Pediatrix Medical Group, Inc. (MD) Q2 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the MEDNAX 2011 Second Quarter Earnings Call. [Operator Instructions] And as a reminder, this call is being recorded. I'll now turn the conference over to Vice President, Investor Relations, Bob Kneeley. Please go ahead, sir.

Thanks, Dylan. Good morning, everyone. Thanks for joining our second quarter call. Before I turn the call over to our CEO, Roger Medel, I do want to read our forward-looking statement. Certain statements and information made during this call may contain forward-looking statements. These forward-looking statements are based on assumptions and assessments made by MEDNAX's management in light of their experience and their perception 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 MEDNAX 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, including the sections entitled Risk Factors, which is available on the Investors page of our website, www.mednax.com. With that, our Chief Executive Officer, Dr. Roger Medel.

Thank you, Bob. Good morning, and thanks for joining our conference call today. I am pleased to report another quarter of strong growth at MEDNAX. Our revenue is up by almost 13% year-over-year, largely as a result of acquisitions completed in the past year. We also continue to benefit from same-unit revenue contributions. At 2.7%, same-unit revenue growth was at 2011 second quarter was well within our expected range. More important, our operating income continues to grow at a rate that exceeds revenue growth. With resulting margin expansion that we report this quarter like many quarters is our model at work. Our model that successfully integrates our acquired group practices into the existing administrative infrastructure for both our Pediatrix Medical Group and American Anesthesiology divisions. In fact, the results we reported today speak to the operating strengths of our organization. We remain prudent managers of our operation's infrastructure, adding the resources necessary to support our growth but remaining a very lean organization. This is reflected in general and administrative expense growth of 9% as we achieve low double-digit revenue growth. We also continue to make incremental improvement to the practices that are part of our national group, and that now includes practices within both our Pediatrix Medical Group and American Anesthesiology divisions. With net reimbursement-related growth of 1.8% for the quarter, our results continue to reflect the progress of our comprehensive managed care contracting process. This is a combination of the modest escalators built into our existing contracts with commercial third-party payors as well as the result of our ongoing negotiations with new and renewing managed care contracts. We continue to receive first-year increases and subsequent year escalators that are in line with rates that we've seen for some time now. While it's logical to think that payors will change the approach they've taken with providers, at this time we're seeing no changes in the results from our efforts to achieve reasonable improvements to our managed care contracts. At the end of the day, we have good visibility into our commercial reimbursement. We're also at a time of the year when we have good visibility into government reimbursement. In fact, while there was lot of uncertainty during the last quarter's conference call because several state budgets have not been finalized, I'm pleased to report favorable outcomes in several of our key states as they set physician reimbursement rates for fiscal 2012 Medicaid. I quote specifically to Texas, our largest state, as well as Nevada and South Carolina, because throughout the legislative cycle, they were the ones most likely to impose cuts to reimbursement for physician services. When their budgets were done, we received no cuts in those states. Both Texas and Nevada passed budgets that left physician reimbursement unchanged. South Carolina did impose a 3% cut for most physicians. But importantly for us, they specifically carved obstetricians and neonatologists out of that reduction. One reason for the preservation of neonatal rates in South Carolina was the presentation of the quality improvement efforts made by neonatologists statewide, including many who practice as part of Pediatrix. This is an example of our physicians measuring their outcome, improving quality and working with our government relations resources to advocate for adequate physician reimbursement. It's a reminder of the value of our national group practice and how it brings to physicians providing care in their community. So to summarize, the state budget impact on us of our top 5 states based on annual revenue, Georgia was the only one of those states to reduce Medicaid physician reimbursement for the 2012 fiscal year. While