse the strong tailwind from improved collection activity, which is flowing through as a decrease in pricing this quarter.
Kasandra Rossi: Payer mix improved by over 70 basis points as compared to the prior year Q3 and remained stable as compared to Q2 2026. Practice level SW&B expenses increased year over year and on a same unit basis, reflected increases in salary expenses, partially offset by lower benefits expense. Salary growth has remained consistent with the ranges we have seen over the past couple of years in that 3% area. Our G&A expense increased year over year, primarily related to higher incentive-based compensation based on financial results, partially offset by lower technology-related expenses. G&A expense was up about $700,000 year over year, primarily reflecting CapEx at our existing units, as well as CapEx and amortization of intangibles from recent acquisitions. Other non-operating expenses were $200,000 for Q3, compared to non-operating income of $19.7 million for the prior year period.
Kasandra Rossi: Payer mix improved by over 70 basis points as compared to the prior year Q3 and remained stable as compared to Q2 2026. Practice level SW&B expenses increased year over year and on a same unit basis, reflected increases in salary expenses, partially offset by lower benefits expense. Salary growth has remained consistent with the ranges we have seen over the past couple of years in that 3% area. Our G&A expense increased year over year, primarily related to higher incentive-based compensation based on financial results, partially offset by lower technology-related expenses. G&A expense was up about $700,000 year over year, primarily reflecting CapEx at our existing units, as well as CapEx and amortization of intangibles from recent acquisitions. Other non-operating expenses were $200,000 for Q3, compared to non-operating income of $19.7 million for the prior year period.
Speaker #1: Payer mix improved by over 70 basis points compared to the prior year third quarter, and remained stable compared to the second quarter of 2026.
Speaker #1: Practice-level SW&B expenses increased year over year, and on a same-unit basis, reflected increases in salary expenses, partially offset by lower benefits expense. Salary growth has remained consistent with the ranges we have seen over the past couple of years in that 3 percent area.
Speaker #1: Our G&A expense increased year over year, primarily related to higher incentive-based compensation based on financial results, partially offset by lower technology-related expenses. D&A expense was up about $700,000 year over year, primarily reflecting CapEx at our existing units, as well as CapEx and amortization of intangibles from recent acquisitions.
Speaker #1: Other non-operating expenses were $200,000 for the third quarter, compared to non-operating income of $19.7 million for the prior year period. The prior year period reflected a net gain on domestic businesses of $20.9 million.
Kasandra Rossi: The prior year period reflected a net gain on divested businesses of $20.9 million. For Q3 2026, we also saw a decrease in interest expense from modestly lower interest rates and borrowings as compared to the prior year period. Moving on to cash flow, we generated $118 million in operating cash flow in Q3, compared to $138 million in the prior year, with the change driven by decreases in cash flow from accounts payable and accrued expenses and accounts receivable. Our leverage at 9/30 sits at just under 1x, using the midpoint of our updated adjusted EBITDA outlook range for 2026, with cash of $312 million and net debt of just over $266 million.
Kasandra Rossi: The prior year period reflected a net gain on divested businesses of $20.9 million. For Q3 2026, we also saw a decrease in interest expense from modestly lower interest rates and borrowings as compared to the prior year period. Moving on to cash flow, we generated $118 million in operating cash flow in Q3, compared to $138 million in the prior year, with the change driven by decreases in cash flow from accounts payable and accrued expenses and accounts receivable. Our leverage at 9/30 sits at just under 1x, using the midpoint of our updated Adjusted EBITDA outlook range for 2026, with cash of $312 million and net debt of just over $266 million.
Speaker #1: For the third quarter of '26, we also saw a decrease in interest expense from modestly lower interest rates and borrowings as compared to the prior year period.
Speaker #1: Moving on to cash flow, we generated $118 million in operating cash flow in the third quarter, compared to $138 million in the prior year, with the change driven by decreases in cash flow from accounts payable and accrued expenses and accounts receivable.
Speaker #1: Our leverage at 9:30 sits at just under one times, using the midpoint of our updated adjusted EBITDA outlook range for 2026, with cash of $312 million and net debt of just over $266 million.
Kasandra Rossi: Our accounts receivable DSO at 9/30 of 42.5 days were unchanged from 30 June and 31 March, and were down just over a half a day year over year. I will go ahead and turn the call back over to Mark.
Kasandra Rossi: Our accounts receivable DSO at 9/30 of 42.5 days were unchanged from 30 June and 31 March, and were down just over a half a day year over year. I will go ahead and turn the call back over to Mark.
Speaker #1: Our accounts receivable DSO at 930 of 42.5 days were unchanged from June 30th and March 31st, and were down just over a half a day year over year.
Speaker #1: I'll go ahead and turn the call back over to Mark.
Mark Ordan: Great. Thank you, Kasandra. Now we will take any questions that you have.
Mark Ordan: Great. Thank you, Kasandra. Now we will take any questions that you have.
Speaker #3: Great. Thank you. Cassandra, and now we will take any questions that you have.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Ryan Daniels with William Blair. Please go ahead.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Ryan Daniels with William Blair. Please go ahead.
Speaker #4: Thank you. And ladies and gentlemen, we will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press the storm one on your telephone keypad to raise your hand and join the queue.
Speaker #4: If you would like to withdraw your question, simply press the storm one again. And your first question, comes from the line of Andre Ryan Daniels with William Blair.
Speaker #4: Please go ahead.
Matthew Mardula: Hello, this is Matthew Mardula on for Ryan. Thank you for taking all the questions. I want to start with pricing. With it coming in at 0.3%, could you break down how each factor of pricing made up this quarter's pricing, especially by quantifying what the RCM impact was? Then-
Matthew Mardula: Hello, this is Matthew Mardula on for Ryan. Thank you for taking all the questions. I want to start with pricing. With it coming in at 0.3%, could you break down how each factor of pricing made up this quarter's pricing, especially by quantifying what the RCM impact was? Looking ahead to Go ahead, Kasandra.
