Pediatrix Medical Group, Inc. (MD) Q1 2021 Earnings Report, Transcript and Summary

Mark Ordan - Chief Executive Officer Marc Richards - Chief Financial Officer Mack Hinson - President-Pediatrix and Obstetrix Medical Group James Swift - Chief Development Officer Dominic Andreano - Executive Vice President, General Counsel and Secretary John Pepia - Senior Vice President, Chief Accounting Officer Charles Lynch - Senior Vice President, Finance and Strategy

Ladies and gentlemen, thank you for standing by and welcome to the Mednax, First Quarter 2021 Earnings Conference Call. At this time your telephone lines are in a listen-only mode. Later we will have an opportunity for questions-and-answers with instructions given at that time. [Operator Instructions]. As a reminder, your call today is being recorded. I would now turn the conference over to your host, Charles Lynch. Please go ahead, sir.

Thanks operator and good morning everyone to our first quarter earnings call. With me today are Mark Ordan our CEO and Marc Richards our CFO. I’ll quickly read our forward-looking statements and then we’ll get into the call. 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, its quarterly reports on Form 10-Q and its current reports on Form 8-K, including the sections entitled Risk Factors. In today's remarks by management we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly reports on 10-Q and our annual report on Form 10-K. With that, I'll turn the call over to Mark Ordan.

