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pediatrix(MD) - 2023 Q3 - Earnings Call Transcript
MDpediatrix(MD)2023-11-05 04:34
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Financial Data and Key Metrics Changes - The adjusted EBITDA for the quarter was approximately 15millionbelowinternalforecasts,primarilyduetopractice−leveloperatingexpensesandsoftpatientvolumes[3][34]−Thefull−yearadjustedEBITDAoutlookhasbeenupdatedtoarangeof15 million below internal forecasts, primarily due to practice-level operating expenses and soft patient volumes [3][34] - The full-year adjusted EBITDA outlook has been updated to a range of 200 million to 210million,reflectingexpectationsforsimilarcontributionsinthefourthquarterasreportedinthethirdquarter[4]BusinessLineDataandKeyMetricsChanges−Year−over−yearexpensegrowthatthepracticelevelwasevenlysplitbetweensalariesandincentivecompensation,withunderlyingsalarygrowthacceleratingbyroughly100basispointscomparedtothesecondquarter[54]MarketDataandKeyMetricsChanges−Same−unitpricinggrowthreflectedyear−over−yearrecoveryinrevenuecollectionratesandpayormixagainstachallengingquarterin2022[27]CompanyStrategyandDevelopmentDirection−Thecompanyplanstomakestructuralchangesinambulatorypracticestoenhanceearningspotential,addressingvariancesinfinancialperformanceacrossindividualpractices[22]−Adecisionhasbeenmadetotransitiontoanewvendorforrevenuecyclemanagementservices,aimingtocombineinternalteamswithexternalefficiencies[24][60]−Thefocuswillbeoncapitalallocationprioritiestobuildoncoreservices,positioningthecompanyfavorablyinthephysicianserviceindustry[38]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgeddisappointingresultsduetosoftpatientvolumesandpersistentcostinflation,emphasizingthebeliefthatcurrentoperatingresultsdonotreflectthecompany′sfullearningspotential[34]−Thecompanyiscommittedtoaddressingcosttrendsandmakingnecessarychangestoservicelinefootprintstostabilizegrossmargins[36]OtherImportantInformation−Thecompanygeneratedover210 million, reflecting expectations for similar contributions in the fourth quarter as reported in the third quarter [4] Business Line Data and Key Metrics Changes - Year-over-year expense growth at the practice level was evenly split between salaries and incentive compensation, with underlying salary growth accelerating by roughly 100 basis points compared to the second quarter [54] Market Data and Key Metrics Changes - Same-unit pricing growth reflected year-over-year recovery in revenue collection rates and payor mix against a challenging quarter in 2022 [27] Company Strategy and Development Direction - The company plans to make structural changes in ambulatory practices to enhance earnings potential, addressing variances in financial performance across individual practices [22] - A decision has been made to transition to a new vendor for revenue cycle management services, aiming to combine internal teams with external efficiencies [24][60] - The focus will be on capital allocation priorities to build on core services, positioning the company favorably in the physician service industry [38] Management's Comments on Operating Environment and Future Outlook - Management acknowledged disappointing results due to soft patient volumes and persistent cost inflation, emphasizing the belief that current operating results do not reflect the company's full earnings potential [34] - The company is committed to addressing cost trends and making necessary changes to service line footprints to stabilize gross margins [36] Other Important Information - The company generated over 81 million in operating cash flow and repaid 40millioninrevolverborrowingsduringthethirdquarter,endingtheperiodwith40 million in revolver borrowings during the third quarter, ending the period with 21 million in cash [28] Q&A Session Summary Question: How are you addressing practice-level expenses? - Management is exploring levers such as adjusting clinician wage rates and seeking subsidies from hospitals to manage practice-level expenses [29][44] Question: What are the learnings from the previous RCM transition? - The management highlighted the importance of a hybrid model, combining internal teams for front-end functions with external vendors for back-end efficiencies [60] Question: What drove the headwind in non-same-store revenue? - The company noted that the review of the portfolio and footprint contributed to the net negative in non-same-unit revenue [62]