Speaker #5: Hello. This is Matthew Mardullah. I'm for Ryan. Thank you for taking all the questions. So I want to start with pricing. With it coming in at $0.3 percent, could you break down how each factor of pricing made up this quantifying what the RCM impact was.
Kasandra Rossi: Yeah
Matthew Mardula: Looking ahead to Go ahead, Kasandra.
Speaker #5: And then looking ahead to go ahead, Cassandra.
Kasandra Rossi: Sorry, Matt, I cut you off.
Kasandra Rossi: Sorry, Matt, I cut you off. Please finish the question.
Speaker #1: Sorry, Matt. I cut you off. Please finish your question.
Matthew Mardula: Yeah.
Kasandra Rossi: Please finish the question.
Matthew Mardula: No, I was just going to finish up with, looking ahead to next quarter, how should we think about the sustainability of the pricing benefits we saw? Is there any changes to that kind of key drivers of pricing than previously mentioned? With that RCM impact we saw this quarter, is that a reasonable way to think about it for next quarter as well?
Matthew Mardula: No, I was just going to finish up with, looking ahead to next quarter, how should we think about the sustainability of the pricing benefits we saw? Is there any changes to that kind of key drivers of pricing than previously mentioned? With that RCM impact we saw this quarter, is that a reasonable way to think about it for next quarter as well?
Speaker #5: No, no. I was just going to finish up with, and then looking ahead to next quarter, how should we think about the sustainability of the pricing benefits we saw?
Speaker #5: And is there just any changes to that kind of key drivers of pricing than previously mentioned? And then with that RCM impact, we saw this quarter.
Speaker #5: Is that a reasonable way to think about it for next quarter as well?
Kasandra Rossi: Sure. First I'll take the pricing components. On the positive side, pricing was led by payer mix. A close second was the hospital administrative fees, coming in third was the acuity. I'd say for the payer mix impact, that was probably, if you look at the positive impacts for the pricing, it was about 40%. The hospital admin fee's about 25%, the acuity was about 15%. Maybe I'll hit the sustainability of those while we're talking about those. Listen, we've talked about the payer mix impact. It's continued to be favorable for us, we don't anticipate anything changing there, but if anything, I think it will remain stable. On the hospital admin fees, we talk about that each and every quarter. The hospital environment is tough, but when we require increases, we go to the hospital.
Kasandra Rossi: Sure. First I'll take the pricing components. On the positive side, pricing was led by payer mix. A close second was the hospital administrative fees, coming in third was the acuity. I'd say for the payer mix impact, that was probably, if you look at the positive impacts for the pricing, it was about 40%. The hospital admin fee's about 25%, the acuity was about 15%. Maybe I'll hit the sustainability of those while we're talking about those. Listen, we've talked about the payer mix impact. It's continued to be favorable for us, we don't anticipate anything changing there, but if anything, I think it will remain stable. On the hospital admin fees, we talk about that each and every quarter. The hospital environment is tough, but when we require increases, we go to the hospital.
Speaker #1: Sure. So first, I'll take the pricing components. And on the positive side, pricing was led by payer mix, a close second was the hospital administrative fees, and coming in third was the acuity.
Speaker #1: So, I'd say for the payer mix impact, that was probably—if you look at the positive impacts for the pricing—it was about 40 percent.
Speaker #1: The hospital admin fees about 25 percent, and the acuity was about 15 percent. I maybe I'll hit the sustainability of those while we're talking about those.
Speaker #1: Listen, we've talked about the payer mix impacts. It's continued to be favorable for us. And we don't anticipate anything changing there. But if anything, I think it will remain stable.
Speaker #1: On the hospital admin fees, we talk about that each and every quarter. The hospital environment is tough, but when we require increases, we go to the hospital.
Kasandra Rossi: We have those tough conversations, we've been having success. We expect those conversations and those successes to continue. On acuity, we talked about that a little bit in detail last quarter, that we've looked at that really on a three-year stack, we have seen just a trajectory that takes that increasing. Of course, that is supported by the fact that we are in more level 3s and level 4s than anyone. We do consider those to be sustainable. But as with everything, there is variability, they do bounce around a bit. As far as the RCM and the lapping, we did start talking about that we would expect in the back half of the year to start seeing that lapping. It did impact the quarter by a little over 100 basis points.
Kasandra Rossi: We have those tough conversations, we've been having success. We expect those conversations and those successes to continue. On acuity, we talked about that a little bit in detail last quarter, that we've looked at that really on a three-year stack, we have seen just a trajectory that takes that increasing. Of course, that is supported by the fact that we are in more level 3s and level 4s than anyone. We do consider those to be sustainable. But as with everything, there is variability, they do bounce around a bit. As far as the RCM and the lapping, we did start talking about that we would expect in the back half of the year to start seeing that lapping. It did impact the quarter by a little over 100 basis points.
Speaker #1: We have those tough conversations, and we've been having success. So we expect those conversations and those successes to continue. And on acuity, we talked about that a little bit in detail last quarter, that we've looked at that really on a three-year stack, and we have seen just a trajectory that takes that increasing.
Speaker #1: And of course, that is supported by the fact that we are in more level threes and level fours than anyone. So we do consider those to be sustainable.
Speaker #1: But as with everything, there is variability, and they do bounce around a bit. And as far as the RCM, the lacking, we did start talking about that we would expect in the back half of the year to start seeing that lapping.
Speaker #1: It did impact the quarter. By a little over 100 basis points, and I think right now we are in a very steady state, but we have talked about continuing to look for ways to further automate but we think that right now it is very stable, but again, we'll look to deliver improvement there as we can over the next coming years.
Kasandra Rossi: I think right now we are in a very steady state. We have talked about continuing to look for ways to further automate. We think that right now it is very stable, but again, we'll look to deliver improvement there as we can over the next coming years.
Kasandra Rossi: I think right now we are in a very steady state. We have talked about continuing to look for ways to further automate. We think that right now it is very stable, but again, we'll look to deliver improvement there as we can over the next coming years.
