Pediatrix Medical Group, Inc. (MD) Q3 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the MEDNAX 2015 Third Quarter Earnings Conference Call. Now, at this time, all participants are in a listen-only mode. As a reminder, today's call is being recorded. Your hosting speaker, Charles Lynch. Please go ahead, sir. Charles W. Lynch - Vice President-Strategy & Investor Relations: Thank you. Good morning, everyone. I'm going to read our forward-looking statements and then I'll turn the call over to Roger and Vivian. 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 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 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 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, our quarterly report on Form 10-Q, or in the Investors section of our website located at mednax.com. With that, I'd like to turn the call over to our CEO, Roger Medel. Roger J. Medel - Chief Executive Officer & Director: Thank you, Charlie. Good morning and thanks for joining our call today to discuss our results for the third quarter of 2015. We had a strong quarter with double-digit growth in revenue and earnings per share despite the loss of almost $16 million in parity revenue compared to last year. This quarter, we generated revenue growth of more than 15%, EBITDA growth of almost 13%, and adjusted EPS growth of more than 14%. During the quarter, our patient volumes continued to grow with NICU days up about 1.2% and growth in anesthesia volumes as well. vRad also continued to perform at or ahead of our expectations in their first full quarter as a part of our company. I am very pleased with their performance since we completed that acquisition in May. We also continued to grow and diversify strategically. During the quarter, we added two very strong anesthesia groups, one based in Tampa and the other one in New Jersey. These marked the eighth and ninth practice acquisitions this year and we continue to see a strong pipeline of future deals. We also acquired a leading third-party receivables company specializing in revenue recovery through eligibility screening and enrollment solutions for hospitals. What's notable about this acquisition is that it's the first that we have completed through one of our portfolio companies. MedData identified Alegis as a business that would be a valuable addition to its set of revenue cycle management services and we worked together to complete this deal. Lastly, we hosted an Investor Day in September and I want to spend some time talking about that. This year marks our 20th anniversary as a public company. Over that time, we've built MEDNAX from a small, single-specialty physician group to a national organization that includes a network of more than 3,200 physicians and spans all 50 states. But this didn't happen overnight. Our growth has been deliberate and strategic. We've also done it at a pace where we could always assure not only that we would generate strong financial returns, but more importantly that we could support our physicians and our hospital partners in taking great care of our patients. Without this, nothing else works. At our Investor Day in New York, we discussed all the pieces of the company that we've built over the years; our clinical services, our operations support, and the additional companies we've added more recently; vRad, MedData and Surgical Directions. All of these companies have joined MEDNAX just in the last year and a half, and we believe they make us very unique in terms of the capabilities we can bring to our customers. This is particularly the case since now we can combine our clinical specialties with additional value programs as a unique, broad based set of solutions for our hospital partners. We also discussed how we've realigned MEDNAX this year. Today, our operating units are aligned along geographic lines, not specialty lines. The reason for this is that in the past, we tended to be very focused on our individual specialties, with operating leadership even down to the local level divided into Pediatrix or American Anesthesiology. Oftentimes, we weren't taking full advantage of all the opportunities that might have existed to provide additional services out of hospitals where we may have only one contract. Under our newly aligned structure, we believe we're well-positioned to have those conversations. This is particularly important now that we've got such a diverse set of services including additional areas such as teleradiology, consulting and revenue cycle management. It's also important because as our hospital partners face their own challenges under healthcare reform, we need them to see us as a true solutions partner, as one MEDNAX. The healthcare industry is only going to get more complex and more challenging as we move forward. We recognize this and all the investments we've made in new technologies, new services, more scale, have been made to position MEDNAX to add true value to the way our physicians and our hospital partners deal with these challenges. With our realigned operating structure now in place, I believe that we are very well-positioned to continue our growth and to help our partners prepare for their own future. Looking towards the end of 2015 and into 2016, our outlook remains strong, and I look forward to what's ahead. With that, let me turn the call over to our CFO, Vivian Lopez-Blanco. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Thanks, Roger. Good morning and thanks for joining our call. I want to give an overview of our operating results for the third quarter, as well as our outlook for the fourth quarter. Overall, I am pleased with our ability to translate our 15% revenue growth into a similar growth in adjusted earnings per share, especially given last year's parity and same unit volume comparisons. I believe this demonstrates our ability to utilize our strength in both operations and capital deployment towards shareholder value, and I'll walk through some of the details of that for the quarter. For the third quarter, our net revenue increased by 15.3% to $722 million. Most of this growth came from recent acquisitions, with our acquisitions of vRad this year and MedData last year contributing more than half of that growth, Anesthesiology practices contributing roughly a third, and neonatology and related pediatric practice acquisitions a little less than 10%. Looking at our same unit metrics, same unit revenue declined by roughly 120 basis points. Excluding the impact of parity in both 2015 and 2014 periods, same unit revenue would have increased by 1.4%. On the volume side, same unit increased by 1.1% against the strong 2.1% comparison last year. Our NICU days were up 1.2% and we continue to see growth in other pediatric services and growth in anesthesia volumes, partially offset by a decline in pediatric cardiology volumes. On the pricing side, we recorded roughly $1.5 million in parity revenue in the quarter or less than $0.01 per share, compared to $17.2 million or $0.05 per share for the same period last year. Excluding the impact of parity from both periods, our net same unit growth from reimbursement related factors was about 30 basis points. Impacting this growth was roughly a 100 basis point shift in mix towards government payors compared to 2014. Our profit after expense for the third quarter was $248 million, up 18% year-over-year. Profit after practice expense margin improved by over 80 basis points, which primarily reflects a favorable impact from the mix of businesses we've acquired in the past year, partially offset by the impact of reduced parity revenue on same unit growth. Our G&A expenses increased by 32% over the prior year and by 140 basis points as a percent of revenue. This increase reflects the mix of acquisitions that we've completed in the past year, particularly our non-practice acquisitions. Excluding those businesses, our G&A expense increased about the same pace as our revenue, even though that revenue growth was impacted by the loss of parity over last year. Overall, our EBITDA increased by 12.5% to $168 million and our EBITDA margin declined slightly to 23.3% from 23.9%, with this margin decline primarily reflecting the impact of lower parity revenue this quarter versus the last year. Finally, our third quarter net income grew by 5.3% to $90.8 million, and diluted earnings per share of $0.97 grew by 12.8% as compared to the prior year period. On a non-GAAP adjusted EPS basis, earnings per share of $1.10 grew by 14.6% over the prior year. For the quarter, weighted average diluted shares were 93.6 million, down about 6.5 million shares from the prior year due primarily to the repurchase activity we undertook during 2014 and the first quarter of 2015. Looking our balance sheet, we had cash and cash equivalents of $61 million at September 30th and accounts receivable were $407 million, an increase of approximately $55 million as compared to December 31. Days sales outstanding were 51.8 at the end of the quarter, up about two days from the end of 2014. Our total outstanding debt under our credit facility was $1.4 billion at September 30th, up from $568 million at the end of 2014, mostly related to acquisitions completed during the first nine months of this year and the share repurchases we executed in the first quarter. As we announced in June, we amended our credit facility increasing it to $1.9 billion from $1.5 billion and with the flexibility to increase it additionally to $2.2 billion. Lastly, during the third quarter, we generated cash flow from operations of $172 million compared to $159 million last year. Moving on to our outlook for the 2015 fourth quarter as we announced in this morning's press release. We expect that our diluted earnings per share for the three months ending December 31 will be in a range of $0.97 to $1.01 and that our adjusted earnings per share will be in a range of $1.10 to $1.14. The range for our fourth quarter outlook assumes anticipated same unit revenue growth will be 2% lower to unchanged year-over-year, including an approximately 2% of favorable impact on pricing from the decrease in parity revenue from the 2014 fourth quarter. Excluding parity revenue from both periods, a non-GAAP measure, our fourth quarter outlook assumes same unit revenue growth will be flat to 2% higher year-over-year. Lastly, included in our fourth quarter is approximately $0.01 per share from Medicaid parity net of the impact from incentive compensation expense and income taxes compared to $0.05 in last year's fourth quarter. Now, I'll turn the call back over to Roger. Roger J. Medel - Chief Executive Officer & Director: Thank you, Vivian. Before going questions, let me just say this. Look, you know who we are. This October marked our 20th anniversary as a publicly traded company, always doing the same thing, taking care of patients. We have articulated the same strategy from day one: Build a national group practice in our specialties. Because we don't like to surprise our shareholders, when we saw that the neonatology deals were going to slow down, we were the first ones to tell you so eight years ago. When we decided to look for a new specialty, we laid out that analysis for you, seven years ago. And when multiples in anesthesia started going up, we told you so two years ago. In spite of all that, we've continue to grow. We just posted double-digit growth in revenue, EBITDA, and earnings per share. The last 20 years have seen a constant instability in the business of healthcare. I remember when HMOs were going to change healthcare services. Then it was managed care. And then, it was capitation. The threat of Hillarycare was around way before Obamacare and may yet come back again. We not only survived, but we strived during that time because we have stuck to our strategy. We understand what business we are in and we understand our specialties very well. I believe there will be opportunities in the future like there always are with change and instability, and I believe we are well-staffed, well-experienced, and well-capitalized to take advantage of those opportunities. With that, let's open up the call for questions.