we prefer to see increases rather than reductions, the magnitude of Georgia's cut was slight, only 0.5%. I do believe that the budget cycle for this year was one of the most challenging that the state will face. We are receiving reports that state tax receipts are improving, so that should lift some of the pressure on provider rates and particularly physician rates. Early in this legislative cycle, we were also concerned that states had to deal with holes in their budgets caused by the end of the federal stimulus program and that they would balance their budgets on the backs of physicians. What we found instead is that state after state sought to maintain their physician network to preserve access to care for Medicaid enrollees. The best way to achieve that is by protecting reimbursement for physicians, as we have said repeatedly. I talked this morning about the strength of our operating model. On the surface, physicians caring for patients should be a relatively easy business, but the reality of healthcare services is that it's anything but simple. We have developed a very deliberate, methodical approach to managing our business and to managing the numerous relationships that are key to our success. This approach is also applied to our business development efforts. In our 16 years of acquiring physician group practices with more than 150 Pediatrix division acquisitions completed during that timeframe and 7 American Anesthesiology groups acquired since 2007, we have built a business about in the process that places considerable emphasis on how acquired practices will be integrated and operate as part of our group. Last month, we announced the acquisition of Pinnacle Anesthesia, an anesthesia group practice that staffs 2 hospitals in Southern Palm Beach County just north of our headquarters, as well as several office space physician groups in that area. The clinical and administrative operations of those 15 physicians and 16 nurse anesthetists are being integrated into our American Anesthesiology division, which has now grown to more than 320 anesthesiologists and 430 advanced clinical practitioners. The Pinnacle acquisition brings our clinical operations into Florida's Southern Palm Beach County, a new part of the country for American anesthesiology, but an area that we obviously know very well. In addition to being close to home, this group also practices in communities where our neonatal and other Pediatrix subspecialists provide patient services. As we have done over the course of almost 4 years managing anesthesia practices, we are identifying ways to expand this Palm Beach County practice and to grow our clinical operations in Florida. Our stated intention is to develop American Anesthesiology as a national group practice, and our pipeline suggests that we are well on our way towards making that happen. We continue to work to a strong anesthesia pipeline, and we remain confident that we will complete additional anesthesia group practice acquisitions this year. At the same time, we are seeing opportunities to expand our geographic presence within our Pediatrix clinical operations. Yesterday, we announced the expansion of Pediatrix's neonatal physician network into Oregon with the acquisition of Northwest Newborn Specialists, as well as a one physician maternal-fetal medicine practice in Austin, Texas. Oregon is the 34th state in our national network of physicians. Northwest Newborn is a large, 20-doctor group based in Portland with annual patient volume in excess of 29,000 patients days. Northwest Newborn has a 25-year relationship with its hospital partners and provides services in multiple facilities within 3 Oregon healthcare systems. It's also a practice that have grown by building a culture around clinical quality. Among the numerous reasons for them joining us, one of them is our ability to collect clinical data through our daily set electronic healthcare record, data that is routinely being mined to improve quality in hospitals across the country. In fact, while this is a large physician group by neonatal standards, one of the challenges facing these physicians was the cost of implementing an electronic health record system that would allow them to collect the data that could be used to measure their outcomes and advance their quality efforts. As we meet with other groups across all of our specialties, the clinical and administrative infrastructure that is a part practicing at Pediatrix and American Anesthesiology continues to be an important draw for these practices. For that reason, as well as many others, we continue to be encouraged by our ability to grow through acquisitions. At this time, I'd like to turn the call over to our Chief Financial Officer, Vivian Lopez-Blanco, for a review of our financial results before we open up the call to take your questions. Vivian?