Matthew Mardula: Great. Thank you for that. In the prepared remarks, you kind of discussed the IDR process. Can you help us understand maybe the magnitude of IDR has on your business? Any kind of numbers around that? As we look forward, what's giving you that confidence that this won't become a headwind, particularly if there are any changes to the IDR process that occurs?
Matthew Mardula: Great. Thank you for that. In the prepared remarks, you kind of discussed the IDR process. Can you help us understand maybe the magnitude of IDR has on your business? Any kind of numbers around that? As we look forward, what's giving you that confidence that this won't become a headwind, particularly if there are any changes to the IDR process that occurs?
Speaker #5: Great. Thank you for that. And then in the prepared remarks, you kind of discussed the IDR process. Can you help us understand maybe the magnitude of IDR has on your business?
Speaker #5: Any kind of numbers around that? And then as we kind of look forward, what's kind of given you that confidence that this won't be become a headwind, particularly if there's many particularly if there are any changes to the IDR process that occurs?
Mark Ordan: Well, we're overwhelmingly, as we always have been, in-network, so the IDR process is not something that we've ever had to live based on. It's not, I can't quantify it precisely, but again, we're always overwhelmingly in-network.
Mark Ordan: Well, we're overwhelmingly, as we always have been, in-network, so the IDR process is not something that we've ever had to live based on. It's not, I can't quantify it precisely, but again, we're always overwhelmingly in-network.
Speaker #3: Well, yeah, we're overwhelmingly as we always have been in-network. So the IDR process is not something that we've ever had to live based on.
Speaker #3: So it's not I can't quantify precisely, but again, we're always overwhelmingly in-network.
Matthew Mardula: Great. Thank you so much.
Matthew Mardula: Great. Thank you so much.
Speaker #5: Great. Thank you so much.
Kasandra Rossi: And Mark, with-
Matthew Mardula: Yeah.
Kasandra Rossi: Sorry, Matt, I was going to say, with the-
Kasandra Rossi: Sorry, Matt, I was going to say, with the changing rules, like Mark said we're one of those who, like we said, we abide by the rules. We're doing the right thing. We don't anticipate any changes from the changes that are happening in that process.
Speaker #1: Sorry, Matt. I was going to say, with the changing rules, like Mark said, we don't anticipate we're one of those who like we said, we abide by the rules.
Matthew Mardula: Go ahead.
Kasandra Rossi: changing rules, like Mark said-
Matthew Mardula: Yeah
Kasandra Rossi: we're one of those who, like we said, we abide by the rules. We're doing the right thing. We don't anticipate any changes from the changes that are happening in that process.
Speaker #1: We're doing the right thing. And so we don't anticipate any changes from the changes that are happening in that process.
Matthew Mardula: Great. Thank you so much for all the color. I really appreciate it.
Matthew Mardula: Great. Thank you so much for all the color. I really appreciate it.
Speaker #5: Great. Thank you so much for all the color. I really appreciate it.
Kasandra Rossi: Thanks, Matt.
Kasandra Rossi: Thanks, Matt.
Speaker #1: Thanks, Matt.
Operator: Your next question comes from the line of A.J. Rice with UBS. Please go ahead.
Operator: Your next question comes from the line of A.J. Rice with UBS. Please go ahead.
Speaker #4: And your next question comes from the line of AJ Wright with UBS. Please go ahead.
A.J. Rice: Hi, everybody. Just to put a finer point to that, do you have a percentage of your revenues or claims or business that is out of network at this point? I assume it is in the single digits, but is there a figure you could give us?
A.J. Rice: Hi, everybody. Just to put a finer point to that, do you have a percentage of your revenues or claims or business that is out of network at this point? I assume it is in the single digits, but is there a figure you could give us?
Speaker #6: Hi, everybody. Just to put a finer point on that, do you have a percentage of your revenues, claims, or business that is out-of-network at this point?
Speaker #6: I assume it's in the single-digits, but is there a figure you could give us?
Mark Ordan: We have typically been out of network of less than 5% of our business.
Mark Ordan: We have typically been out of network of less than 5% of our business.
Speaker #3: We have typically been out-of-network of less than 5 percent of our business. So it's always been about so if that helps.
A.J. Rice: Okay
A.J. Rice: Okay
Mark Ordan: about, so if that helps.
Mark Ordan: About, so if that helps.
A.J. Rice: Yeah. No, that is sort of what I.
A.J. Rice: Yeah. No, that is sort of what I.
Speaker #6: Yeah.
Speaker #3: So just sort of we've left with the IDR process now for several years. And as I said in my call, we've read about alleged abuses by others and people, I guess, as I'm learning, use different tactics.
Mark Ordan: We have lived with the IDR process now for several years, and as I said on my call, we have read about alleged abuses by others and people, I guess, as I am learning, use different tactics. We think that the rules were well-crafted, and we see the proposed changes, and we think the spirit and letter of the proposed changes is to make sure that there is a fair process between payers and providers. in 2020, when the No Surprises Act first came out, we were supporters of it. We believe that if you are going to take care of the patient, the patient should be out of the middle. As long as the rules are fair and the payers are playing by the rules and providers are doing it the right way, we are comfortable.
Mark Ordan: We have lived with the IDR process now for several years, and as I said on my call, we have read about alleged abuses by others and people, I guess, as I am learning, use different tactics. We think that the rules were well-crafted, and we see the proposed changes, and we think the spirit and letter of the proposed changes is to make sure that there is a fair process between payers and providers. in 2020, when the No Surprises Act first came out, we were supporters of it. We believe that if you are going to take care of the patient, the patient should be out of the middle. As long as the rules are fair and the payers are playing by the rules and providers are doing it the right way, we are comfortable.
Speaker #3: We think that the rules were well-crafted and we see the proposed changes. And we think that the spirit and letter of the proposed changes is to make sure that there's a fair process between payers and payers and providers.
Speaker #3: In 2020, when the no surprises act first came out, we were supporters of it. We believe that if you're going to take care of the patient, the patient should be out of the middle.
