pediatrix(MD)2023-08-06 12:49Financial Data and Key Metrics Changes - The company reported strong pricing, reflecting improvements in revenue cycle operations, with net accounts receivable days decreasing to 49 from 51 in the previous quarter [21][5] - General and administrative expenses declined by approximately 5% year-over-year, maintaining efficiencies against revenue growth [6] - The company generated strong cash flow, allowing for the repayment of roughly 675 million and a net leverage of 3x based on trailing 12 adjusted EBITDA [26][27] Business Line Data and Key Metrics Changes - Patient volume trends decelerated but remained stable to positive, with NICU days increasing year-over-year, offset by softer volumes in pediatric ICU and pediatric floor [20][19] - The company is expanding its urgent care platform, opening new clinics in Houston and Denver, and rebranding acquired clinics under the Pediatrix name [9][10] Market Data and Key Metrics Changes - The payer mix remained stable year-over-year, contributing to the overall financial stability of the company [5] - The company has seen a reduction in days sales outstanding (DSO) by nine days over the past 12 months, indicating improved collections [32] Company Strategy and Development Direction - The company is focused on improving accounts receivable collections and expanding relationships with existing hospital partners while also seeking new partnerships [7][8] - There are plans to commit capital to acquisitions in the second half of the year, focusing on core service lines [10] Management's Comments on Operating Environment and Future Outlook - Management anticipates seasonal increases in patient volumes as the school year begins, following a return to normal summer seasonality [20] - The company is optimistic about its ability to generate sufficient cash flow to repay all revolver borrowings during the third quarter and build a cash position thereafter [27] Other Important Information - The company has not completed any acquisitions year-to-date but sees opportunities in the market [10] - The success rate in arbitration continues to lead industry averages, with a noted improvement in in-network payer agreements [11] Q&A Session Summary Question: Can you help us bridge the EBITDA margins from 2Q into the back half year? - Management explained that same-store rate growth accounted for about 23 million, indicating a complex relationship between rate growth and compensation [31] Question: Is the decrease in DSO all due to revenue cycle management improvements? - Management confirmed that the majority of the DSO decrease is associated with improved collections, with further improvements anticipated [32] Question: How do you view the opportunity to adjust incentive compensation costs? - Management noted that incentive plans are contractual and discussions are ongoing to ensure competitiveness in compensation across practices [36][37] Question: What is the outlook for normalized cash generation? - Management indicated that cash flow has been variable but expects to eliminate borrowing by the third quarter and build free cash flow towards the end of the year [38] Question: Can you discuss the impact of inflationary pressures on rate increases? - Management acknowledged that while inflationary pressures exist, there are counterbalancing factors that restrict the ability to fully pass through these costs to payers [67]