Thanks, Roger. Good morning, everyone, and thanks for joining our call. As Roger said, we're reporting a strong quarter with growth coming from operational improvement, reflecting the strength of our business model. Our revenue for the 3 months ended June 30, 2011, grew by 12.7% from the prior year to $393.4 million. Approximately 80% of our revenue growth came from acquisitions, while the remainder is from same-unit growth, which increased by 2.7% for the 2011 second quarter from the prior year. Same-unit revenue growth included net growth of 1.8% from reimbursement-related factors. This includes continued improvements, in the rates paid by third-party commercial payors, offset by a 20 basis point shift in payor mix to government payors from commercial payors year-over-year. Same-unit revenue growth attributable to patient volume was up 0.9% for the 2011 second quarter and this includes growth from our physician specialties and subspecialties including pediatric cardiology, anesthesia and neonatal, with the exception of maternal-fetal services, which was down slightly. The number of NICU patient days increased by 0.04% for the 2011 second quarter from the prior year period on a same-unit basis, and that growth comes during the period in which the number of births at our hospital, also same unit, was slightly lower. Continuing with the discussion of the income statement, profit after practice expense for the 2011 second quarter was $141.9 million, a 12.3% increase from $126.3 million for the prior-year period. Profit after practice expense margin decreased by 11 basis points, which can be primarily attributed to the impact of expense increases offset by the positive impact of acquisition growth related to acquired group practices. Our operating income was $93.1 million for the 2011 second quarter, which is a 13.4% increase from the prior-year period. Second quarter operating margin improved by 15 basis points year-over-year due to acquisitions-related growth, which drove efficiencies across our operation's infrastructure. General and administrative expenses as a percent of revenue grew by slightly more than 9% for the 2011 second quarter, considerably below the rate of our revenue growth. G&A expenses as a percent of revenue were 37 basis points lower for the 2011 second quarter compared to the prior-year period as a result of our model of acquiring and integrating practices into our existing administrative infrastructure. Net income for the 2011 second quarter was $55.9 million, up 13.3% from $49.4 million for the prior-year period. On a per share basis, earnings grew by approximately 11% to $1.15 for the 2011 second quarter based on a weighted average 48.7 million shares outstanding, and that compares with earnings per share of $1.04 based on the 47.5 million shares for the prior year period. For the first half of 2011, our revenue grew by 13.7%, operating income grew by 15.9%, and net income grew by 15.7%. Revenue for the 6 months ended June 30, 2011, was $775.7 million, an increase of $93.7 million from prior-year 6 months revenue of $682 million. Of this $93.7 million increase, over 77% or approximately $72 million of the revenue growth came from acquisitions, while the remainder is from same-unit growth, which increased by more than $21 million for the first half of 2011. Same-unit revenue for the first half of 2011 grew by 3.2%, which is almost 2/3 of that coming from reimbursement-related factors, which were up 2% net. Through the first half of 2011, we continue to see improvement in reimbursement from third-party commercial payors. Same-unit patient volume increased by 1.2%, with volume growth coming from our same-unit anesthesia, pediatric cardiology and neonatal practices. Operating income grew to $168.8 million for the first half of 2011, up 15.9% from $145.7 million for the first 6 months of 2010. For the first half of 2011, net income grew by 15.7% to $101.4 million, up from $87.6 million for the same period last year. We earned $2.09 based on a weighted average 48.5 million shares outstanding for the first half of 2011, up from $1.85 for the first half of 2010 based on 47.4 million shares outstanding. We ended the second quarter with approximately $24 million of cash on our balance sheet. Accounts receivable were $194 million, which grew slightly since year end, though in line with the growth of our business. Day sales outstanding remained below 45 days for the 2011 second quarter, which is a reflection of our continued strong claims processing systems. At June 30, we had a total of $66 million outstanding on our $350 million revolving credit facility. Coupled with our strong cash flow from operations, this puts us in a solid financial position as we continue to expand our operations by acquiring established physician practices in our specialty. During the 2011 second quarter, we generated strong cash flow from operations of $95 million. This is an improvement from the prior year where we generated over $91 million from operations. Consistent with our historical approach, most of our cash flow from operations is available for investing back into the growth of our business. At this point, I'd like to move to our outlook for the 2011 third quarter, which we announced in this morning's press release. We expect that our earnings per share for the 3 months ending September 30, 2011, will be in a range of $1.15 to $1.20. The range for our 2011 third quarter outlook is determined by anticipated total company same-unit revenue growth for the period, which we estimate to be 2% higher to 4% higher year-over-year. This same-unit growth range assumes combined volume growth across all of our physician specialties. In addition, this rate anticipates variability in the mix of our services reimbursed under commercial and government payor programs, as well as improvement from commercial payor contracts. Also, our third quarter forecast anticipates that same-unit growth will be evenly divided between volume growth and net reimbursement growth. The outlook for our 2011 third quarter also incorporates expected contributions from acquisitions completed as of this morning. In summary, our results for this quarter underscore the effectiveness of our business model as we successfully grow our operations while efficiently integrating acquisitions into our clinical and administrative infrastructure. At this time, I'd like to turn the call back to Roger.