Speaker #3: As long as the rules are fair and the payers are playing by the rules and providers are doing it the right way, we're comfortable.
A.J. Rice: Company obviously came in ahead of expectations on the quarter, $85 million, 85.5 of EBITDA. You have updated the guidance. When I look at what that implies for Q4, if I am doing the math right, I get about $70 to $80 million in EBITDA. Is there anything embedded in there? Is that natural seasonality? Is there something that does not recur that occurred in Q3, or are you just being conservative?
Speaker #6: Yeah. The company obviously came in ahead of expectations for the quarter, with $85 million, $85.5 million of EBITDA. You've updated the guidance. When I look at what that implies for the fourth quarter, if I'm doing the math right, I get about $70 to $80 million in EBITDA.
A.J. Rice: Company obviously came in ahead of expectations on the quarter, $85 million, 85.5 of EBITDA. You have updated the guidance. When I look at what that implies for Q4, if I am doing the math right, I get about $70 to $80 million in EBITDA. Is there anything embedded in there? Is that natural seasonality? Is there something that does not recur that occurred in Q3, or are you just being conservative?
Speaker #6: Is there anything embedded in there? Is that natural seasonality? Is there something that doesn't recur that occurred in the Q3, or you're just being conservative?
Kasandra Rossi: No, I would say it just gives us a little bit of flexibility. Volumes have bounced around, pricing has bounced around, and it just gives us that flexibility to land in that range. So nothing else baked in there, A.J.
Kasandra Rossi: No, I would say it just gives us a little bit of flexibility. Volumes have bounced around, pricing has bounced around, and it just gives us that flexibility to land in that range. So nothing else baked in there, A.J.
Speaker #1: No, I'd say it just gives us a little bit of flexibility. Volumes have bounced around. Pricing has bounced around. And it just gives us that flexibility to land in that range.
Speaker #1: So, nothing else baked in there, AJ.
Mark Ordan: No. A.J., it is always November.
Mark Ordan: No. A.J., it is always November.
Speaker #3: You know, AJ, it's always November.
A.J. Rice: Okay. All right. You mentioned that you are still looking at high-value opportunities in adjacent businesses. I wondered maybe if I could get you to just flesh out what is behind that. What would be things that would be of interest to the company?
A.J. Rice: Okay. All right. You mentioned that you are still looking at high-value opportunities in adjacent businesses. I wondered maybe if I could get you to just flesh out what is behind that. What would be things that would be of interest to the company?
Speaker #6: Okay. All right. You mentioned that you're still looking at high-value opportunities in adjacent businesses. I wondered maybe if I could get you to just flesh out what's behind that.
Speaker #6: What would be things that would be of interest to the company?
Mark Ordan: Well, I can only flesh it out a little bit. I would say that what we have said repeatedly is that we have a very strong balance sheet, and we have the ability to make larger acquisitions. We strategically would only look at something that is in something adjacent to what we already do. So staying in the women's and children's space is important to us. So I am just underscoring that when people look at our balance sheet and see our very low leverage, I do not want people to think that we are complacent and we are just sitting there. Yes, we have bought back shares, but not to the extent that it limits us from doing something if there is a very good opportunity. So we do think in the women's
Mark Ordan: Well, I can only flesh it out a little bit. I would say that what we have said repeatedly is that we have a very strong balance sheet, and we have the ability to make larger acquisitions. We strategically would only look at something that is in something adjacent to what we already do. So staying in the women's and children's space is important to us. So I am just underscoring that when people look at our balance sheet and see our very low leverage, I do not want people to think that we are complacent and we are just sitting there. Yes, we have bought back shares, but not to the extent that it limits us from doing something if there is a very good opportunity. We do think in the women's and children's space are bound to be attractive opportunities, and we actively consider them.
Speaker #3: Well, I can only flesh it out a little bit. I'd say that what we have said repeatedly is that we have a very strong balance sheet.
Speaker #3: And we have the ability to make larger acquisitions. We strategically would only look at something that is in something adjacent to what we already do.
Speaker #3: So staying in the women's and children's space is important to us. So I'm just underscoring that when people look at our balance sheet and see our very low leverage, I don't want people to think that we're complacent and we're just sitting there.
Speaker #3: Yes, we've bought back shares. But not to the extent that it limits us from doing something if there's a very good opportunity. So we do think in the women's and children's space, we're bound to be attractive opportunities.
A.J. Rice: Okay
Mark Ordan: and children's space are bound to be attractive opportunities, and we actively consider them.
Speaker #3: And we actively consider them.
A.J. Rice: Okay. The level of share repurchase, I will just wrap up with this. $83 million during the quarter. Any comments on pacing going forward on that?
A.J. Rice: Okay. The level of share repurchase, I will just wrap up with this. $83 million during the quarter. Any comments on pacing going forward on that?
Speaker #6: Okay. And then the level of share repurchase, I'll just wrap up with this. 83 million during the quarter. Any comments on pacing going forward on that?
Mark Ordan: No. We've tried to be opportunistic. We're happy that over the course of the last year, our average price was $23, which looks like it was a good buy. But we'll consider, along with the board, what our pace going forward is.
Mark Ordan: No. We've tried to be opportunistic. We're happy that over the course of the last year, our average price was $23, which looks like it was a good buy. We'll consider, along with the board, what our pace going forward is.
Speaker #3: No. We've tried to be opportunistic. We're happy that over the course of the last year, our average price was 23, which looks like it was a good buy.
Speaker #3: But we'll consider it along with the board. What our pace going forward is.
A.J. Rice: Okay. All right. Thanks so much.
A.J. Rice: Okay. All right. Thanks so much.
Speaker #6: Okay, all right. Thanks so much.
Mark Ordan: And if other opportunities.
Mark Ordan: If other opportunities.
Speaker #3: There are other opportunities.
A.J. Rice: Yeah. I understand. Thanks so much.
A.J. Rice: I understand. Thanks so much.
Speaker #6: Yeah. Yeah. I understand. Thanks so much.
Kasandra Rossi: Thanks, A.J.
Kasandra Rossi: Thanks, A.J.
