Pediatrix Medical Group, Inc. (NYSE:MD) Q4 2022 Earnings Call Transcript

Jim Swift: Sorry for that. This is Jim. Listen, I think what, again, as I referenced on the call is that we are going to be very careful about our strategic acquisitions and deployment of capital in that regard. I think we are with a balance sheet where it is. We have plenty of cash flow in order for us to do transactions. At this time, we’re coming off the heels of having the stock buyback. We thought that was an original allocation that we took in 2022. And right now, I think we again have the balance sheet to look at some acquisitions in our core areas that may be attractive. I will say that one of the behaviors we’ve seen change with groups is instead of us having to do prospecting and called groups we have people who have been reaching out to us about interest in being a part of pediatrics.

Operator: And, excuse me, next we can go to Tao Qiu with Stifel. Please go ahead.

Tao Qiu: Thank you. Good morning. Could you talk about the expectation in terms of potential impact on either payer mix shift or patient volume from Medicaid with determination that’s expected to start in the second quarter? And how much of that is baked into your guidance?

Charles Lynch: Hey, Tao. It’s Charlie. We haven’t given that a huge priority in our outlook. We tend in all the changes that have occurred whether it was additional support during the pandemic, anything going back a long time ago to some of the rules within the original Affordable Care Act. The nature of the services are affiliated physicians provide for expecting mothers and newborns, virtually I think it completely across a country has a higher eligibility threshold as a percent of poverty for Medicaid eligibility. So that has tended not to create any movement in our Medicaid mix as a part of our payer mix based on those changes. And indeed, we did not see that in any material fashion through the course of the pandemic.

Tao Qiu: Got you. And Ordan you called out the $15 million expected revenue having from R1, what was the level in fourth quarter? Could you kind of give us the cadence of the expectations through the next four quarters on the $15 million?

Mark Ordan: I think Marc referenced that in the fourth quarter. The impact embedded within our results, although it’s difficult to see in the fourth quarter was comparable to what we experienced in the third quarter of last year.

Marc Richards: And if you’re asking about 2023, as Mark said, we just €“ we think that the $15 million drag in 2023 will be largely in the first half of the year and ramp-up €“ and ramp-up as we approach the end of the second quarter, into the third and fourth quarter.

Tao Qiu: Okay, got you. Mostly in the first half. So then when we think about the DSO, when €“ where do you think that might stabilize in 2023 or once the R1 transitions complete? Thank you.

Mark Ordan: We don’t know. We saw positive movement in the DSO from the third and fourth quarter. But it is €“ it is a slow recovery to normal. So we would expect that once again probably waited towards the latter half of 2023 when we see our DSO come back in line.

Marc Richards: And we’ll continue to report on that in the coming quarters.

Tao Qiu: Yes. So when you talk about normal, right, are we talking about kind of pre-pandemic level DSO or do you expect it to be a little bit elevated?

Mark Ordan: Correct. Pre-pandemic level.

Tao Qiu: Okay. Thank you.

Operator: And next we have a follow up from Pito Chickering with Deutsche Bank. Please go ahead.

Pito Chickering: Hey guy’s thanks for taking this follow up. Just a quick one here. Excluding contract labor, what’s your practice dollars and benefits increase in fourth quarter?