Thank you, Vivian. Now before we open up the call for your questions, I want to bring you up-to-date on some other discussions going on here at MEDNAX. I'm very pleased to announce this morning that I am in the final stages of discussions with our Board of Directors to establish a new 7-year contract as Chief Executive Officer. There are 2 years remaining on my current contract, so this new contract effectively is a 5-year extension or until mid-2018. I am very excited about the opportunities that are available to us as an organization, opportunities to expand our group practice models, to provide value to physicians caring for patients, to change the way medicine is being practiced in this country and elsewhere and to provide excellent care for our patients. It is my hope that this new contract signals both stability of and continuity in the leadership of this organization as we execute our strategy, and I look forward to continuing to drive the growth of our company. With that, operator, let's open up the call for questions.

[Operator Instructions] We'll go to the line of Ryan Daniels with William Blair. Ryan Daniels - William Blair & Company L.L.C.: Roger, I wanted to hit on your prepared comments. You indicated comfort in doing at least one more anesthesia deal this year, and it sounds like the pipeline is fairly robust. I know this is kind of a key topic on the minds of investors, so can you give us a little more color on the size of the pipeline maybe versus a year ago? What type of practices you're diligence-ing on a size basis? And then maybe your comfort level 4 years into the business, if it's grown high enough to potentially accelerate the rate at which you're doing those anesthesia deals?

All right, thanks, Ryan, good morning. We're very excited about this anesthesia opportunity. We see increasing interest from different practices across the country. I know that there were some disappointment in our inability to get practice acquisition performed during the first half of the year. Our strategy has always been to do the right thing and not to do the fast thing. So we just wanted to make sure that we had all the dots -- all the Is dotted and Ts crossed before we completed that acquisition, and we did. And we're happy, and we're excited, and we think that it brings opportunities for us to grow. It also provides us with an opportunity to start to establish a second region, if you will, a second patient accounts region in our Florida office, to expand some of the services that we're able to provide there. So it's a very exciting acquisition for us. I know it's a smaller one, but it's still one that carries, we think, some pretty important same-unit growth opportunities because this is a practice that is growing into some of the surgical facilities within the communities, not just hospitals but freestanding surgical facilities, et cetera. So we're very excited about this practice. Having said that, our pipeline is robust. We do have a number of larger anesthesia potential acquisitions within the pipeline, and my plan calls for completing a couple of more acquisitions before the end of this year. And I'm confident that we will be able to complete 1 and possibly 2 acquisitions within 2011. As we move forward, our management team, Karl and the rest of the management team for American Anesthesiology, just continues to get more and more comfortable with their ability to manage that division for us. And so we do expect to see an acceleration in practice acquisitions during 2012 and beyond. So we think that American Anesthesiology is the way of future growth for us, as we have said from the beginning. Four years ago when we started to talk about this, we think that it provids us with the growth avenue for the next decade for MEDNAX. And so, yes, we're comfortable, and we think we're going to grow the division. Ryan Daniels - William Blair & Company L.L.C.: Okay, that's very helpful color. And then one quick follow-up, just on the guidance. If I look at your range of same-store or same-unit growth expectation, it's a little bit tighter than what we've seen in the past, I think a 200 basis point versus 250 last quarter. Is that just a reflection of more comfort on the pricing front? Or are you actually starting to see more stability across the various markets in regards to birthrates or volume?

