Pediatrix Medical Group, Inc. (MD) Q1 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the MEDNAX First Quarter 2013 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to our host, Mr. David Parker, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Lola, and good morning, everyone. Thank you for joining us for our first quarter 2013 earnings results call. Joining me today on the call are Dr. Roger Medel, our CEO; and Vivian Lopez-Blanco, our CFO. 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 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 and its quarterly reports on Form 10-Q, including the section entitled, Risk Factors. With that, I would like to turn the call over to Dr. Roger Medel.

Thank you, David. Good morning, and thanks, all, for joining the call today to discuss our 2013 first quarter results. Our strong results from operations reported this morning for the 2013 first quarter reflect the ongoing progress we're making in expanding our national group practice through our proven strategy that adds value, not only to physicians attracted to practice as part of our national group, but also through our other key stakeholders, including patients, referring physicians, hospital partners and third-party payors. We continue to strategically grow by acquiring well established and well-recognized groups and integrating them in a way that advances our commitment to patient care, while achieving efficiencies through the delivery of administrative services to support our physicians and advance practitioners. In looking at a few highlights, our revenue growth for the first quarter increased by approximately 19% with growth attributable to contributions from recently acquired practices at almost 17%, and the remainder coming from our same-unit results. We also generated solid operating income and net income growth for the first quarter and continued to leverage our infrastructure as we integrated practices into our national group model. We continued our methodical due-diligence process on multiple different group practices in our American Anesthesiology and Pediatrix Medical Group divisions during the first quarter. And as we have recently announced, we're continuing to successfully acquire and integrate physician practices within our specialties. Since the beginning of the second quarter, we have added 1 neonatology practice to our Pediatrix Medical Group division and 1 anesthesia practice to our American Anesthesiology division. In early April, we acquired the Neonatology Associates Limited, NAL, a neonatal physician group practice based in Phoenix, Arizona. NAL is a private practice that consists of over 100 clinicians and administrative support staff, who provide a wide spectrum of services, including neonatal intensive care, labor and delivery and hearing screen services at 27 hospitals throughout Central and Northern Arizona and in Tucson. The practice, which has served the area for more than 40 years, has an annual NICU patient volume of approximately 60,000 days, performs over 37,000 hearing screens annually and represents our largest ever single-practice neonatology acquisition by patient days. NAL has been a leader in neonatal education through conference and training programs, and several of the practices' clinicians have been involved in research programs and clinical trials, which aligns well with our research education and quality-value proposition. In addition, we are already an established provider of a full continuum of care, including neonatology, maternal-fetal, pediatric cardiology, pediatric and OB/GYN hospitalists, developmental pediatric and newborn hearing screen services at locations throughout the State of Arizona. Yesterday, we also announced the acquisition of Gwinnett Anesthesia Service, a physician group practice located in Lawrenceville, Georgia. This practice provides anesthesia services at Gwinnett Medical Center in Lawrenceville and Duluth, as well as at survey centers and other outpatient facilities throughout those metropolitan areas. Gwinnett Anesthesia was founded in 1983 and is a private group practice consisting of 22 anesthesiologists and 59 anesthetists providing anesthesia services across a wide spectrum of subspecialty areas, including obstetrics, cardiology, gynecology, general surgery and orthopedic care, as well as acute and chronic pain management. The practice is the third Georgia-based practice to join American Anesthesiology. As reflected in these recent acquisitions, there continues to be a high level of interest in both our Pediatrix Medical Group and American Anesthesiology national group practices, and we certainly see more opportunities for growth throughout the year across all of our specialties. At the same time, I want to reiterate that our pipeline is as strong as it has ever been, and there is continued escalation of interest in our divisions, representing many growth opportunities for the coming months and years. In addition to our business development efforts, our integration efforts have gone very smoothly as we are successfully integrating the large practices we brought into our American Anesthesiology division at the end of the year, representing in total, nearly 300 physicians, anesthesiology clinicians and support personnel. We see nothing that would suggest that the level of activity we have experienced over the past years will change as the interest level in MEDNAX and our national group model is very high. As we continue to acquire practices across all of our specialties, we will move forward in expanding our national model for American Anesthesiology, which continues to be our primary strategic avenue for future growth. Consistent with our approach over the last 3 decades, we will not deviate from our deliberate approach to