Thank you. First question is from the line of Ryan Daniels, William Blair. Please go ahead. Ryan S. Daniels - William Blair & Co. LLC: Yeah. Good morning, everyone. Thanks for taking... Roger J. Medel - Chief Executive Officer & Director: Good morning. Ryan S. Daniels - William Blair & Co. LLC: ... the questions. Let me start with one just on pediatric cardiology. I know it's not a huge piece of your sales, but it's a segment that apparently continued to see negative volume where the others are up. So I'm curious if there's anything that you would point to there that's pushing sustained volume declines even as the U.S. birth rate has stabilized over the last year or so. Roger J. Medel - Chief Executive Officer & Director: There's nothing specific that I would point to. I would tell you that a couple of years ago, there was a decrease in reimbursement for cardiac ultrasounds. And that had a significant impact back then. Other than that, there's nothing in specific that I could point to. And that was for both, adult and pediatric... Ryan S. Daniels - William Blair & Co. LLC: Right. Okay. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: And it's not significant dollars, Ryan. It's concentrated in a couple of areas, but it's just not big dollars. Ryan S. Daniels - William Blair & Co. LLC: Okay. So it's not impacting the overall growth? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: No. Ryan S. Daniels - William Blair & Co. LLC: Got it. Okay. And then, I guess as a follow-up just on mix. I know you had a 100 basis point decline year-over-year, and clearly that's something that's completely under your control. So, it's based on who's coming in and what insurance they have. But have you looked into anymore insights on what's going on there, just in regards to certain geographies. Are you surprised, maybe mix hasn't improved with the employment picture and exchanges putting a little bit more people on the commercial front. Any thoughts you might have there as we think about going forward? Thanks. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. So we've spent a lot of time looking at it in the individual regions where we're at. And we do have some specific examples of we know what's happening with some of the payors related to, for example, in one state where we had to hold some applications because we were waiting to get all the credentialing in. And so, we've seen pockets of that. So that's really the bigger driver of that. And there's nothing macro about it. We have seen, in some states where there has been some increases in enrollment on Medicaid, but that's really not a big factor. And we do have some specific payor situations in some of our states. Ryan S. Daniels - William Blair & Co. LLC: Okay. That's helpful. Thank you. I'll hop back in the queue.