Thanks Charlie and good morning everyone. Along with Charlie, joining me this morning are Marc Richards, Dr. Mack Hinson, Dr. James Swift, Dominic Andreano and John Pepia. My comments this morning will be in three areas: the results we reported this morning, the essence of what we do as a company, and how we are strengthening and reshaping Mednax. I’m quite pleased with our results for the quarter, which were ahead of what we could have foreseen when we talked to you in February. Our patient volume strengthened through the quarter, ramping up through March and into April. I'm sure most of you saw the statistics published by the CDC, which indicated a sharp downturn and a nationwide birth in the fourth quarter of 2020. As you know, we experienced the same trajectory at the end of last year, but to a significantly lesser degree. We believe this reflects the typical profile of the hospitals where we provide neonatality services, which tend to be larger and bigger markets and with extensive labor and delivery services, including robust neonatal ICUs. It may also reflect our geographic footprint, which has a heavier weighting in their two growing states of the markets. With that, going to the first quarter, there’s roughly 400 hospitals that make up our own birth statistics as downward trajectory in births did not continue. Adjusting for the leap year, total births at the hospitals where we provide NICU services were essentially unchanged in Q1, which is better than what we reported in late 2020. Lastly, while it’s too early to make a final call, the improvement in our payor mix so far suggests that the volatility we experienced in November and December could have been more of an anomaly. To give you one quick insight into how this rebound and trends impacted our results, our revenue for the quarter, excluding the Cares money we recorded was over $30 million ahead of our internal expectations, which translated into meaningful year-over-year growth and adjusted EBITDA versus the expectation we shared with you in February that could easily be down versus 2020. Looking ahead to our full year 2021 expectations, we expect that our 2021 adjusted EBITDA will be at or above $220 million; I’ll explain. I said last quarter that we’re looking closely at our 2019 adjusted EBITDA of $265 million before the pandemic as the best available benchmark for how our business is recovering, as well as backing out our estimate that the 2020 impact of the pandemic was roughly $40 million to $50 million. If you look at the first quarter of 2021, our adjusted EBITDA of $45 million is still below the first quarter of 2019 and when we reported – and that's when we also reported $50 million in adjusted EBITDA. And when you exclude the roughly $4 million in contributions from the Cares fund we recorded this quarter, we were roughly 18% below Q1 2019. So, while I'm certainly pleased with our results, it's still clear that we're not back to normal, and in fact that our first quarter results reflect a similar run rate of COVID impact to what we experienced last year. I don't think this should be surprising given the unique nature of the services we provide and the time lag of this COVID impact and since much of our patient volume is based on pregnancies and childbirth timing. Lastly, I’ll add that our operating results for the past two quarters have been unusually volatile, so we're also mindful of the still uncertain nature of outlets where consistently we’ll see things recover. Now, I’ve talked for a couple of quarters about my confidence that we can achieve a run rate of $270 million in adjusted EBITDA once we move past the impact of the COVID-19 pandemic. Our results bolster our confident that we will reach and exceed that run right. But I'm not confident just because we saw better trends over the past couple of months. I'm confident because we continue to push our operating plans and because we are reshaping how we do things here. Our singular focus at Mednax is to reinforce our position as the foremost provider of women's and children's healthcare in the markets we serve, and to do so efficiently and as the best partner we can be to the patients we serve, as well as to the payors and health systems we work with. So let me talk about what we've been focused on and speak to our core pediatrics and obstetrics notables. It's all about the patient. Since Mednax first began caring for mothers and babies in their most challenging times about 40 years ago, the only absolute imperative that our Founder and Board Member Dr. Medel prescribed has been, ‘take great care of the patients.’ Much of my time is spent with our clinicians, hospital partners, prospective partners, and of course with my team, and I can attest to this unwavering commitment. There is an unshakable conviction at Mednax that if we only take great care of the patient, everything else will follow. Now that’s easier said than done. To take the best care of the patients, the mothers, babies and children requires a lot of work and investment. First, we have to recruit and retain the finest physicians and clinicians. Second, to do this we try to provide more support for our affiliated clinicians than anyone else in our field. Third, we are the foremost independent research organization in our field of medicine. Including complex newborn screenings, one in four babies in the U.S. are patients of ours. We have more knowledge and data in these areas than anyone else. And since our care is provided of course at the very local level, we have to provide more support for our affiliated clinician in each market where we are in than anyone else. Finally, we must always lead in our field. For example, one of the most critical and active parts of our organization is our clinical support group. This group, along with our full support team makes sure that we can continue to advance our skill and knowledge for the sake of our patients. In two weeks, as we did even during the depth of the pandemic last year, we will be holding our Annual Medical Directors Meeting where over 2,000 clinicians will actively participate and we’ll learn from research, quality and clinical experts. On top of these areas, we provide systems support, recruiting support and every other kind of help to allow our clinicians to again, ‘take great care of the patient.’ This long winded tour of what we do is what I believe makes us the choice among our nation’s outlets. This is what makes us a leading choice, a partner for great medical care. This is what makes us the leading referral choice of physicians who want their patients to be in our care during their most difficult minutes, days and weeks. I've spoken about our drive to imply our practice data to the dashboards to improve patient access. This has and continues to be of paramount importance to us; the steady drumming [ph]. We want to be certain that a patient who needs care from one of our affiliated physicians gets that care as soon as possible. I'm sure anyone on this called can relate to how a medical appointment process can win or lose loyalty, and we know the business leaders and owners, the affect that this can have on volume. So we're working with all of our practices to help them make scheduling as driven and efficient as we can, making sure their appointments are kept, immediately rescheduling no-show, back filling cancellations, using our scheduling tools to open additional slots, staggering staff outreach and referral management, they are all part of this necessary equation. We've already seen improvement in many practices, particularly in terms of higher percentages of kept appointments and reductions in no-shows. This focus is also helping us to share best practices and create benchmarking capabilities so we can measure how effective our data has on the practice scheduling and every measurable factor beyond just the post-COVID recoveries we have recently seen. We also recently welcomed a new leader in telehealth, to make us – to help make that boulder the truly active part and what we are for our patients. We all know that a physical visit is not only needed or possible and we will make our telehealth process fluid to help our patients and attract new patients. This efficiency and effectiveness is also required for our growth plans. Our sales and business development team has reengineered a focused, market-by-market approach that’s driven by local intelligence and relationships. We've also added resources to this team to make sure that we are highly integrated, not just in identifying and winning new business, but providing services quickly and seamlessly to the partners who put their trust in us, and in pediatric affiliated physicians. In my view, we’ve lacked until now two other major ingredients to propel us forward. First, our patient relationships have not extended past our subspecialty practices. We need to make sure as well as we can that when a patient needs to see a physician in our network, they can do so as quickly and easily as possible. We are moving forward in Pediatric Urgent Care to develop plans for expansion in their business in markets where we have a significant interest and we will expand with our brand name Pediatrics. We believe that providing pediatric primary and urgent care in patient friendly, dedicated clinics will allow us to give patients easier access to the exceptional specials across the organization when they need it, and will also help strengthen our relationships with the communities where we provide services and with our hospital partners. And maybe more significantly, we believe nobody knows how to care for babies, children and mothers like we do and we want to fully extend the types of relationships we currently have. When a mother and child want to find the best primary and urgent care practice, our answer should be and will be, ‘right here with us at Pediatrics.’ Second, our brands Pediatrics and Obstetrics are not widely known. We do believe our hospitals hardly know our name very well and more importantly, they know that they can rely on us for what we can do to their patients. But patients learn about us and count on us at their most challenging times and then they move on. Our perspective practices and clinicians do not only think of who we are and what we provide as they slot their career paths. To address this, and all of our work, we've launched a marketing campaign and it’s obvious the key theme is trust. Our ads are going to be widespread and they are completely authentic. They feature only our own doctors who speak about why people should trust them and trust us. We will continue to reach out to reinforce the very unique importance of pediatrics and obstetrics. In hospitals pediatrics and obstetrics we trust lifesaving, world-class clinicians; our brand will be known for that. I’ll finish this morning where I started. We're working to ensure that Mednax can be the best possible partner to the patients we serve and to the physicians, payers and health systems we work with. All driven by our mission to take great care of the patient, while at the same time taking great care of the business. This isn't always easy, but we have a long track record that working hard is the best solutions when we need to. With that, I'll turn the call over to Marc Richards to provide some more details.