due diligence in bringing these practices into our model. And we remain very confident in our targeted $400 million acquisition spend for 2013. The strengths that brings practices to our national model platform has not changed. These include over 30 years of experience that combines stability and practice experience with clinical autonomy, supported by superior back-office systems and driven by research education and quality patient care. That will continue to drive our acquisition pipeline. As an example of my point about the strength of our value proposition and model, we recently completed our National Medical Directors Meeting, which is our largest meeting of the year. It's an annual meeting where our physicians and clinicians and leadership roles come together to share best practices across all of our specialties and benefit from the resources and collaboration that come with our national group model. Our theme this year was facing forward, the future of health care today, which quite frankly, we've been preparing for over the course of the past 30 years with our model and the changes and challenges in health care that we have encountered throughout this time period. I'm proud to say the fact that our physicians authored or participated in over 75 research papers in 2012 along with the coming milestone of our clinical data warehouse achieving its 1 millionth patient in 2013 are truly notable accomplishments for our physician-led national group practice. And they underscore the importance of data and outcomes-based medicine, which will only gain more and more importance in the future of medicine. We also addressed the value on importance of government relations through our practices and the need for our physicians to be involved in driving the future of health care. We have learned that we must put ourselves in a proactive position looking after the well being of the patients and our physician practices. We must also be aware of the changes in health care, and we must have a seat at the table and be able to adapt to changes in the best way possible. These are critical elements in our evolutionary approach to growth and help underscore our stability as a national group practice in this uncertain health care environment. This point presents an opportunity for me to briefly address a few of the current topics in our health care environment that directly apply to MEDNAX. As we expected on January 1, 2013, CMS implemented what we call, the parity rule, which requires states to pay certain physicians Medicaid fees, at least, equal to Medicare payments rates for many primary care services in 2013 and '14. Eligibility for these Medicaid primary care enhanced payments includes all American Board of Medical Specialties recognized subspecialties of Pediatrix. For us, this includes our neonatologists, pediatric hospitalists, pediatric intensivist and pediatric cardiology physicians. At the progress report at the beginning of the year, we set up an internal multidiscipline parity rule workgroup that is working closely with our practices and our states to ensure that we are following the process outlined by CMS and each state to implement this rule and achieve the desired outcome of improved access to care for Medicaid patients. We anticipate our patients will have more Medicaid providers available to them because of this rule. States were expected to submit state plan amendments by March 31, and we know that many have. CMS then has to approve, disapprove or request additional information on these state plans, a process that is expected to continue over the next few months. Some questions remain unanswered, including whether certain services under state-specific programs are eligible for the enhanced payments and the timing of when all parity rule payments will commence. The parity rule will have a positive impact on our patients, our practices and our physicians. And it sends the right message that payments for kids should be, at least, equal to those for adults. In summary though, given the uncertainty surrounding the timing and frequency of any payments, we cannot predict with any assurance the timing impact of that rule on us. We will continue to keep you updated as it applies to MEDNAX. Lastly, on a related note, we're also at a time of the year when we start to have good visibility into government reimbursement at our state Medicaid level. While several state budgets have not yet been finalized, as we look at our top 5 states, I am pleased to report that at this point in the budget cycle, we expect no cuts to Medicaid physician reimbursement in these states for the 2014 fiscal year. As with the basis behind the Medicaid to Medicare parity rule, we believe state after state seeks to maintain their physician network to preserve access to care for Medicaid enrollees. These states understand that the best way to achieve that is by protecting reimbursement for physicians. The game has changed for health care. Regardless of the Affordable Care Act and what comes with it, we are moving into a new era in how the United States health care system is organized and funded. So we're going to have to be prepared to address it. Our objective is to be actively involved, utilize our strong government affairs platform to ensure we have a seat at the table and pursue fair and reasonable initiatives that focus on quality access to care education and clinical research, all in the name of improving patient care and taking great care of our patients. We believe these are the cornerstones of our successful national medical group model. At this time, I'll turn the call over to our Chief Financial Officer, Vivian Lopez-Blanco, for our review of our first quarter 2013 financial results before we open the call to take your questions. Vivian?