And the next question is from the line of Kevin Ellich, Piper Jaffray. Please go ahead. Kevin K. Ellich - Piper Jaffray & Co (Broker): Thanks, and good morning. Thanks for taking the questions. I guess just following-up on the mix shift, Vivian, if we think – what's really pushing that? Is it Medicaid expansion? And even excluding the impact of parity, I think pricing was up about 30 basis points. And just wondering is that kind of the rate of pricing growth we should assume in 2016 once you guys lap parity? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: So as I just mentioned to Ryan, we do have some – when we looked at p mix there, there are some specific drivers in certain states with some of our applications. And other than that, we did see that there's some slight increase in enrollment, not really significant, as well as then on the pricing side, as I've mentioned to you guys before, that is somewhat seasonal because it just depends on execution of the work plan. And so, in any given quarter, you'll see some, really, fluctuations based on the number of contracts that we've gotten renegotiated when they pop up. Kevin K. Ellich - Piper Jaffray & Co (Broker): When you say applications, are you talking about applications for the exchanges, Vivian, or I guess I'm just trying to... Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: I'm saying applications for us to turn in our billing for government programs. Kevin K. Ellich - Piper Jaffray & Co (Broker): Okay. Okay. And then I guess, Roger, just big picture. As you expand further into anesthesia and other specialties, radiology, do you expect the mix to continue to shift more to government pay just naturally? Is that just something we should model in? Roger J. Medel - Chief Executive Officer & Director: Well, I can't predict that. We're certainly not predicting that. I think that the Medicaid shift on the neonatology side is what it is, and we don't predict much more of a move in that direction. On the anesthesia side, there may be some movement in that direction, but you know as the economy improves and jobs get better, I mean we would, like everybody else, expect the tide to turn in the opposite direction. Kevin K. Ellich - Piper Jaffray & Co (Broker): Okay. Great. And then lastly, can you give us some color or update on the M&A environment, your thoughts on doing some bigger deals? Obviously, you guys have done a number of acquisitions and deployed a lot of capital already this year. Do you think you could – will you be able to repeat this next year and do you see the pipeline in that type of shape? Roger J. Medel - Chief Executive Officer & Director: Well, the pipeline, as I said earlier, is very full and we are very happy with where our pipeline is today. We've completed a number of significant deals, two of them in this quarter that were larger deals and so we're very happy with that. Yeah. I mean, I look at my pipeline and there are a number of opportunities there where, if things fall the right way, we could have a big year again next year. Kevin K. Ellich - Piper Jaffray & Co (Broker): Okay. Great. Thank you.