Thanks Mark and good morning everyone. I’ll add some details for our first quarter results, including some of the benchmarking versus 2019 as Mark mentioned, and touch on some of our G&A expectations as we move through the second quarter. Lastly, I'll touch on our financial position as it stands today. Turning to the quarter, at the top line our net revenue grew by $5.5 million or just over 1% year-over-year. We recorded about $8 million in revenue from the Provider Relief Fund established by the Cars Act during the quarter. Overall, same unit revenue increased by 2.5% year-over-year or 3.6% after excluding the additional calendar day in February 2020, with a 2020 leap year. Same unit volumes declined 2.5% year-over-year or 1.4% adjusted for the leap year, compared to a 6.6% year-over-year decline in the 2020 fourth quarter. The table in our press release provides some detail, breaking down our hospital based versus office based patient volumes, and I’ll add a little more color. First, as Mark mentioned, patient volumes improved throughout the quarter, such that we say same unit growth in March across all of our service lines with the exception of PeekYou and pediatric hospitalist services. Second, our NICU days for the quarter as a whole were down slightly more than total births at the hospitals where we provide NICU coverage. This reflects a modest year-over-year decline in average length of stay, partially offset by a year-over-year increase in rate of admission. I know that the rate of admission was area of interest for many of people, following our fourth quarter release. So I’ll point out that in Q1 our admit rate reverted to its historical level after being modestly lower through the latter part of 2020. Lastly, I’d like to address our 2021 volume relative to 2019. Our first quarter same unit volume was down approximately 3% as compared to the same period in 2019 with hospital based volume down to a greater degree than office based volume. We'll continue to look at this two year comparison throughout this year, since it’s likely that comparison to 2020 will not be relevant based on the pandemic related disruptions we experienced last year. On the pricing side, we had a couple of favorable items in addition to our usual records, which has been typically in the 1% to 2% range based on Managed Care and administrative fee revenues. First, the Cares revenue we recorded added a little under 2% to our pricing for us. Second, as we detailed in our press release, our payor mix was 110 basis points favorable, compared to 2020, which added roughly an additional $5 million in revenue or a little more than 1% to pricing growth for the quarter. On the expense side, our practice level salary, wage and benefit expense was up by $2.7 million or about 85 basis points year-over-year. This increase, mostly reflects variable incentive compensation tied to practice level revenues, partially offset by decrease in malpractice expense, which was higher in 2020. Our G&A expense was down nearly $1 million year-over-year, despite incurring approximately $5 million of costs related to transitional services we provided to the buyers of our anesthesia and radiology medical groups. The reimbursement for those expenses is reflected in our investment and other income line items. So there is minimal impact or adjusted EBITDA for those costs to inflate our reported G&A expense. In the near term, although while the radiology PSA arrangement has concluded, we do anticipate that we’ll continue providing services under our anesthesiology PSA at least through the second quarter of this year. So you should expect a similar expense in reimbursement dynamic in the second quarter. We expect to wind down the anesthesiology PSA services sometime after the second quarter, at which point we'll also be able to begin winding down the expenses we’re incurring and move toward that future state expectation for G&A. Again, there may be some period of time when we're still incurring some of those expenses, but not being reimbursed for them. Lastly, our balance sheet reflects our reduced leverage profile and strong liquidity position. We ended the quarter with $270 million in cash and net debt of $730 million, implying leverage just over 3x. With that, now I'll turn the call back over to Mark.