Thanks, Roger. Good morning, and thanks for joining our call. As we highlighted in our press release this morning, our results for the first quarter 2013 reflect solid earnings growth as a result of strong revenue growth, primarily driven by acquisitions over the last year. Net patient service revenue for the 3 months ended March 31, 2013, increased by 19% to $502.7 million from $422.6 million for the comparable prior year period. Our revenue growth, attributable to contribution from recently acquired practices, was 16.8% while same unit revenue grew by 2.2% when compared to the prior year period. Of this 2.2%, same unit growth -- of this 2.2% same unit growth revenue attributable to net reimbursement related factors grew by 2% while volume grew by 0.2%. Our same unit revenue growth from net reimbursement-related factors was principally due to continued modest improvement in reimbursements received from third-party commercial payors as a result of the company's ongoing contract renewal processes, partially offset by a shift in payor mix to government payors from commercial payors year-over-year. The percentage of services reimbursed under government programs increased by approximately 140 basis points during the 2013 first quarter compared to the prior year period. On a sequential basis, same unit payor mix remained unchanged. Same unit growth attributable to patient volume was driven by growth in our other pediatric physician services, primarily newborn nursery and pediatric intensive care services, as well as anesthesia services, partially offset by a decline in our office-based pediatric cardiology services. Volume in our neonatology and maternal-fetal medicine services was essentially flat for the quarter. When excluding the additional calendar date in February for the 2012 leap year, the increase in same unit net patient service revenue was 3.2% for the 3 months ended March 31, 2013, with same unit volume growth adjusted to 1.2%. For the 2013 first quarter, same unit neonatal intensive care NICU patient days and births at our hospital were essentially flat when compared to the prior year period, or up 1% to when adjusted to exclude the leap year impact of the extra day in the 2012 first quarter. Our profit after practice expense for the 2013 first quarter was $154 million, up 15.5% from $133.4 million for the prior year period. Profit after practice expense margin decreased by 92 basis points, which can be attributed primarily to higher practice salary and benefits and also supply costs to support the practice operations, as well as the variability in margins due to the mix of practices acquired since January 2012. We generated operating income of $91.6 million for the 2013 first quarter, an increase of 15.3% from $79.4 million for the prior year period. General and administrative expenses grew by 13.8% to $53.3 million for the 2013 first quarter, a growth rate that is considerably lower than the rate of revenue growth. As a percentage of revenue, G&A expenses decreased by 48 basis points during the 2013 first quarter to 10.6% compared to 11.1% for the prior year period. Depreciation and amortization expense for the 2013 first quarter increased to 1.8% of revenue from 1.7% for the prior year period, primarily due to the amortization of intangible assets related to acquisitions. Net income for the 2013 first quarter was $55.4 million, up 14.5% from $48.4 million for the 2012 period. Our diluted earnings per share increased by 12.2% for the 2013 first quarter to $1.10 based on a weighted average 50.4 million shares outstanding, which compares with diluted earnings per share of $0.98 based on a weighted average 49.4 million shares outstanding for the 2012 first quarter. Looking at our balance sheet. We had cash and cash equivalents of $34.4 million at March 31, 2013. Accounts receivable at March 31, 2013, were $263.8 million, an increase of approximately $60 million as compared to December 31, 2012. The growth of our accounts receivable is related to recently acquired practices. Day sales outstanding improved by over 1 day to approximately 47 days for the 2013 first quarter as compared to the fourth quarter of 2012, primarily as a result of improvement at our existing units, as well as the continued integration of our recent acquisitions. The total amount outstanding on our $800 million revolving credit facility was $184 million, an increase of $40 million from $144 million outstanding at December 31, 2012. During the 2013 first quarter, we used $18.4 million of cash to fund our operations. As a reminder, we used cash to fund our operations during the first quarter as we do every year, as we make performance-based incentive compensation payments principally to our physicians. We also had our normal 401(k) matching contribution payments in the first quarter. Moving on to our outlook for the 2013 second quarter as we announced in this morning's press release. We expect that our earnings per share for the 3 months ending June 30, 2013, will be in a range of $1.32 to $1.37. The range for our 2013 second quarter outlook assumes anticipated same unit revenue growth for the period, which we estimate to be 1.5% higher to 3.5% higher year-over-year on a total same unit basis. This same unit growth forecast is expected to be divided evenly between patient volume assuming growth across all MEDNAX physician specialties and net reimbursement growth, including improvement from commercial payor contracts offset by variability in the mix of services reimbursed under government payor programs. As a reminder, we have experienced increases in the percentage of patient services being reimbursed under government payor programs in recent periods. Regarding the Medicaid parity rule, we do expect this rule to have a positive impact on our practices. However, our 2013 second quarter forecast does not include the benefit of parity payment given the uncertainty surrounding the timing and frequency of any payments. Now, I'll turn the call back over to Roger.