I would say both of those things. There is no doubt that we are seeing increasing stability in the birthrates across our regions. And for the first time, we're starting to see it across all regions. As I have said historically, we would see variability from region to region. One region would be up for a month, and the following month, that same region would be down or flat, et cetera. We are seeing, for the first time in a couple of years, stabilization of that and not nearly as much variability as we have seen in the past.

And our next question is from Kevin Fischbeck with Bank of America Merrill Lynch.

This is actually Joanna Gajuk for Kevin. Roger, you talked about EBITDA growing faster than your revenue due to the margin improvement at the recent acquisitions. And the question I have here is, how much do you think the opportunity is still there on the cost side?

Well, as you know, we typically don't quantify that. I think what Roger mentioned and what we agree is that, for example, with moving in some of the anesthesia acquisitions into our Florida region, there's certainly no infrastructure that needs to be expended for that because, last quarter, we did purchase a building of which was in anticipation of the growth that we expect to have really amongst anesthesia as well as amongst all of our specialties. So we're not quantifying that specifically, but we do believe that there will be more of that coming as we certainly continue to basically push down our revenue cycle management processes to some of these newer practices. For example, the Charlotte anesthesia acquisition that we did last year is on track to be moved into our, again, our patient accounts platform later on in the third quarter. And so basically, with that, I think you will see some continued improvement but nothing that we're able to quantify at this point.

And just a follow-up to the commentary on deal outlook. I haven't heard you talking about the Pediatrix deal. So are you still expecting to spend -- to do $100 million of this in this year?

Yes, our guidance was $75 million to $100 million, and we still expect to meet that guidance.

Our next question is from Nicholas Jansen with Raymond James. Nicholas Jansen - Raymond James & Associates, Inc.: Just following up on the margin question. If you think about Raleigh, the big anesthesia deal that you did back in 4Q '08, I know you provided some statistics on Fairfax previously, but I just wanted to get a sense of 2 years into the -- 2-plus years into the deal. How much organic growth has improved? And then kind of talk about the margin within that practice. I'm not sure if you'll break that down, but I think you did so with Fairfax previously.

Yes, Nick, this is Vivian. And again, we do believe -- I mean, specifically, we're not going to talk about the specific margin improvement, but certainly, we have had benefits from our revenue cycle management in Raleigh, as well as just from some contracting there. It is hard to say because they have had some business issues as far as some of the volume there. But specifically, from an administrative point of view, we do believe that Raleigh is similar to our other practices that we have improved the margins due to the operating infrastructure there that we have. Nicholas Jansen - Raymond James & Associates, Inc.: Okay. And then lastly, if you think about kind of the favorable Medicaid update that you just gave, relative to where you were, let's say, entering the year, kind of where did the net Medicaid come in versus, let's say, 6 months ago when you were thinking about all the budgets coming out?

Well, remember that we don't really put in our guidance anything related to positive or negative Medicaid. But obviously, we do believe, as Roger said, having our top 5 states, that other than Georgia with 1/2 point negative, we're certainly in a much better position. And so that's one of the things that we would have had to contemplate into our guidance here in the third and the fourth quarter, which we feel more confident, as I said when I went through our guidance numbers, reflected in what we're expecting for net reimbursement factors. So we are feeling much better about that because we do feel that this year was a very challenging year as it relates to where the states were at, so a lot of our efforts did pay off there, Nick.

We'll go to Brooks O'Neil with Dougherty & Company. Brooks O'Neil - Dougherty & Company LLC: I have a couple of questions I was going to ask you, Roger, about your thoughts on retirement, but clearly you answered that already. I'm curious, I think we've been hearing some things about soft surgical volumes from some of the hospital operators. Is that affecting your anesthesia business at all? And maybe you could just comment, you gave us an extensive review on the Medicaid side, but do you have any thoughts on the outlook for reimbursement for anesthesia on the Medicare side?