Our next question is from the line of Brooks O'Neil, Dougherty & Co. Please go ahead. Brooks G. O'Neil - Dougherty & Co. LLC: Roger and Vivian. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Hi, Brooks. Roger J. Medel - Chief Executive Officer & Director: Hey, Brooks. Brooks G. O'Neil - Dougherty & Co. LLC: So, I was hoping you mentioned that vRad was off to a great start, maybe you could just give us a few more details there and kind of what your outlook for that business is and how it fits with the rest of the mix? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. So, vRad is performing as we told you guys when we acquired that it was. So they're really doing on the volume side high-single-digits. And so we're happy with the results. As I said also in my commentary, Brooks, on the gross profit side, on the EBITDA side, they are also helping with that given their margin profile as we also said when we acquired them. So really, right now, we're happy with the performance. Brooks G. O'Neil - Dougherty & Co. LLC: That's great. And then I guess I just wanted to ask you. I know I asked you about the ER business at the Investor Day, but subsequent to that, we've seen these announcements of AmSurg trying to buy TeamHealth and the issues – I guess some issues in the hospital business, some issues with Envision. Can you just comment, obviously, with your realigned structure, you're focusing more on trying to serve your hospital patients. How do you view the environment out there today? And any comments would be just much appreciated. Roger J. Medel - Chief Executive Officer & Director: Well, I'm not sure what you just asked me, but... Brooks G. O'Neil - Dougherty & Co. LLC: I'm not either. Roger J. Medel - Chief Executive Officer & Director: Look, we have said from the beginning that there's enough people already taking care of the emergency room, that we don't believe there's a need for us to jump into that business. We would enter the business only as a defensive measure if we were to see or feel the threat that some of our contracts would be taken away if we were not able to provide those services to any of our clients. We have not seen one single instance of that. We have not had one single hospital or client come to us and say, you must do this. And so we like to study our specialties and we like to dig deep into them, and we like to become experts in our specialties. And so what we are continuing to do is continuing to work down the path to become those kinds of experts in anesthesia and starting to go down the path in radiology. We have no plans in the foreseeable future unless something changes and some hospitals come to us and there's the threat of one of our contracts disappearing, we have no plans to go into the emergency room business. As far as the global picture is concerned, I think it was interesting what happened a couple of weeks ago. I don't have any inside knowledge of any that, and I don't really have any comments on it. I just think that that was an interesting development. Brooks G. O'Neil - Dougherty & Co. LLC: It is interesting, but 20 years is a tremendous accomplishment and I'm pretty sure there's going to be 20 more. Roger J. Medel - Chief Executive Officer & Director: I'm looking forward to it. Brooks G. O'Neil - Dougherty & Co. LLC: There you go. Roger J. Medel - Chief Executive Officer & Director: Thank you. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Thanks.

And next question is from the line of Brian Tanquilut, Jefferies. Please go ahead.

Hey good morning, guys. Vivian, just to follow-up on your comments on the payor mix and pricing. So outside of parity and outside of the payor mix shift, as you renew your contracts, are we still getting sort of the typical between, put it 3%, 5% rate increases on a same contract basis? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. I mean, it fluctuates but yeah, it's still in that range.

Okay. Got it. And then G&A ramp for the quarter was pretty, I don't want to say steep, but it was a good chunk and then Alegis obviously kicks in, in Q4. So what were the drivers for the G&A uptick in Q3, and then how should we think about all that with Alegis in Q4? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. And so, again, it's the first full quarter for vRad. And so, as I mentioned to you guys before, Brian, on the portfolio companies, they do have a higher G&A percentage than overall MEDNAX. So that's really the effect you're seeing in there. I don't think really think that Alegis per se is going to move that more because they're smaller. So, I think in this range is where you're going to see it, give or take a few basis points here and there, but I don't think Alegis itself will be able to move the needle. But the other portfolio companies, and again, vRad being in the full quarter, that's it. That's why I wanted to specifically address that if we take those out, MEDNAX per se really – our G&A grew at the same rate, slightly below revenue.

Got it. All right. And then was there any uptick from ICD-10 or any issues related to ICD-10 in the quarter? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: So we are happy to report that we had a very successful rollout of that. And right now, as you would expect, we keep very close tabs on that. And we have a committee here, as I've mentioned before, that is responsible for it and is really meeting daily to look at the progress of that. And right now, I'm happy to say that we have not reported any issues with that. And so we'll see as the cash comes in, right? Roger J. Medel - Chief Executive Officer & Director: We're more worried about how prepared the payors are. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. Yeah, exactly. Roger J. Medel - Chief Executive Officer & Director: (26:48).