Speaker #1: Thanks, AJ.
Operator: Your next question comes from the line of Jack Slevin with Jefferies. Please go ahead.
Operator: Your next question comes from the line of Jack Slevin with Jefferies. Please go ahead.
Speaker #4: And your next question comes from the line of Jack Slevin with Jeffreys. Please go ahead.
Jack Slevin: Hey, good morning. Thanks for taking the questions. There is a note in the release on a little bit of, it sounds like, small disposition activity in the quarter. Could you maybe just provide a little more color on maybe what is at play from practice dispositions or how you are approaching that?
Jack Slevin: Hey, good morning. Thanks for taking the questions. There is a note in the release on a little bit of, it sounds like, small disposition activity in the quarter. Could you maybe just provide a little more color on maybe what is at play from practice dispositions or how you are approaching that?
Speaker #7: Hey, good morning. Thanks for taking the questions. There's a note in the release on a little bit of—it sounds like—small disposition activity in the quarter.
Speaker #7: Could you maybe provide a little more color on what's in place regarding practice dispositions, or how you're approaching that?
Kasandra Rossi: Yeah, no, that is just the carryover from the disposition activity that happened in 2024. So when we were talking about non-same unit, it is the net of the acquisitions and any disposition. So it is just natural flow through of that.
Kasandra Rossi: That is just the carryover from the disposition activity that happened in 2024. When we were talking about non-same unit, it is the net of the acquisitions and any disposition. It is just natural flow through of that.
Speaker #1: Yeah. No, that's just the carryover from the disposition activity that happened in '24. So when we were talking about non-same unit, it's the net of the acquisitions and any disposition.
Speaker #1: So it's just natural flow through of that.
Jack Slevin: Okay. Understood. Thanks. I appreciate the clarification there. A lot of questions already been asked, maybe just to understand what you're seeing on the labor front or from a wage inflation perspective, how that's tracking underlying in the business.
Jack Slevin: Okay. Understood. Thanks. I appreciate the clarification there. A lot of questions already been asked, maybe just to understand what you're seeing on the labor front or from a wage inflation perspective, how that's tracking underlying in the business.
Speaker #7: Okay. Understood. Thanks. I appreciate the clarification there. A lot of questions already been asked. Maybe just to understand what you're seeing on the labor front or from a wage-inflation perspective, how that sort of tracking underlying in the business.
Kasandra Rossi: Yeah. I would just say, we kind of talked about we've been able to keep those clinical salaries, in the last couple of years, in that 3% to 3.5% area. We are really comfortable that what we saw a few years back where we were in the mid to high single digits that time, we are not seeing that. So nothing really more to say on that, Jack.
Kasandra Rossi: I would just say, we kind of talked about we've been able to keep those clinical salaries, in the last couple of years, in that 3% to 3.5% area. We are really comfortable that what we saw a few years back where we were in the mid to high single digits that time, we are not seeing that. So nothing really more to say on that, Jack.
Speaker #1: Yeah. So I would just say we kind of talked about we've been able to keep those clinical salaries in the last couple of years, in that 3, 3 and a half percent area.
Speaker #1: And so we're really comfortable that what we saw back a few years back where we were in the mid to high single digits at times, we're not seeing that.
Speaker #1: So nothing really more to say on that, Jack.
Jack Slevin: Okay. One more for me, just a quick one. The mentioning of some of the coding changes. My understanding is there is an unbundling that is looking to happen next year of some of the related codes in your space for those services. The way that I had read it, if you trend towards the higher side of the acuity scale, that unbundling might end up being a positive opportunity. Got your comment, Mark, that you are still weighing it up, and you will see what happens on the coding front. But just want to understand if you could handicap whether or not you think that possibly is a positive or a negative for you as you look at 2027. Thanks.
Jack Slevin: Okay. One more for me, just a quick one. The mentioning of some of the coding changes. My understanding is there is an unbundling that is looking to happen next year of some of the related codes in your space for those services. The way that I had read it, if you trend towards the higher side of the acuity scale, that unbundling might end up being a positive opportunity. Got your comment, Mark, that you are still weighing it up, and you will see what happens on the coding front. But just want to understand if you could handicap whether or not you think that possibly is a positive or a negative for you as you look at 2027. Thanks.
Speaker #7: Okay. And then one more for me, just a quick one. The mentioning of some of the coding changes, my understanding is there's an unbundling that's looking to happen next year, of some of the related codes in your space.
Speaker #7: For those services, the way that I had read it, if you sort of trend towards the higher side of the acuity scale, that unbundling might end up being a positive opportunity.
Speaker #7: Got your comment, Mark, that you're sort of still weighing it up and you'll see what happens on the coding front. But just want to understand if you could sort of handicap whether or not you think that possibly is a positive or a negative for you as you look at '27.
Speaker #7: Thanks.
Mark Ordan: Rather not handicap it because first of all, the rules should be finalized in the next few weeks in November. So handicapping it before it all comes out, I do not think is going to be particularly helpful. We are going to see, based on the rules, how OBs react to that. So I think it is a little bit hard. Yes, there potentially, depending on how the rules shake out, there could be opportunities on the OBH side or more on the OB side. But I think it is too early to tell, both because the rules are not finalized, and we do not know how people are going to react to the rules. But again, importantly for us, it is not a material part of our business, and this gives us an opportunity to see how the rules change and what we make of it.
Mark Ordan: Rather not handicap it because first of all, the rules should be finalized in the next few weeks in November. So handicapping it before it all comes out, I do not think is going to be particularly helpful. We are going to see, based on the rules, how OBs react to that. So I think it is a little bit hard. Yes, there potentially, depending on how the rules shake out, there could be opportunities on the OBH side or more on the OB side. But I think it is too early to tell, both because the rules are not finalized, and we do not know how people are going to react to the rules. But again, importantly for us, it is not a material part of our business, and this gives us an opportunity to see how the rules change and what we make of it.
Speaker #3: Rather not handicap it because it's really going to first of all, the rules are going to be should be finalized in the next few weeks in November.