Thanks Marc. I think we are ready to take questions. Charlie.

[Operator Instructions] We’ll first go to the line of Kevin Fischbeck with Bank of America. Go ahead please.

Okay, great thanks. I just wanted to understand a little bit the – you know the way that you're thinking about volumes coming back for the rest of the year. I know you guys talked about COVID having an impact on volume. Just trying to see if you could see that exactly and what you thought about that. And the fact that the volumes in the non-hospital settings are coming back faster, is that a bullish time for births coming back or is that new leases and more this reflection of a competent growing that business as this [inaudible] or understand if that’s a leading indicator or not.

Well Kevin, its Mark. I’ll start by saying that, look I’ve talked about volatility and we've seen in the last two quarters volatility obviously was an upward trend. So we're trying to see where all of this shapes out. As I mentioned, according to the markets we serve and since we tend to be in larger hospitals with level 3 and level 4 NICUs, we think that that helps boost what we do in an otherwise sluggish period. But I'm not making a bullish announcement here, that we don't have a basis to see. We are certainly working with the operating initiatives that we talked about and that are most in our ambulatory practices. We think it will obviously increase the volume and efficiency, so that will have the effect of having them take up a large part of our business. So I would say that we are doing everything we can to maximize our results in unchartered territory. I might ask Mack to comment – Mack Hinson to comment on any thoughts about what we’re seeing in our practices that could help change the mind here.

Yeah, I would agree with Mark. I think the volatility makes it difficult to comment on, definitively on a trend. You know historically the markets we are in, we have been less affected by the total birth rate, because we tended to be in market, the total national birth rate being down, we tended to be in market that were a little more favorable to this. And certainly on the ambulatory side, there is a whole host of work that gets the niche as we discussed before and the ability to see in real time the data about what's happening in our ambulatory practices. I think we’re making it significantly more efficient and we believe that can driver our unique patient volume.

Okay, and then I guess as far as TSA goes, I understand that your kind of talking about for the number, but clearly you mentioned that the reimbursable drop as the year goes on, it may not be one-for-ones, that's how quickly you're cutting costs. So your guidance, I’ve seen its at net zero or is your guidance seeing that there is a drag from that in the back half of the year.

We really don't have guidance out there, but what our ongoing assumption is that as we wind down the TSA there will be a residual cost component that will flow through the remainder of 2021, where we're not collecting fees for some of the restrained costs. The bulk of you know what we have here, aside from human capital is really IT related costs that are under various contracts. So there will be a lag; it's not one-for-one, but its materially in that range.

Yeah, no, the only other thing I would add looking forward, is once we're past TSAs and so a lot of the work that we’ll be doing, while we’re reimbursed for it, it does take a lot of our teams time and attention as it needs to. So I do think that as we move past it, we will find a lot of ways to be much more efficient and I would also say, enable our team to be less distracted by outside interests and to be fully focused on our needs. So I would expect this is going to be a net positive.