Got it. And last question for me. Everyone is talking about cost inflation or wage inflation. And I know you don't employ that many nurses relative to doctors, but what do you see in terms of just wage growth going forward, and then I'll hop out the call? Thank you. Roger J. Medel - Chief Executive Officer & Director: Yeah. We're not seeing anything significant... Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: No. Roger J. Medel - Chief Executive Officer & Director: ... down that road. Our doctors have a bonus plan in place, and we utilize that plan to address the issue of pay raises and those kinds of things. So we're not expecting anything on that front.

All right. Thanks, guys.

And next question is from the line of Ralph Giacobbe, Citi. Please go ahead.

Thanks. Good morning. So, in the recent past there was sort of a thought and hope of economic improvement, and sort of higher birth rates maybe turning the corner and driving better volume. Volumes obviously softened a little bit in total and then we've got sort of the mix shift to Medicaid. So I guess the question is – I mean, do you still sort of have a comfort or a conviction that the other better volume sort of will show through? And then specific for this quarter, can you give us a sense at all of commercial volume if that was sort of up, down, or flat? Roger J. Medel - Chief Executive Officer & Director: Well, when we look at the statistics, we still see that there was an increased number of births going back from 1975 to 1990. And that number has stayed at the 4 million babies per year in a row since 1990 for the past 25 years. And so because half their babies born are boys and half are girls, we expect that. There're an additional half a million women of child-bearing age that are coming into our service area. And so we continue to believe that because of that, because of that statistic, we continue to believe that we will see birth rates growing up. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: But also, honestly, the volumes were good considering last year, if you guys remember, we basically had very high volumes as well. And so we're happy with it.

Okay. And then the commercial volumes in the quarter? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. I mean, again, overall, we saw a mix shift towards government, but again in some places the commercial was actually offsetting that. And so, yes, we're still seeing commercial growth.

Okay. And then ex-parity the guide for 4Q, same-store revenue zero to 2%, can you sort of give us a breakdown on how you see that between price and volume? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Well again, we had some pretty good volumes last year in the fourth quarter. Third and fourth quarter were very good last year. So we do have something baked in there for payor mix, again just because I don't know where that's going to end up, so some in for payor mix and then the rest volume.

Okay. All right. Thank you very much.

And next question is from the line of Kevin Fischbeck, Bank of America Merrill Lynch. Please go ahead.

Yes. Hi. This is actually Joanna Gajuk filling in for Kevin. So I just wanted to go back briefly to the comments around G&A. So when you said the increase is reflective of the business mix, that you now have more non – I guess, practice businesses there. So the idea there is that the labor cost actually is reported in that line rather than SWB because in fact the SWB line was down year-over-year. So that's the way to think about that, kind of the cost structure is changing because of the way of the reporting of labor costs between the two different types of businesses you're in? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. I mean, again it is labor cost, but of course vRad does have some labor cost in their gross profit. The point is that, yeah these companies are smaller and they have a higher percentage of G&A.

Okay. So it's not just labor. You're just talking about the G&A, right? That makes sense, too. All right. And then so second of all, going back to the commentary around acquisitions, so can you give us a flavor for, I guess, the multiples? I know that, Roger, you mentioned that – you told us in the past when you saw the anesthesia multiples growing up or starting to creep up. So has it accelerated. Are you seeing any change or would you expect, I guess, things have changed there if in fact there is a large merger that was also discussed during this call? Would you view it as a sort of benefit to you in a sense that it would remove competitors for anesthesia deals? Any color on that or any view you might have? Thank you. Roger J. Medel - Chief Executive Officer & Director: Well, as I said before multiples have gone up way beyond where we would have liked to have seen them and there are number of practices that are in the market. And as I've said before, if it's just about how much money can I get for my practice and the practice will go to highest bidder will likely not to be the winner of those deals. Now, we continue to do deals as you have seen throughout this year, because there are others who are not just interested in how much they're going to make, but also what's also important is who is going to be my partner. Am I going to get flipped to somebody else three or four years from now. I don't know who I'm going to be working for. Is my hospital happy with who my new partner is going to be. So the number of other considerations that sometimes, and I'll say often, influence where the practice is going. It's not just about the money. But multiples have gone up, there's no doubt about it.

So any color on – of the two competitors with deals merging whether that kind of remove them from the market? Roger J. Medel - Chief Executive Officer & Director: Well, I don't know. I guess if a couple of those came together, that would remove one competitor, but I don't have any insight or any comment on any of that. We're not involved in any of that stuff.