Speaker #3: So handicapping it before it all comes out, I don't think is going to be particularly helpful. And we're going to see based on the rules how OBs react to that.
Speaker #3: So I think it's a little bit hard. Yes, there potentially, depending on how the rules shake out, there could be opportunities on the OBH side or more on the OB side.
Speaker #3: But I think it's a too early to tell both because the rules aren't finalized and we don't know how people are going to react to the rules.
Speaker #3: But again, importantly for us, it's not material part of our business. And this gives us an opportunity to see how the rules change and what we make of it.
Jack Slevin: Got it. Okay. That's helpful. I appreciate all the color and congrats on the quarter.
Jack Slevin: Got it. Okay. That's helpful. I appreciate all the color and congrats on the quarter.
Speaker #7: Got it. Okay. That's helpful. I appreciate all the color and congrats on the quarter.
Mark Ordan: Thank you.
Mark Ordan: Thank you.
Kasandra Rossi: Thanks, John.
Kasandra Rossi: Thanks, John.
Speaker #3: Thank you.
Speaker #1: Thanks, Jack.
Operator: Once again, if you would like to ask a question, simply press star one on your telephone keypad. The next question comes from the line of Whit Mayo with Leerink Partners. Please go ahead. Whit Mayo, you might be on mute.
Operator: Once again, if you would like to ask a question, simply press star one on your telephone keypad. The next question comes from the line of Whit Mayo with Leerink Partners. Please go ahead. Whit Mayo, you might be on mute.
Speaker #4: And once again, if you would like to ask a question, simply press the star one on your telephone keypad. The next question comes from the line of wheatmail with Lyric Partners.
Speaker #4: Please go ahead. Wheatmail, you might be on mute.
Whit Mayo: Oh, there we go. Sorry about that, guys. A little early this morning. I know you're in the budgeting process, the planning process for 2027, but just was wondering if you could share any headwinds, tailwinds as you're thinking about next year.
Whit Mayo: Oh, there we go. Sorry about that, guys. A little early this morning. I know you're in the budgeting process, the planning process for 2027, but just was wondering if you could share any headwinds, tailwinds as you're thinking about next year.
Speaker #6: Nope. There we go. Sorry about that, guys. A little early this morning. I know you're in the budgeting process, the planning process for '27, but just was wondering if you could share any headwinds, tailwinds as you're thinking about next year.
Mark Ordan: No, not at this point. I think obviously we'll report. As you said, we're in the budgeting process. We're looking at a lot of things, but we're not going to talk today about the 2027. I've given the characterization of the things that we're looking at that stand out right now. I think that covers it.
Mark Ordan: No, not at this point. I think obviously we'll report. As you said, we're in the budgeting process. We're looking at a lot of things, but we're not going to talk today about the 2027. I've given the characterization of the things that we're looking at that stand out right now. I think that covers it.
Speaker #3: No, not at this point. I think, obviously, we'll report—as you said—we're in the budgeting process, and we're looking at a lot of things.
Speaker #3: But we're not going to talk today about '27. I've given the characterization of the things that we're looking at that stand out right now, I think that covers it.
Whit Mayo: Okay. Maybe just on the exchange stuff. I know you haven't seen a headwind this year. Would you think that maybe you see a little bit of a slip in mix next year? Or just any preliminary thoughts as it relates to payer mix?
Whit Mayo: Okay. Maybe just on the exchange stuff. I know you haven't seen a headwind this year. Would you think that maybe you see a little bit of a slip in mix next year? Or just any preliminary thoughts as it relates to payer mix?
Speaker #6: Okay. Maybe just on the exchange stuff. I know you haven't seen a headwind this year. Would you think that maybe you see a little bit of a slip in mix next year or just any preliminary thoughts as it relates to payer mix?
Mark Ordan: Well, it's hard for me to say that because starting in Q4 of last year, we were getting this question, and we said, "Well, we don't know." And when people said, "Why aren't you reducing their numbers?" I said, "Because I could pull a number out of the air, but we prefer not to do that. We like to do things based on numbers." And that has continued. So we haven't seen anything that points to it. I hypothesized that possibly because of the population that we serve, people are doing a different calculation about the value of insurance without the subsidies, but that's me sitting around trying to figure out why our results are different than some people are.
Mark Ordan: Well, it's hard for me to say that because starting in Q4 of last year, we were getting this question, and we said, "Well, we don't know." When people said, "Why aren't you reducing their numbers?" I said, "Because I could pull a number out of the air, but we prefer not to do that. We like to do things based on numbers." That has continued. We haven't seen anything that points to it. I hypothesized that possibly because of the population that we serve, people are doing a different calculation about the value of insurance without the subsidies, but that's me sitting around trying to figure out why our results are different than some people are.
Speaker #3: It's hard for me to say that because we're starting in the fourth quarter of last year. We were getting this question and we said, "Well, we don't know." And when people said, "Why aren't you reducing their numbers?" I said, "Because I could pull a number out of the air, but we prefer not to do that.
Speaker #3: We like to do things based on numbers." And that has continued. So we haven't seen anything that points to it. I hypothesized that possibly because of the population that we serve, people are doing a different calculation about the value of insurance without the subsidies, but that's me sitting around trying to figure out why our results are different than some people are.
Mark Ordan: But other than that, we continue, and a lot of people, I would say probably you included, thought that by sometime in the Q1 or Q2, we would see the effect, and we haven't. So I'm not sitting here worried about what happens next year. I'll be paying attention to it. We do check, and when we hear something anecdotal, we track it down to see if it's affecting us, and it just hasn't.
Mark Ordan: Oher than that, we continue, and a lot of people, I would say probably you included, thought that by sometime in the Q1 or Q2, we would see the effect, and we haven't. I'm not sitting here worried about what happens next year. I'll be paying attention to it. We do check, and when we hear something anecdotal, we track it down to see if it's affecting us, and it just hasn't.
Speaker #3: But other than that, we continue and a lot of people, I would say, probably you included, thought that by the sometime in the first or second quarter, we would see the effect and we haven't.