Okay, and then just this last one. You mentioned our pipes was down year-over-year. Was that in your view because last year was inflated or how would you think about what you saw this quarter?

Yeah, hi Kevin. This is Mack on. Yeah Kevin, we were – our [inaudible] expense was a little bit above trend in the third quarter last year on a temporary basis. So what we pointed is that you know for this quarter we were generally in trends and that's where we got the tailwind for this quarter; nothing unusual in 2021.

Okay, perfect! Thank you.

One moment please. Our next question will be from A.J. Rice with Credit Suisse, go ahead.

Hi everybody! A couple of quick questions here. The pick-up in the commercial mix, are you ratifying [ph] that basically the people that made decisions to sort of postponed extending families or starting families were tended to be people that were more commercially covered and may be therefore a little more assisted to the economy and therefore you should see it come back. You're going to get that pick up in commercial and that's something that will persist or is there something about this quarter that drove that commercial mix improvement.

Hey, you know what I would say is as I commented A.J. that we now look at the results in the latter part of the fourth quarter. Sales were more of an anomaly, so I would say that the payout what we see, is that the payor mix is more in line with what we've expected before, not that there's a difference a new trend. So I think that so far and still early in the year, the fourth quarter with an anomaly, then we would say that we’re going back to the kind of payor mix that we've experienced in the past.

Okay. Any update on the deal pipeline and acquisitions obviously you leveraged where it is, you’ve got plenty of fire power. I think you spent about $6 million in the first quarter. Is there anything to comment on what you expect for the rest of the year there?

Yeah, actually I might ask Jim to make a – Dr. Swift to make a couple of comments. As I said, we are operating in a more organized fashion I think than ever before with obviously the first time here as we’re all focused in growth is in pediatrics and obstetrics. So we do see a very strong pipeline and I would say a full core press from all of us to make that happen. Jim, you might want to…

Yeah, I think that both on the acquisitive side and on the organic growth side we’ve seen in the first quarter, especially on the organic growth side, an acceleration in terms of contracts signed with our hospital partners. On the acquisitive side, I think we'll see the pipeline vertical right now in the second quarter, we'll have some execution on some of the current priorities, and that will accelerate into the third and fourth quarter. I’m not calling any numbers on this right now and growth in pediatrics and obstetrics was relatively small in 2019 and in 2020. So we do think that’s going to become a more meaningful part of our story going forward.

Okay, and then just last question, I know in the prepared remarks you are saying you expect 2021 adjusted EBITDA to be at or above $220 million. We look back and it looks line in a normal, more normal year, who knows what a normal year is, but you get about 15% to 20% of your earnings in the business in Q1, if you were to apply a mid-point of that, you know you’d probably end up with an EBITDA range given what you reported Q1 more the $245 million range. I know you said something about just given the volatility being conservative, but is there anything specific that you know now, that suggests the trend in the quarters over the course of this year might be different than the normal seasonality. Is there anything back?

Well, A.J. you hit the nail on the head. We looked at this every way we can and it is a very different shade of light. It’s not a normal time and 2020 wasn’t normal. So we can only by our current trend and say, and look and compare that to 2019 and say, not that we are trying to be conservative, but say that we don’t have a basis to project that what we saw in Q1, 2021 is a start of a normal pattern. But as we’ve gone a month into Q2 we see that we would expect – you know I see that for Q2 the consciences seems to be around $50 million to $55 million of EBITDA and we think that’s looking like that’s about right. So $220 million seems like, without providing guidance, it seems like not a conservative number, but a justifiable outlook, as we don't have a reason to think that, yes that the quarters will follow a traditional pattern where we’ve had the volatility we’ve had in the coming off with what we have. So that’s why I wouldn’t be throwing out numbers in the $240 million to $250 million. That seems a bit robust.

Okay, alright. Thanks a lot.

We'll go next to Brian Tanquilut with Jefferies. Go ahead please.