Right. And just lastly though quickly, just coming back to the discussion around payor mix. So is that a way to think about it? You don't see any sort of change, major change in the underlying trend? You're just saying that there's fluctuation because you didn't make it sound like the business mix is changing and that's impacting payor mix. So, is that the way to think about it if there's no really major change in underlying trends, if there's kind of normal fluctuation or was there something that happened this quarter? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Well, like I said Joanna, I mean, there's several factors of it. Some are ours related to payors and application for government and all that. Some of it, we have seen a slight increase in the enrollees in Medicaid programs but again I wouldn't call any of this a trend at this point because the numbers are not significant enough to say that. Again, there's been accumulation of them for what made up the quarter, but yeah, nothing that I would say this is going to be a continuous trend going forward. But we're always very cautious on p mix because we don't really have the underlying factors of it, other than what we can glean out from our own information.

Great. Thank you so much.

Our next question is from the line of Chris Rigg, Susquehanna. Please go ahead.

Good morning. Just wanted to follow-up on an earlier question with regard to labor, what percentage of your direct costs are related to nurses? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: I don't look at that like that, honestly because we look at the clinician line in total. So there's physician cost and there's CRNAs and NMPs and it totally, so I don't really have that.

Okay. And then just on the NICU volumes and Roger's big picture comments on population growth. I mean, when you think about the changes in demographics, should that be in impacting births now, or are we still a year or two away or several years away from when you think this extra half a million or so people really begin to impact the volume side? Roger J. Medel - Chief Executive Officer & Director: Well, we would expect that it's been 25 years. So we would expect that that should happen probably at any point, I suppose. I can't predict as to when that's going to happen, but it's been 25 years so we expect that that would start at some point.

Okay. And then just lastly, obviously, you've done several deals recently and you had the decent size buyback earlier in the year. Just capital priorities at this point. Are you in a deleveraging mode or just you feel comfortable with the leverages and use capital as priorities present themselves, or just any color there would be helpful. Thanks a lot. Roger J. Medel - Chief Executive Officer & Director: Yeah. We're comfortable with where we are. We believe that there will be more opportunities. And, of course, we would rather put our money to work by acquiring practices and generating not only income, but the significant amount of cash flow that comes with these practices. So we'll evaluate where we are at the end of the year and make whatever decisions, if we're going to make any, after the end of the year.

Great. Thank you. Roger J. Medel - Chief Executive Officer & Director: Yeah.

Your next question is from the line of Chad Vanacore, Stifel. Please go ahead. Mr. Vanacore, your line is open. Chad C. Vanacore - Stifel, Nicolaus & Co., Inc.: Okay. Hey, I just wanted to follow-up on Joanna's questions because I'm not sure I got that all. So expense controls in the quarter were good, in particular SWB was better than expected. Have you been doing something that helped you avoid some of the same pitfalls that other staffing companies can have during the quarter? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: I don't know what those pitfalls are, but as we said, our physicians typically have contracts. And so we're not renewing their contracts all the time. And so we haven't really seen. When I look at same unit numbers, honestly, it's not unusual increase there at all. And so we're not seeing those increased costs, I guess, like some other companies are reporting. Chad C. Vanacore - Stifel, Nicolaus & Co., Inc.: Okay. And then just on the acquisition front, would you expect the acquisition pricing to moderate next year, seeing as the other staffing companies seem to be pressured? Roger J. Medel - Chief Executive Officer & Director: Well, we would hope so. Obviously hard to predict, but we do think there is a possibility that prices or multiples will moderate given the recent activity in the sector. Chad C. Vanacore - Stifel, Nicolaus & Co., Inc.: All right. And then have you seen any enhanced cross-selling opportunities since you've had vRad under your belt? Roger J. Medel - Chief Executive Officer & Director: Yeah. I mean, I don't have any specific wins to point to, but we are having significant conversations with some of our hospital partners about helping them, particularly on the Pediatrix side with pediatric services, whether it's pediatric emergency room or pediatric hospital services, et cetera. So we are seeing some movement in that direction. Chad C. Vanacore - Stifel, Nicolaus & Co., Inc.: All right. Then last question for me. I think on the prior call, you had expected payor mix to actually improve in the third quarter from what was maybe a lull in the second quarter. That doesn't seem to have happened. Could that be a function of the mix in new practice acquisitions? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Well, it's really on a same unit basis. And so when we go back, we put it in, so not really. I mean, like I said we've done a lot work on the p mix (39:18) shifts, and we believe it's a specific payor in certain of our states that we've had either the application on the government side, a payor issue, and/or we've seen some slight enrollment increases overall in the states, but that's really as much commentary as I can give you on that based on what we've been able to pull together. Chad C. Vanacore - Stifel, Nicolaus & Co., Inc.: All right. Thanks. That's it for me.