Speaker #3: So I'm not sitting here worried about what happens next year. I'll be paying attention to it. We do check, and when we hear something anecdotal, we track it down to see if it's affecting us.
Speaker #3: And it just hasn't.
Whit Mayo: Yeah. Maybe just last one. Kasandra Rossi, you mentioned in your prepared comments, lower technology expenses. Can you just elaborate a little bit more on what that was? Thanks.
Whit Mayo: Maybe just last one. Kasandra Rossi, you mentioned in your prepared comments, lower technology expenses. Can you just elaborate a little bit more on what that was? Thanks.
Speaker #6: Yeah. Maybe just the last one. Sandra, you mentioned in your prepared comments lower technology, expenses. Can you just elaborate a little bit more on what that was?
Speaker #6: Thanks.
Kasandra Rossi: Yeah, just some of the SaaS costs that we had just rolling out of P&L.
Kasandra Rossi: Just some of the SaaS costs that we had just rolling out of P&L.
Speaker #1: Yeah, just some of the SaaS costs that we had, just rolling out of the P&L.
Whit Mayo: Okay. Thank you.
Whit Mayo: Okay. Thank you.
Speaker #6: Okay. Thank you.
Kasandra Rossi: You are welcome, Whit.
Kasandra Rossi: You are welcome, Whit.
Speaker #1: You're welcome, Wit.
Operator: Your next question comes from the line of Pito Chickering with Deutsche Bank. Please go ahead.
Operator: Your next question comes from the line of Pito Chickering with Deutsche Bank. Please go ahead.
Speaker #4: Your next question comes from the line of P2, Chickering with Deutsche Bank. Please go ahead.
Pito Chickering: Hey, good morning, guys. Thanks for taking the question. I guess, looking at the pricing, what percentage of your NICU practices today have subsidies from hospitals? How has that changed in the last year? And where do you think it can go next year, or sort of what inning are we in at this point of getting subsidies for your NICU? Thank you.
Pito Chickering: Hey, good morning, guys. Thanks for taking the question. I guess, looking at the pricing, what percentage of your NICU practices today have subsidies from hospitals? How has that changed in the last year? And where do you think it can go next year, or sort of what inning are we in at this point of getting subsidies for your NICU? Thank you.
Speaker #6: Hey, good morning, guys. Thanks for taking the question. I guess looking at the pricing, what percent of your NICU practices today have subsidies from hospitals?
Speaker #6: How has that changed in the last year? And what do you think can go next year? Or sort of what inning are we in at this point of getting subsidies for your NICUs?
Mark Ordan: Yeah. I am sorry. I just want to make sure I understand the question, Peter. You are asking what percentage of our NICU revenue comes from?
Mark Ordan: I am sorry. I just want to make sure I understand the question, Peter. You are asking what percentage of our NICU revenue comes from?
Speaker #3: Yeah. I'm sorry. I just want to make sure I understand the question, Peter. You're asking what percentage of our NICU revenue comes from?
Pito Chickering: What percentage of your NICU practice? If you have 1,000 NICU practices, are half of them getting subsidies from the hospitals? Where are we on that at this point, and how has that changed in the last year?
Pito Chickering: What percentage of your NICU practice? If you have 1,000 NICU practices, are half of them getting subsidies from the hospitals? Where are we on that at this point, and how has that changed in the last year?
Speaker #6: What percent of your NICU practices so if you have 1,000 NICU practices, are half of them getting subsidies from the hospitals? So where are we on that at this point?
Speaker #6: And how has that changed in the last year?
Kasandra Rossi: No, it is not half. It is much lower than that.
Kasandra Rossi: No, it is not half. It is much lower than that.
Speaker #1: No. It's not. It's not half. It's much lower than that.
Mark Ordan: There is not much change year to year.
Mark Ordan: There is not much change year to year.
Speaker #3: And there's not much change year to year.
Pito Chickering: Okay. Do you think that that can continue to grow going forward? I am trying to understand. We are seeing pressures in hospitals from practices getting more subsidies. I am just curious. Let me ask it differently. What inning are you guys in in order to get subsidies for your NICU practices? Are we in the second or third inning a year, or are we more the seventh or eighth inning?
Pito Chickering: Okay. Do you think that that can continue to grow going forward? I am trying to understand. We are seeing pressures in hospitals from practices getting more subsidies. I am just curious. Let me ask it differently. What inning are you guys in in order to get subsidies for your NICU practices? Are we in the second or third inning a year, or are we more the seventh or eighth inning?
Speaker #6: Okay. Do you think that that can continue to grow going forward? I mean, I'm trying to understand we're seeing pressures in hospitals from practices getting more subsidies and just curious.
Speaker #6: I guess let me ask it differently. What inning are you guys in in order to get subsidies for your NICU practices? Are we in the second or third inning here, or are we more in the seventh or eighth inning?
Speaker #3: I'm not what I'm about to say is not sidestepping the question. So let me I'll respond to that. We work very closely with our hospital partners and we think that along with taking care of the patient, it's very important that they know that we do things very efficiently so that they're better off with us running that NICU than if they did it themselves.
Mark Ordan: What I am about to say is not sidestepping the question. I will respond to that. We work very closely with our hospital partners, and we think that along with taking care of the patient, it is very important that they know that we do things very efficiently, so that they are better off with us running that NICU than if they did it themselves. And we think we have to demonstrate that value all the time. It is not like you come to the end of the year and you have a discussion. You have a constant relationship with the hospital to show that you are adding value. The reason that you receive a payment from the hospital is because if they did it themselves, they would have that or a greater expense. It is not charity.
Mark Ordan: What I am about to say is not sidestepping the question. I will respond to that. We work very closely with our hospital partners, and we think that along with taking care of the patient, it is very important that they know that we do things very efficiently, so that they are better off with us running that NICU than if they did it themselves. And we think we have to demonstrate that value all the time. It is not like you come to the end of the year and you have a discussion. You have a constant relationship with the hospital to show that you are adding value. The reason that you receive a payment from the hospital is because if they did it themselves, they would have that or a greater expense. It is not charity.