Yes. We're not seeing that softness at all. We're on the flip side of that. Maybe it's because of these large practices that we acquire or because of the location of these practices or the services that they provide, but we're not seeing that at all. It's a little early yet for us to talk about Medicare reimbursement. I mean, our initial look at this is that I know that there is some expectation out there for about a 2% increase in anesthesiology reimbursement. I think, for right now, we're just calling it flat. I think the conservative thing to do is just to do that. We'll see as we get more information. There's more that goes into the Medicare reimbursement, the location and office or administrative expenses, et cetera, et cetera. But I think the safe thing to do for the time being is just to call it flat. Brooks O'Neil - Dougherty & Company LLC: Yes, that make sense. And then just one other question. Obviously this quarter, sort of a top line growth in the lower-teens area. I'm guessing part of that was potentially the delay in completing the anesthesia acquisition, but would you comment at all on whether you feel you have kind of the capacity and the appetite to have a bit more robust growth over time, assuming things play out the way you think they might be able to?

Yes, I mean, that's exactly correct. The fact that it took a while to get these acquisitions completed plays a more significant role there. We have structured our infrastructure in such a way to be able to complete acquisitions simultaneously. So there is nothing that holds us back. For example, as you know, we have our Pediatrix division split into 6 different regions. Because each region is run by its own regional president and has its own infrastructure, I can have an acquisition of 20 neonatologists going on in our Pacific region, and it will have no impact on the acquisition that happened simultaneously in Texas because they're 2 different regions, 2 different teams. And so that's the way that we have structured it. Additionally, because of our structure, acquisitions in anesthesia will have no impact as well. And these acquisitions won't have any impact on the anesthesiology acquisitions. So what we are seeing for the future is the potential to grow this anesthesiology division substantially. We think that there is a lot of interest in our specific practice management from anesthesia practices, and we believe that the future will bring some accelerated acquisition opportunities for us. And that is not to say that we're giving up on the Pediatrix division, either. You just saw a very large -- you've been following us, well, since our IPO in 1995, Brooks, and you know that a 20-physician neonatology acquisition from us, a group of guys that is well thought of, that has been established for 20-some years. I mean, these guys take care of half of the babies in the state of Oregon. So I mean this is a well-thought out -- a group that is well-thought of and that, I think, because of -- and that we, of course, have been talking to for 20 years about them coming to join us. So we're very excited. And I think that these acquisitions will send a message to other larger groups out there that perhaps we ought to be having some conversation. So I wouldn't be sitting here telling you I want to sign up for another 7 years if I didn't think this was just a great opportunity for us, and I'm excited about it. Brooks O'Neil - Dougherty & Company LLC: That's good. I could tell you, having covered you since '95, that I couldn't be more excited about continuing to cover you for the next hopefully 7 years.

And our next question is from Rob Mains with Morgan Keegan. Robert Mains - Morgan Keegan & Company, Inc.: Just one question on anesthesiology. When you got into it a few years ago, you said that the business model would kind of evolve as you got into it. Do you have a sense as to where you stand in terms of MEDNAX's ability to both enhance margins and enhance growth for acquired practices, as well as developing sort of the clinical tools that you can offer to neonatologists?

Yes. I think you mean anesthesiologists. But I'd say we're well on our way there. I think that we have demonstrated that we can improve margins. We think that we can bring some of the same value that we bring to our neonatology practices to our anesthesiology practices. We're very confident to that and comfortable, and it's why we're moving forward and hoping to accelerate the speed of our acquisitions. As far as the clinical improvements, those always take longer. We have recently hired our first physician to the management team, who will bring some of his expertise, and part of his job is to evaluate these different tools that are available to anesthesiologists. So he will bring some of that expertise as sort of the top physician manager for our anesthesia division. And he came from one of our practices in North Carolina, and he was the medical leader for those practices. And his name is Eric Mason, and I'm just delighted to have him on board. So I think we're making -- as you know, we tend to gradually make these investments and improve the quality of our management team, and I think we're well on our way to doing that. Robert Mains - Morgan Keegan & Company, Inc.: Okay. And the one follow-up to that, in terms of contracting. How much of the improvement that you think you can ultimately get through your practices is dependent on kind of the information that you get from having a national footprint relative to just your contracting skills that you've learned along the lines from the neonatology business?