Okay. Next question is from the line of Gary Taylor, JPMorgan. Please go ahead.

Hi. Good morning. Roger J. Medel - Chief Executive Officer & Director: Hey, Gary. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Good morning, Gary.

Hi. Couple of questions. One, I just wanted to make sure I'm very precise about the change in government payor mix. I had a note in my model. One time – when you guys talk about 100 basis point change year-over-year, is that on net or gross same-store Medicaid billing? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: That's on gross.

Okay. And that percentage change in mix that you've called out over the last couple of years, that has always excluded parity impact, so it... Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. Well, I guess not really because it would be all in there, yeah.

Okay. So it has been included. Okay. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yes.

And I know I asked the same question last quarter, but just on payor mix, so that tick-up in Medicaid versus commercial, is that – are you generally seeing that across all service lines and geographies, there's nothing really to call out there? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah, not really.

Okay. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Some states have a lot more improvement in commercial. So, yeah, not really.

Okay. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Not all across the board.

And when I kind of do my back-of-the-envelope on what I think may be a 100 basis point shift in mix year-over-year, I kind of come up with – that's maybe a 5%, 6% earnings headwind year-over-year. Would you be willing to endorse that being in the ballpark or not? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: No. I'll tell you why not, because it just depends on where you're getting that hit, it depends on where – in that state, what the difference is between government and commercial. So that could have a significant impact. And so, for example, this quarter, that 100 basis points really is slightly less than what we would do if we did it all across the board, because some states that are pretty favorable had a more commercial mix, and so it's not a straightforward calculation.

Right, on the payment differential. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yes. Exactly, Gary.

Last question. Roger, maybe this one is for you. I know you don't give forward year guidance or even long-term guidance, but I have had a lot of questions from investors just about, really what does kind of organic growth look like at MEDNAX over the next few years? You've had, obviously, the benefit of parity and now really difficult comps going up against that. So I think almost everyone would argue the reported numbers are probably understated versus what the real go-forward looks like. But if you look kind of the last five years or so before parity, volumes kind of ran 1% to 2% same-store, price kind of ran 2%, it was kind of a 3% to 4% same-store revenue growth story. Is that still a number that makes sense and then the new specialties, cross-selling, contract adds potentially adds to that on a non-same-store but organic basis. Is that a reasonable way to think about this? Roger J. Medel - Chief Executive Officer & Director: Yeah. I mean, I think 3% to 4% makes sense. I think that's an appropriate number to be thinking about. Obviously, we're putting in a lot of initiatives to improve that, to increase it. We think that with the addition of vRad and their focus on organic growth and some other things that we are putting in place, we'd like to see that increase. So, I think that going forward, that same 3% to 4% is a reasonable assumption and our expectation is to try and improve that.

Last question, if I could. So when vRad or even the Anesthesiology segment with some of your sales restructuring, presumably there's some cross-selling there and you'll be able to add some specialties in hospitals where you have existing contracts already. Will you report that out as same-store, or will that be kind of a same-store plus organic and kind of carved out separately, or will you just imagine rolling it all into that same-store revenue that you report? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: So it depends on how it falls out, Gary. I mean, if it's significant enough, we could consider doing non-purchase versus purchase growth, but quite candidly, it hasn't made an impact. But typically, if it's in the same unit you'll see it in there.

Okay. Well, thank you.

Our next question is from the line of Whit Mayo, Robert Baird. Please go ahead. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Hey, thanks. Just a few questions. Roger, a few quarters ago you offered up what I guess I'd call maybe a commitment or belief that you felt like you could grow your earnings double-digit. And just curious, do you still share that view, and Charlie might throw a pencil at you, but just curious what you think about your growth rate. Roger J. Medel - Chief Executive Officer & Director: No. We did it this quarter and we believe we're going to continue to go down that path. We've said it during our conversation in New York last month and we're saying it again. We expect continued double-digit growth. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: And by the way, the fourth quarter forecast also contemplates that. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Right. And so back to just the question on parity, what did you say the headwind in the fourth quarter will be or what you expect to record for parity? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: It'll be slightly or roughly around $0.01. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Okay. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Basically similar to what we did in the third quarter. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Okay. And just remind me the margin on – I'm just trying to make sure I size up sort of what the EBITDA headwind is for the full year. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Well, yeah. So on the top-line basis, roughly you're talking about $52 million difference, right? Because we'll have roughly about $12 million to $13 million of top-line, recorded parity runoff for states that have continued that this year versus roughly around $65 million top-line last year. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): But not all of that $52 million drops to the bottom-line... Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: No, no. So you take half of it for bonus that we typically have. Again, our practice is as you know, we share in the profits of that and then you tax effect that and then you get the difference. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Okay. 50%. And last question I had was just around Alegis, and I just don't have any numbers in my notes around the size of that. Is there any way to potentially size up the revenue with Alegis? Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. I mean, we didn't really specifically point that out. Again, it's a complementary business to the MedData suite of offerings there but we didn't really specifically talk about the numbers. In the MEDNAX world, it's just complementary to their service lines. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Okay. It's worth a shot. Thanks. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. Thanks, Whit.