Thank you. Operator, let's go ahead and turn -- and open up the call for questions, please.

[Operator Instructions] First, we'll go to the line of Kevin Ellich with Piper Jaffray.

First of all, the same unit volumes, NICU especially, looked like it was basically flat this quarter. Adjusted for the day, it was about, up about 1%. Roger, could you provide a little bit color as to what trends you're seeing?

Well, we did see during the beginning of the quarter some increased volumes. And so we were kind of excited about that. And then as the quarter progressed, that increase in volume dried up, and so we ended up with what you saw. So basically for the first, probably half, if not a little more than that of the quarter, the volumes were trending up nicely. And then they just went the opposite direction.

Have you seen any rebound since the end of the quarter?

Yes. Well, I can't really talk about that at this point.

Okay, okay. And then more of a big-picture question, with the advent of ACOs in integrated care, it seems like there's a bit of a showdown between physicians being employed by hospitals and managed care companies and then large national group practices like yourself. How do you think this is all going to play out over the next 3 to 5 years?

Yes. Well, we've seen a lot of this in the past. And one of our advantages is we have a pretty national look at what's going on in many different states and with many different hospitals. And so we're trying different things. We have hospitals in Georgia that are trying to do some things, and we're negotiating with them to help them. And we've got hospitals elsewhere that are doing other things. And so we're kind of getting a pretty good look at what the possibilities are. I'll tell you, obviously, I don't know how things are going to turn out. But I do see physicians that we speak with, very few of them, working for a hospital would be their first choice. That's a trend that we see across the country. So for us, as we look at what the options are going to be for physicians, I think standalone physician practices will continue to diminish the number of them. And I think that the options will be, either go work for a large group like ours, go work for a university or go work for a hospital. And like I say, every single group that we speak with, working for a hospital is just not their first choice.

And is it -- do you think that's because of the specialties that you're in, being neonatal and anesthesia? Or is it just -- is there something else?

Well, I think definitely the hospital-based guys, whether it's emergency room or pathology or whatever, are in that bucket that they really don't think they want to go work for hospitals. So I think that as hospitals look to acquire office-based practices, they're really looking for referrals. And so that might be a little bit different. But in general terms, I think obviously, we deal mostly with hospital-based physicians. So that's our experience, but I think the office-based physicians probably are not too far from that either.

And next we'll go to the line of Ryan Daniels with William Blair. Ryan Daniels - William Blair & Company L.L.C., Research Division: Vivian, let me start with one for you with just in regards to the Medicaid parity. How do you contemplate starting to recognize that revenue? So if you have a handful of states starting to pay at the new rates in Q2, will you only recognize it in those states and then wait for the others? Or once you start seeing some of the cash flows come through, will you kind of take those rates and apply it across the entire book of business for revenue recognition?

Ryan, so considering that based on the parity work group that Roger mentioned, we have seen some disparities in how the states are applying this rule. So I can't really tell you that I think I could use one state as -- or a couple of states as the barometer for the rest of them until we have more clarity on it. Right now, most of the states have filed their applications, but they haven't received the acceptance from CMS. And so I think that there's still a lot of uncertainty surrounding how the states are going to implement that. So I don't see myself applying the rule from a couple of states to all of them, but this is an evolving process. And our workgroup meets every week, and we get an update on how the states are planning to do it. But right now, there's still just not a lot of clarity on that. Ryan Daniels - William Blair & Company L.L.C., Research Division: Okay. And when you -- do you talk about disparity? Is that in regards to that they're going to qualify your physicians, or is it more on the timing and level of payments?

It's on the timing and level. There's no question, as Roger said in his notes, that neonatologists are included. It's more about the programs and about California with the conversion of C codes, et cetera. Those types of things that are, frankly, noise, surrounding it. But again it impacts the timing of the payments. Ryan Daniels - William Blair & Company L.L.C., Research Division: Okay, but just to be clear, so I understand this. If you do get payments in the quarter, you'll at least recognize that revenue in those states. So we might see this kind of trickle through the entire year with kind of gradual pricing benefits in a bit of a step-function basis as opposed to all at once, that's the right way to think about it?