Speaker #3: And we think we have to demonstrate that value all the time, so it's not like you come to the end of the year and you have a discussion.
Speaker #3: You have a constant relationship with the hospital to show that you're adding value. If the reason that you receive a payment from the hospital is because if they did it themselves, they would have that or a greater expense.
Speaker #3: So it's not it's not charity. It's saying that they understand the real cost involved in providing the care that we provide. And all the expenses that go in it to make sure that they're confident that they have a really high-functioning NICU.
Mark Ordan: It is saying that they understand the real cost involved in providing the care that we provide, and all the expenses that go in it to make sure that they are confident that they have a really high-functioning NICU. So we feel, as Kasandra Rossi said, I am being long-winded about it, we feel that while those discussions are a push and pull, we feel that we can continue to demonstrate value and be fair in the requests that we make of hospitals. And I think if hospitals value us and what we do, we think we will be okay. Is it a higher pressure environment with the One Big Beautiful Bill Act in the process? Sure. That takes away from the system, so that is going to provide pressure.
Mark Ordan: It is saying that they understand the real cost involved in providing the care that we provide, and all the expenses that go in it to make sure that they are confident that they have a really high-functioning NICU. We feel, as Kasandra Rossi said, I am being long-winded about it, we feel that while those discussions are a push and pull, we feel that we can continue to demonstrate value and be fair in the requests that we make of hospitals. I think if hospitals value us and what we do, we think we will be okay. Is it a higher pressure environment with the One Big Beautiful Bill Act in the process? Sure. That takes away from the system, so that is going to provide pressure.
Speaker #3: So we feel as Cassandra said, I'm being longer-winded about it. We feel that while those discussions are a push and pull, we feel that we can continue to demonstrate value and be fair in the request that we make of hospitals.
Speaker #3: And I think if hospitals value us and what we do, we think we'll be okay. Is it a higher-pressure environment with the big, beautiful bills?
Speaker #3: Sure. That adds that takes away from the system. So that does provide pressure.
Pito Chickering: Let me ask this a slightly different way. Looking at the economics of a NICU, a patient, the technical component the hospital gets is very large, and therefore, the relative cost of any subsidies, frankly, is fairly inconsequential. And so keeping NICU practices happy is a very profitable endeavor for hospitals due to the technical component. I am just trying to ballpark today sort of where we are. Is it like a quarter of your practices today have subsidies? Is that the right ballpark, plus or minus?
Pito Chickering: Let me ask this a slightly different way. Looking at the economics of a NICU, a patient, the technical component the hospital gets is very large, and therefore, the relative cost of any subsidies, frankly, is fairly inconsequential. And so keeping NICU practices happy is a very profitable endeavor for hospitals due to the technical component. I am just trying to ballpark today sort of where we are. Is it like a quarter of your practices today have subsidies? Is that the right ballpark, plus or minus?
Speaker #6: So if I ask this a slightly different way, I guess, look, looking at the economics of a NICU, a patient, the technical component, the hospital gets is very large and therefore the relative cost of any subsidies, frankly, is sort of fairly inconsequential.
Speaker #6: And so keeping NICU practices happy is a very profitable endeavor for hospitals due to the technical component. I guess I'm just trying to ballpark today sort of where we are.
Speaker #6: Is it like a quarter of your practices today have subsidies? Is that the right ballpark, plus or minus?
Mark Ordan: Well, maybe at a future date. We have not published that number. I would rather not cuff it. As Kasandra Rossi said, it is considerably less than half. I appreciate your comment about the relative economics for us versus the hospital system. We might add you to our negotiating team. You can be helpful.
Mark Ordan: Well, maybe at a future date. We have not published that number. I would rather not cuff it. As Kasandra Rossi said, it is considerably less than half. I appreciate your comment about the relative economics for us versus the hospital system. We might add you to our negotiating team. You can be helpful.
Speaker #3: Well, maybe at a future date, we haven't published that number. I don't want to I'd rather not cuff it if Cassandra said it's considerably less than half.
Speaker #3: I appreciate your comment about the relative economics for us versus the hospital system. We might add you to our negotiating team. You can be helpful.
Pito Chickering: All right. Yeah, fair enough. Okay. Just because as I look at this thing in the next few years, that, for me, seems like a pretty massive driver for pricing as a durable seg going forward. So any color you can provide to us in terms of how this has changed over time would be very helpful. Thanks, guys.
Pito Chickering: All right. Yeah, fair enough. Okay. Just because as I look at this thing in the next few years, that, for me, seems like a pretty massive driver for pricing as a durable seg going forward. Any color you can provide to us in terms of how this has changed over time would be very helpful. Thanks, guys.
Speaker #6: All right. All right. Yeah. Fair enough. Okay. Just because the guys are looking at this thing in the next few years, that for me seems like a pretty massive driver for pricing.
Speaker #6: As a durable set going forward. So any color you can provide to us in terms of how this has changed over time would be very helpful.
Speaker #6: Thanks, guys.
Mark Ordan: Sure.
Mark Ordan: Sure.
Kasandra Rossi: Thanks, Pito.
Kasandra Rossi: Thanks, Pito.
Speaker #3: Sure.
Speaker #1: Thanks, Peter.
Operator: There are no further questions at this time. I would like to hand it back to Mark Ordan for closing remarks.
Operator: There are no further questions at this time. I would like to hand it back to Mark Ordan for closing remarks.
Speaker #4: And there are no further questions at this time. I would like to hand it back to Mark Ordon for closing remarks.
Mark Ordan: Great. Thank you all for joining us this morning and your continued support of Pediatrix. Have a great day.
Mark Ordan: Great. Thank you all for joining us this morning and your continued support of Pediatrix. Have a great day.
Speaker #3: Great. Great. Thank you all for joining us this morning and for your continued support of pediatrics. Have a great day.
Operator: This concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: This concludes today's conference call. Thank you all for joining. You may now disconnect.