I think it's -- obviously, there is some benefit to having that kind of information. The contracting part is just one part of the value that we bring on the revenue cycle management to these practices. A lot of it is making sure the bills get sent out correctly, and they're clean, and they're coded correctly and, then of course, the collections piece, which is also very important. But contracting, having information of reimbursement in other areas of the country does give us the opportunity to have just better access to contracting.

And our next question is from Bill Bonello with RBC.

Yes, just a question, in terms if we continue to hear stories about payors and organizations like the March of Dimes taking initiative to try and reduce the frequency and sort of the scheduled discretionary preterm verse. And in some of the stories, they at least talk about that having an impact on neonatal admits, reducing neonatal admits. And I'm just curious if you're seeing anything different on that front, sort of what your thoughts are.

Well, first of all, let me just say that we agree with, from a clinical standpoint, as a clinician, I agree with the American College of Obstetricians and Gynecologists guidelines for when these elective C-sections should be done. We believe that 39 weeks is the right time for babies to be born. And a lot of the work that our perinatologists are doing across the country is in fact in trying to preserve these pregnancies until they are full-term. So for us, there is no win in having babies that are born electively ahead of time for convenience or whatever. Having said that, the impact of these guidelines is really minimal because they just aren't that many of those going on across the country. I mean, most obstetricians tend to follow the ACOG guideline, and they've been following them for a long time. So we agree with that. We think that, that's exactly how it should be. And I think any impact from that initiative has really been minimal. And if you look at specific units across the country, we just really can't see any kind of significant impact from that.

Okay. And then just a follow-up, somewhat related. You talked about that you really haven't seen any change in your ability to get rate increases after acquiring a practice and get the escalators in place for future years. Is there anything else on the payor front that's changed? I mean, it just -- I know there's a tremendous amount of concern right now about just cost pressure. And I'm just curious if there's anything else we need to be thinking about maybe besides just rates in terms of payor behavior that could be threatening.

Bill, I would say no. I mean, this thing about negotiating with payors is really a everyday bread-and-butter thing for us. It's been going on since the beginning of time. We try to get better rates, and they try to get the rates that they want to get, and it's why we have a very professional team in place that does this contracting for us. But I mean, that's really what it always boils down to is -- these rate conversations that we have with them. And as of this point, we are not seeing any change in our ability. And it takes a lot of conversations, and they demand a lot of explanations as to why we need to have our rate increases. I mean, it's not an easy thing to do, but again, it's the bread-and-butter, blocking-and-tackling everyday kind of issue for us and one that we have a professional team in place that handles that for us.

And our next question comes from Art Henderson with Jefferies. Dana Hambly - Jefferies & Company, Inc.: This is Dana Hambly for Art, this morning. Quick question, Vivian. The payor mix, it was, I think it improved a little bit last quarter, down a little bit this quarter. Is the visibility on that getting any easier? Or should we still think about that in a band of up 1% or -- up or down 1% or 2% every quarter?

