Pediatrix Medical Group, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Pediatrics Second Quarter Earnings Conference Call. At this time, your telephone lines are in the listen-only mode. Later, there will be an opportunity for questions and answers with instructions given at that time. If you should require assistance during the conference call, please press star, then zero, and a specialist will assist you offline. And as a reminder, your call today is being recorded. I'll now turn the conference call over to your host, Charles Lynch. Please go ahead.

Thank you, Alan, and good morning, everyone. Welcome to our call. I will quickly read our forward-looking statements before we get into our comments. 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 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. 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. 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. In today's remarks by management, we 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, quarterly reports on Form 10-Q, and our annual report on Form 10-K, and finally on our website at pediatrics.com. With that, I'll turn the call over to our CEO, Dr. Jim Swift.

Thank you, Charlie, and good morning, everyone. Also with me today is Mark Richards, our Chief Financial Officer. Our operating results for the second quarter continue to track very near our expectations. Patient volume trends decelerated somewhat from the first quarter, but remained stable to positive. Within our hospital-based services, NICU days increased year over year, offset by softer volumes in the pediatric ICU and the pediatric floor. We attribute this to a return to normal summer seasonality after a number of years of distortions from COVID and non-seasonal respiratory diagnoses. And we anticipate that volumes in these settings will increase seasonally as we move through the fall and into the winter. On the ambulatory side, our volume growth was driven by maternal fetal medicine and pediatric cardiology. Certain of our ambulatory subspecialties, such as our ENT practices, saw a similar seasonal deceleration in volume growth to what we saw in both the PEDS ICU and the PEDS floor. And similarly, we would anticipate a seasonal re-acceleration in patient traffic as the school year begins. Turning to rate, our reported pricing was quite strong, which largely reflects the progress we've made in improving our revenue cycle operations. Our payer mix was also stable year over year. On the cost side, our practice level compensation and benefits expense reflected a deceleration in underlying salary growth as compared both to the first quarter and the fourth quarter of 2022. Additionally, our G&A expense declined by roughly 5% year over year, reflecting our ability to maintain efficiencies and generate leverage against our revenue growth. Lastly, we generated strong cash flow during the quarter, which allowed us to repay roughly 75 million in borrowings. As you'll see in our press release this morning, based on our second quarter results, we are maintaining our full year outlook for adjusted EBITDA of between 235 and 245 million. Now I'll touch on a number of business and strategic priorities. First, as I mentioned, our second quarter results reflect improved AR collections which in turn reflect the efforts we put forth to staff our front end activities internally. We remain focused on further improvement through the second half of this year. Second on growth, we're working on three fronts. On the sales side, we believe we continue to have great relationships with our existing hospital partners, which we view as our strongest pathway to new contract growth. But we're also focused on new relationships. As a good example of this, we finalized an arrangement with Blythedale Children's Hospital, the only independent specialty children's hospital in New York State, under which pediatrics-affiliated clinicians will provide pediatric hospitalist and intensivist services. We're excited at the opportunity to work with the leadership of Blythedale and to help ensure that patients there receive the highest quality care possible. Within our primary urgent care platform, we're also expanding. In the Houston market, we opened our first de novo pediatrics branded clinic this last fall, and we are scheduled to open an additional de novo clinic during the second half of this year. In both Houston and Orlando, we are actively rebranding our acquired clinics under the pediatrics name. And lastly, during the second half of 2023, we are planning to open three de novo clinics in the Denver market. marking our entry into a third priority market for us. Finally, we haven't completed any acquisitions year to date. We believe there are opportunities in the market, and we anticipate that we may begin committing a modest amount of capital during the second half of the year, focusing in our core service lines. Lastly, I'll comment briefly on the No Surprises Act. As we've discussed at length in the past, our focus has been maintaining strong payer relationships and are predominantly in network status, while at the same time undertaking a comprehensive, thoughtful approach to the arbitration process in those instances where we're in and out of network position. Our success rate in arbitration continues to lead industry averages for providers, and I want to commend our managed care team for this success. Against that backdrop, I'm also pleased to note that we have now been able to reestablish an in-network payer agreement in one of our markets following a period when we were previously out of network. We believe this reflects our ability to work constructively with our payer partners and arrive at a structure that first and foremost benefits our patients, but also represents an economically appropriate level of compensation for for the critical services provided by our affiliated clinicians. With that, I'll turn the call over to Mark Richards.