Hi, thanks. Its Jack [inaudible] for Brian. Congrats on a good quarter. I think I just want to piggyback on A.J.’s M&A question here. But more looking at it from a strategy perspective, you know seeing what you did with NightLight, do you think – I guess trying to understand how you're thinking about balancing tuck-ins and smaller acquisitions that you can then kind of take the blueprint and push it over to the organic growth side of the equation versus maybe slightly more sizeable deals given the flexibility you have in the balance sheet now.

Well, we are always open to a more sizeable deal. But we think that there is – the key to our Mednax is to be the best partner in our markets that we possibly can be, and we think that starts with tuck-ins and being able to do things that make our relationships with our hospitals really deeper and more lasting. So that's why our focus is absolutely on that, to make sure that our core businesses is as strong as we can be and we’re being the best possible partner and then we have a position in each of these markets, so that a clinician and physician who’s looking for a place to land, wants us to be with one of our affiliated practices, so that’s our trust there. Now, as we’ve spoken about in the last few quarters, we – it’s sort of a frustration that we take care of mothers and babies and then we wish them well and we know that there's an enormous opportunity in many of our market. We read in Pediatrix and Obstetrix to be able to build that part of our business. So strategically, we think it’s a major plus to be able to be in a combination of primary and urgent care. We think it’s a natural extension of what we do. We simply have more of local knowledge about that than anybody else and we have the best relationships with local hospitals than anybody else. So we think that’s a major strategic advantage. Certainly we could do that in a combination of organic growth and acquisitions, the most important thing is to get it right, is to get the combination of primary and urgent care right, so that we are in great location and facilities that are really welcoming, that are very patient friendly, where we are backed by systems and apps that enable you to make appointments and do the things that we all now have been investing before the pandemic and certainly heightened by the pandemic. This is unscripted, so Jim do you have anything on your mind here.

No just – and we see that primary care piece sitting nicely into our specialties working out, in some specialty areas where again we – that’s more of an intermittent growth in terms of care, to the Primary Care and some Specialty Care, we’ll tie that in to urgent care.

Okay great, no that’s super helpful. I think next one I wanted to touch on, just on that delta between births and NICU days. I appreciate all the color on admission rates and length of stay. I guess you know maybe just looking back to the last quarter, I know you talked about no changes in clinical protocols, I guess with three more months to look back and reflect, any color you can give on that delta you know normalizing and perhaps you know what exactly the anomaly was in Q4?

It’s probably – let me just give a quick point of clarity on that, because I know this was a question last quarter. You know our rate of admission, the percent of deliveries in the hospital there admitted into the NIUC is in the low to mid-teens. And while we discussed you know the rate of admission being down a little bit to the back half of last year, to put that in perspective, in the fourth quarter our rate of admission was down by 30 basis points. It was not an exorbitant difference or any kind of significant quadruple trend, but it did nonetheless impress our NICU days versus births. So I just want to put that into context and on a pure percent basis, it had begun trending upward you know from the second quarter to the third, third quarter to the fourth, but we are still below year-over-year, and we guided in the first quarter here, it appears to be right back on the trend line, a longer and more bigger trend line and was up year-over-year. So I hope that’s a little bit a helpful. I might turn to Mack to talk about protocols and the like, but just from the statistical side that’s what we saw.

Yeah, I don’t think that we can point to any substantive differences on how babies are evaluated and admitted to the NICU. It’s a case by case basis based on best available evidence, base medicines that our clinicians may be giving at that time. So there is certainly nothing we would point to systematically that would be different than our normal course of business.

Okay, great. Thanks.

We’ll next go the line of Pito Chickering with Deutsche Bank. Go ahead please.

Good morning, guys. A nice quarter on an otherwise challenging quarter. A couple questions here; the first one is, it seems a lot of assets of this business are fairly hard to manage, whether its payor mix or QE or to your point patient admission in the NICU or like the stay in the NICU. You know looking at your first quarter guidance you gave us, in February versus what you guys just posted, you know obviously huge inflections there on the mostly driven by the payor mix we are talking about. So I just wanted to see if you can give us some color on, how much visibility and control you guys have on EBITDA or is it more from a macro driven to who shows up into the hospitals.