Yes, that's right because I would have to recognize those on a cash basis as you could imagine. So yes, for sure, I'd have to recognize the ones that we've received, absolutely.

And next we'll go to the line of Brooks O'Neil with Dougherty & Company. Ashwini Birla - Dougherty & Company LLC, Research Division: This is Ash Birla for Brooks. I have another question on parity. And I know you guys must be bored on listening to parity questions. I know you talked about you will get the benefit. But have you ever quantified that, how much would that be for this year, and perhaps, next year?

No, we have not quantified that. And again, because there's uncertainty surrounding some of the programs. And like I said with Ryan on the phone, the California D Code conversion and things like that. So we have to have more clarity surrounding that to be able to give a range that makes sense. Ashwini Birla - Dougherty & Company LLC, Research Division: Sure. And, Vivian, can I ask you about, we have been hearing about low, slow and surgical volumes from hospitals. Has there ever been any impact on anesthesia side of the business at all?

Yes. Well, our anesthesia business, as we mentioned, is one that still had positive volumes. I'm quite aware of what the hospitals are reporting. And I think sometimes the only explanation I have for that is again, we're still in a relatively small number of hospitals as it relates to some of these hospital systems that are reporting in areas that are pretty good demographic areas with a pretty good payor mix, et cetera, and very high acuity centers. So I don't know if that really impacts it, but I do believe it probably does, because again our anesthesia volume was positive for the quarter.

I also think some of that may be impacted by the fact that hospitals are reporting hospital volumes. And a lot of the work that we're doing is in surgical centers, so some are freestanding. And so some of that -- some of what the hospitals may have seen, may have been a shift from out of the hospital to AFC.

; Next we'll go to the line of Rob Mains with Stifel. Robert M. Mains - Stifel, Nicolaus & Co., Inc., Research Division: Obligatory parity question. Have any -- are you aware of any of your states that are not seeking to get the payment?

Well, we don't believe they're not seeking, but there are a few states that have not applied yet. They haven't done -- gone through the access station [ph] enrollment process as it's called, but not because we believe that they're not going to do it. Robert M. Mains - Stifel, Nicolaus & Co., Inc., Research Division: So that March 31 isn't a drop-dead date?

Yes, I've asked that question many times in that parity meeting. And we believe it's not. We believe that CMS will probably continue to accept these. But I can't be certain of that, but that's what we think because they do want to get this program going. Robert M. Mains - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So at this point, you're assuming that you'll get some level of payment in all states?

Yes, in the state -- yes, that it would be quantified, yes, absolutely. Robert M. Mains - Stifel, Nicolaus & Co., Inc., Research Division: Then just a pricing question. Sequestration started on the first, and it sounds like you're saying that you're not particularly worried about pricing getting affected significantly across the business. Do you have any commercial contracts that are based on Medicare rates that took a hit as well on April 1?

Well, we would have some. But again, it's not material for us, and it primarily, as you would imagine, applies on the anesthesia side of the house. So we just don't believe that, that's going to be a material number for us.

And next we'll go to the line of Darren Lehrich with Deutsche Bank.

This is Dana Nentin in for Darren. Just on length of stay trends in Q1, have you been seeing any changes at all in length of stay?

No. We continue to be within our historical ranges.

Okay, great. And then just to clarify, across the 34 states that you're in, have you seen any parity payments so far...

Just one very small in Michigan, just a very small amount of money in Michigan is all we've received from parity so far.

Next, we'll go to the line of Matt Weight with Feltl and Company.

Roger, again back to the NICU volumes. You made the comment that they're strong in the first half. Was there anything that you can discuss in terms of maybe geographic regions? I know in the past, Texas has been strong. Anything you can share from -- in that light?

No. We did see it pretty much across the country. And again, we see -- we continue to see increases in one state during 1 month and decreases in the following month. So there wasn't a specific geographical area that I could point to and say there was weakness here or there.

Okay. And then one for Vivian. Salaries and benefits, I think as a percent of revenues, was up about 110 basis points year-on-year, which was pretty much in line. Assuming no other anesthesia acquisitions that could pressure that, is that kind of a good run rate to look at over the course of the year?