And next question is from the line of Dana Hambly, Stephens. Please go ahead.

Hey, thanks for the question. And Roger, appreciate the comments at beginning with the long-term big picture outlook. And with that I'm going to ask a question, that's a very short-term focused. Just on the acquisition front with the change in the trading multiples of the public equity guys, I assume at some point that it trickles over into the private equity market, I'm sorry into the private deals. Does this create a period of inertia in the deal activity? And if so, is that a couple of weeks, a couple of months, a couple of quarters, just any idea there? Roger J. Medel - Chief Executive Officer & Director: Well obviously, my crystal ball, it doesn't work that well. But I have to agree that I think along the same lines as you're thinking along. If multiples have gone down, and the private equity deals of course are based on paying a multiple now that will be increased down the path. So I think that it's reasonable to think that there will be some of these that will be sitting on the sideline in a way to see what happens to multiples between now and the end of the year.

Yeah. Is that true of the larger deals, is it maybe not so much true with the smaller deals? Roger J. Medel - Chief Executive Officer & Director: Well, I could see that really across all deal sizes.

Okay. Thanks. Roger J. Medel - Chief Executive Officer & Director: Yeah.

Okay. Our next question is from the line of Nicholas Jansen, Raymond James. Please go ahead. Nicholas M. Jansen - Raymond James & Associates, Inc.: Hey, guys. I just wanted to focus maybe a little bit on utilization management by payors. If I go back to look at the birth data from 2003 to 2007 when you guys were growing NICU volume growth at like 3% to 5% when the birth rate was or the number of births was kind of growing 1% to 2%, now the birth rate is kind of growing 1% to 2%, and your NICU volume growth is kind of growing the same as the birth rate. So, I was just wondering if there's anything different today that payers are doing maybe in managed Medicaid that's resulting in that recovery and NICU volume growth never going to potentially happen. Thanks. Roger J. Medel - Chief Executive Officer & Director: Well, that's not how we think about it. I don't think there's anything special going on today. I think that NICU volumes tend to fluctuate admissions based on the patient population that the hospital is serving, et cetera, et cetera. But no, I don't think there's anything different in NICU admissions today than there was seven or eight years ago. Nicholas M. Jansen - Raymond James & Associates, Inc.: I'll keep it at one. Thanks, guys. Roger J. Medel - Chief Executive Officer & Director: Yeah.

Okay. Next question is from the line of Brian Tanquilut, Jefferies. Please go ahead.

Hey, Vivian just one quick follow-up. We've been getting a lot of e-mails as the call progressed. People are trying to figure out the comment about the application delays on Medicaid. So how exactly does that impact the payor mix if you're submitting the billings to Medicaid? So if you don't mind just giving us more color to clarify that comment. Thank you. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: It's really based on one state, but how that impacts that is because the payor mix is based on billed. And so I had those unbilled, right? And so now I'm billing them and they were government bills. And so that's why it impacts the numbers of that. But it was specifically in one state. It was an isolated situation.

So to follow-up, just so when you file the bills – let's just say State of Tennessee, it's still Medicaid though, right, in your accounting. So maybe I'm not getting it, but I don't get how it changes the payor mix because in your book it should be Medicaid from the get-go. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: It was unbilled. And so it wasn't...

Unbilled. Got it. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: ...included in the payer mix. Yes, right. So then when I bill it, it gets included as bills. Yes.

Okay. Got it. That makes sense. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah.

Thank you so much. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Yeah. You're welcome.

Okay. Now, at this time we have no questions in queue. Roger J. Medel - Chief Executive Officer & Director: Okay. Well, thank you. If there are no more questions, let me thank you for your attendance this morning. I look forward to speaking with you again next quarter. Thanks. Vivian Lopez-Blanco - Chief Financial Officer & Treasurer: Thank you.

Thank you. Ladies and gentlemen, that does conclude your conference. We do thank you for joining while using AT&T Executive Teleconference. You may now disconnect. Have a good day.