Well, I think it’s no different than in the past. I think we can look at our core business and trends in our core business, and normally payor mix has a more linier, has a more linier pattern that we’ve seen. So I think again that the last several months saw more volatility than we are accustomed to. As far as it being a difficult business to manage, I don’t what Mack to hit me up with a raise, but yes its – there are a lot of components in what we do, but I do think it tends to be especially in the major markets that we are in. I think it tends to be relatively predictable. Unless we use different tactics and with different tactics in both growth and managing the business with the analytics that we have are the real changes. So I don't think it's – not that it’s so unpredictable. We obviously are subject to the birth rate in the hospitals that we serve, but beyond that I think other than what looks like again the anomaly in the fourth quarter, you know it’s generally predictable. Now, obviously the wildcard is COVID and we have the aspects of our business we are – like in Pediatric Intensive Care and other areas where you know children have been getting sickly as they traditionally do, which is a good thing overall, but not robust for our business. So we'll see how that, of course we’ll see how that comes back. So certainly, you know the pandemic has a lot of varying effects of the health care company. But beyond that, we are trying to just run as steady as we can and with very close contact with our NICU use or ambulatory practices to see how things are shaping up.

Okay, and then as a follow up, as you think about revenues and costs relatively to 2019 levels, can you remind us how much hours of practices increase each year via the contact of the doctors. What is the mix of the payors and doctors on fixed versus variable? That would be great.

Yeah, when you look at that practical, what’s [inaudible] data number on it and probably the largest is the underlying salaries for the clinician at all the practices that are part of Mednax. You know there’s necessarily going to be some inflationary pressure on that, you know clinicians who work within the practice, there is a greater seniority and the link and somewhat offset by physician turnover retirements and the like, but it does have an upward track and call that you know probably in the low single digits. The other component is variable except the compensation, and for pediatric or Mednax as a whole today and we can follow-up in somewhat greater specifics, but that level of compensation expense in that line is significantly above $100 million, and it moves and its tied to practice level and financial results. So that’s where you see us call out pretty consistently in the fourth quarter as we saw revenue constraints and declines, that they were buffered quite a bit by the variable compensation expense. Again, in the first quarter when we did see some return to growth and our specific call out is the Provider Relief Funds you know that we receive, that are practice specific, you know those will also flow through that variable compensation expense. So there is a layer of variability in there and we’ve been trying to call that out.

Okay, and the last question from me, I believe you guys are requesting the second quarter consensus EBITDA numbers. Is it fair to think about 2Q street revenues also directionally in the right way? Just want to make sure that you the models are up, probably prepped with a lot of moving parts here. Thanks so much.

Yeah, I think what we're looking at is, you know a any kind of preliminary basis without being specific, you know it just so happens that we're looking in consensus for Q2 and it looks basically appropriate. We haven’t typically guided to revenues, so I don’t think I’m going to be in a position to comment on the top line right now.

Yeah, I think more than anything what we are trying to do is to be as a transparent as we can be and we just don't want things to run ahead of themselves without analytical basis for it. So we look at – we have a better than expected quarter and the natural tendency would be for people to say well, I want to just see how well we annualize that and look at what you get. And we just don't see the analytical underpinnings for that. As we started into the second quarter, we see that we think we’d be right around that low to mid-50’s number, which happens to be as Charlie said where consensus is falling out. And again, I would still say that it's way too early to think that we're out of the woods, and I'm not saying that to be cumulative. I’m saying that because it’s way too early to say we are out of the woods. So I think that projecting anything meaningful above 220-ish area, to us we don't see the underpinnings. I can't rule it out, but we don't see it. So I don't want to get people ahead of themselves from the results of one quarter and the voluntary.

[Operator Instructions]. And speakers, we have no one else queuing up at this time. You may proceed?

Great! Well, thank you everybody for your support and tuning in this morning. We will keep you posted and stay safe.

Ladies and gentlemen, that will conclude your conference call for today. Thank you for your participation and for using AT&T Event Teleconferencing. You may now disconnect.