Yes, now remember that in the first quarter we have the higher taxes because people are qualifying for the Social Security cap there. And so typically, the first quarter is higher than the rest of the year.

Well, yes, I understand on the absolute, just kind of looking at the year-over-year increase that could probably be 100 basis points up or down -- up. Is that a good run rate, I guess, is where I was going with it?

Yes. I mean, we typically haven't seen -- we didn't see any other anomaly in the first quarter as it relates to -- the salary increase was in line with what it is and as well as the other benefits, nothing that stood out. So for the rest of the quarter barring -- I mean, the rest of the quarters for the year barring the first quarter phenomena, that should be a good run rate versus anything that would -- we'd have to account for because of the acquisitions, needless to say.

And next we'll go to the line of Brian Zimmerman with Goldman Sachs.

It looks like your acquired revenues for the quarter were around $70 million. And I know you've done some additional acquisitions this year. How should we be thinking about acquired revenues for the remaining -- remainder of the year? Is $70 million a good run rate number?

Well, as you know, we don't really comment much on that. But basically, what I've told people when I meet with them is that for the last couple of years, you basically had about 75% to 80%. This quarter was a little bit higher of acquired revenues on our total revenue base. But we don't give really specifics on that, other than just that general note. Because as you know, Brian, that's going to get impacted by the timing of these acquisitions, and then certainly, the anesthesia ones that have an ability to move the needle more because they're larger acquisitions.

Okay. And then my second question is from the second quarter, you've taken up your same unit revenue growth estimates to 1.5% to 3.5%. Can you comment on what you're seeing that led to this increase from the 1% to 3% that you highlighted in the first quarter?

Yes, I mean, there is some seasonality in that. Again, we believe that some of the volumes we're hoping will be coming back even though we are comping against a pretty good quarter last year. But also the pricing impact, which we continue to believe, will be pretty favorable.

And the last question will be a follow-up from Kevin Ellich with Piper Jaffray.

So just to clarify that last point, Vivian. Are you expecting about 2% price growth for the remainder of the year?

Well, again, as you know, based on what I said, we kind of divide it half and half. So it does fluctuate, as you know, from quarter to quarter. But basically, that could end up being that way or could be slightly less, slightly more. I mean if you go back to what we did last year, we had 3.2% with about 2% being volume but about 1.3% being rate. Year before that, it was more rate driven. So within a range, Kevin, that'll fluctuate, but 2% is not a bad number. It could be 1.5%, but it's the best estimate at the time.

Okay, got it. That's helpful, and then just going back to anesthesia. Wondering if you could break out what percent of the case volume that you guys see comes from hospitals versus outpatient surgery centers?

Yes. I mean, we haven't really broken that out yet. That's something that we could -- we've been talking about, trying to put one of those metrics in our 5-year selected information. But we haven't really disclosed that yet.

Okay. And then on acquisitions, Roger, has the view changed at all? Do you still plan to spend, at least, $400 million on deals this year?

Yes. No, I haven't changed at all. I'm very encouraged by what we see. We have always said that we want to get the right deals done. And it's not about doing them fast, it's about doing them right, and we're not going to pull the trigger on any of these deals until we feel comfortable that we have the deal in place that we want and -- but I'm very comfortable that this year, we'll spend what we guided you towards.

Okay. And then with the NAL deal that we saw earlier this year, are you seeing any other sizable neonatal deals out there? And, I mean, has your appetite for doing a big kind of transformation of deal changed at all?

As a matter fact, we are. We -- NAL is a very well-known group of neonatologists that we have been courting for, I'll say, 20 years. Yes, and so we know them well. We competed with them for many, many years. Throughout Arizona, they're well respected. They have put together some, as I said, research and education programs. And it's just a matter of the timing being right, and we believe that there are other deals like that, that we'll get done. But hopefully, it won't take 20 years to get it done. But we are speaking with a couple of other larger groups that we've been talking to for years as well.

And since you mentioned the larger deals, would you say that the $400 million you plan to spend, at least, is could you break out, I guess, the split between neonatal and anesthesia? Or do you still think it's going to be more weighted to anesthesia this year?

No. Definitely more weighted towards anesthesia. I mean there are a lot more anesthesia deals to be done than core. Operator, with that, we'll go ahead and conclude the call, please.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.