We're cautiously optimistic with that because, again, what we had, the favorability in the last quarter, was because we did have a significant increase in the prior quarter, and we had it basically going, moving towards government all through last year, if you compared it to the prior year. And so really, this quarter, we're happy with it because it's basically in line with what our expectations are. And we're hoping that it goes back to the more historical seasonality for MEDNAX, which was basically that. You did see the second quarter was relatively flat, and then cautiously optimistic because in the third quarter you typically did see it spike up somewhat. So both volume, as Roger mentioned, we're continue to see that more stable. And hopefully, the P-mix [ph] will also be somewhat in that range as well. But I use the word caution because I'm not sure yet if it has totally stabilized. But we're happy, certainly, throughout the first 6 months of this year with where we're at with it. Arthur Henderson - Jefferies & Company, Inc.: Okay, understood. And then, Roger, on the American Anesthesiology acquisitions, do you have a sense of what the brand recognition of that is, either regionally or throughout the country? And then maybe related or unrelated? Are you seeing the courtship time decline at all as people become more familiar with the brand?

My ego's not big enough to say that we have brand recognition. I think that the practices that we acquire bring us the -- accrue their many years of service and recognition for what they provide to us. But I don't think that I or anybody at American Anesthesiology brings anything to the table. I think we just sort of feed off of these great practices that are part of it. I know the timing of the acquisitions really -- I mean, I think it is easier to get appointments to go in and have conversations with them because now they know what we're about, now we have something to point to, we have practices that are part of our group. So it's a lot easier to get in and talk with them. Last year, they are and agreed to move forward the process rightfully so takes time, and you got to go through the whole due diligence and everything else. So I wouldn't say that part of it is any different. It certainly is easier to get in and talk to the practice.

[Operator Instructions] We do have a follow-up from the line of Kevin Fishback with Bank of America Merrill Lynch.

Hi, this is Joanna again. In the past, you always gave us birthrate at your hospital clients. Do you have that? And also, can you comment on the fact that, over the past few quarters, you were able to grow faster than the number, and is that still the case? And are you taking market share?

We'll frantically look for the numbers here. If you -- you got them? Okay.

Yes. I mean, we do have the numbers, Joanna. I mean, basically, when we talk about it -- last quarter, we said it was slightly positive, which we were very encouraged about that because we had seen negative birthrates all throughout 2010. This quarter, it went slightly negative in our same-unit. But again, when we look at this, as we've said in the past, because our volume was positive obviously, we look at it in conjunction with what the other metrics are here, which is related to the admit rate and the average length of stay for us. So we see those always moving around. And so for this quarter, we had slightly negative birthrate. We had positive admit rates. We had the length of stay was slightly up as well. So nothing that's outside of the range that we expect in the variability, again, in every quarter. And so we are, like I said before with the prior question, we're encouraged with the birthrate as well as with the P-mix, and hopefully see that coming back to a more stabilized pattern.

Okay. And then on different topic,well maybe first on the related topic. I guess you mentioned that maternal-fetal numbers were down. So can you just give us more color there? And what trends are you seeing?

Yes. I mean, I wouldn't say way down. It's down slightly, slightly down. I personally think that, that is a reflection. This is -- I don't have any data to back this up. I think it's a reflection of the fact that obstetricians, general obstetricians, when they're not as busy, they tend to keep more of the patients that they might normally refer to the maternal-fetal medicine specialist. And I think that as the volume for OBs pick-up. We'll see that volume, again, being referred to the maternal-fetal medicine specialist. But I don't, I'm not terribly worried about that.

All right. And then on, clearly a different topic. Any color you can provide on in terms of what the impact possibly could be from that feed-in negotiations on your business? Would you expect maybe any flow-through from Medicaid cuts that were, I guess, also discussed as possible to be included in any deal here?

Yes. I don't remember seeing anything on Medicaid cuts. I think Medicaid is specifically off the table as far as the bill is concerned. So no, we're not expecting any impact from that.

Yes, I mean, if there is a across-the-board cut, effects Medicaid would not be affected, but I guess if there's any decision from the commission there could be possibly some cuts.

Yes, I think it was related to Medicare that potentially could have a cut, but Medicaid should be exempt the way we understand it right now.

[Operator Instructions]

Okay, if there are no other questions, then I'll just thank everyone for participating this morning and look forward to speaking with you again next quarter. Thank you.

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