Pediatrix Medical Group, Inc. (MD) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the MEDNAX, Inc. Business Update Call. [Operator Instructions] And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to Mr. Charles Lynch. Please go ahead.

Thank you, Cynthia. Good morning, everyone, and thanks for joining our call today. A couple of administrative notes as we begin. We have provided a slide presentation that's available on our website at mednax.com in the Investors section, and we'll be reviewing that today. With me today are Dr. Roger Medel, our Chief Executive Officer; Stephen Farber, our Chief Financial Officer; Dr. Mack Hinson, President of Pediatrix/Obstetrix Medical Groups; and Nikos Nikolopoulos, our Chief Growth and Strategy Officer. I'll briefly 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. With that, I'll turn the call over to Roger Medel.

Thank you, Charlie. Good morning, and thanks for joining our call. I'm very excited to discuss the significant steps we announced this morning to continue the transformation of our organization. These steps will enable us to dedicate all of our focus and resources on the business we've been in for over 4 decades, which is taking great care of mothers and children through our Pediatrix/Obstetrix Medical Group. With the approval of our Board of Directors, we announced this morning that we will pursue strategic alternatives for our radiology medical group, MEDNAX Radiology Solutions, and expect to sell this organization via a thorough robust process. We first invested in the radiology field in 2015 through the acquisition of vRad, a powerful and innovative teleradiology platform. Following that investment, we began talking with hospital-based practices and completed our first acquisition in 2017. Today, MEDNAX Radiology Solutions includes more than 800 physicians comprising both hospital-based physicians and teleradiologists. Prior to the onset of the COVID-19 pandemic, we have been in advanced discussions with certain parties about a potential transaction. We needed to halt those discussions as a result of this unprecedented crisis. But today, we are announcing that we will move forward and pursue a sale of our radiology organization. This decision follows the meaningful steps we have already taken, including the sale of MedData in 2019; and, in May of this year, the sale of American Anesthesiology to North American Partners in Anesthesiology (sic) [ North American Partners in Anesthesia ]. As a result, our decision to pursue a sale of MEDNAX Radiology Solutions marks a full return of our organization to our roots. Since its founding in 1979, Pediatrix has been a leader in neonatal care, growing from a single practice in South Florida to, today, caring for 1/4 of all the newborns in America's neonatal intensive care units. In fact, based on the diversification of our business over the years into many service lines today, clinicians across our organization provide services to over 1 million babies a year. Many of you may remember the last time we were named Pediatrix in 2007, but today's organization is quite a bit different than we were back then. We are larger, more diversified and more closely aligned with our hospital partners. And similarly, the opportunities for us to grow are significantly greater than they were a decade ago. So the real purpose of today's call is to reintroduce you to Pediatrix Medical Group. Along with the press release we issued this morning, we provided a slide deck available through our website that we hope will help you with this reintroduction. In addition, along with Stephen and Charlie, joining me on today's call is Dr. Mack Hinson, President of Pediatrix/Obstetrix. As you may recall, we announced last summer, that we created a role of President for our women's and children's organization in order to have a focused leadership team as well as a dedicated operations support structure for Pediatrix/Obstetrix. Since assuming that role, Mack has taken aggressive steps to position these medical groups for operational success and for growth. He is a neonatologist, who has been with our company for more than 15 years, and has taken on increasingly senior leadership roles throughout his time here. Also joining me today is Nikos Nikolopoulos, our Chief Growth and Strategy Officer. Nikos rejoined our company in 2019 after previously leading our business development legal team. At other companies, Nikos has held numerous leadership and strategic roles. And since rejoining the company, he has worked closely with Mack in developing our growth plans for Pediatrix/Obstetrix as well as reengineering our overall growth organization, including acquisitions, sales, marketing and innovation. We thought it would be valuable to have Mack and Nikos discuss the materials we have provided to you today, and to give you a formal reintroduction of Pediatrix/Obstetrix. And with that, I'll turn the call over to Dr. Mack Hinson.

Thank you, Roger, and good morning, everyone, and thanks for joining our call today. As Roger mentioned, the real purpose for talking today is to reintroduce Pediatrix clinical group. Let me start by introducing myself. I'm a neonatologist, as Roger told you. I joined this organization as an associate neonatologist in our Seattle practice in 2003. And over the ensuing years, I've sat in nearly every seat you can sit in as a physician in this organization in leadership roles, both clinical and administrative. I've watched this company develop and grow over almost 2 decades, and I've always been proud to be a part of the Pediatrix/Obstetrix team. I share Roger's excitement about the transformation of our company, particularly since today, we, in a very fundamental way, are returning to our roots as an organization devoted to the care of moms, babies and children. Perhaps more importantly, I want to tell you how we are a different Pediatrix Medical Group than you may remember from a decade ago and how this makes us an organization that is uniquely positioned to lead and grow in the new health care world we're all see developing around this. As part of the National Medical Group, our affiliated clinicians, each of them is locally focused, are backed by the robust resources of Pediatrix Medical Group. Our commitment to quality and safety are second to none. Our resources in data and analytics, backed by our proprietary clinical data warehouse, which incidentally is the largest of its size in existence, allows us to continuously work to deliver better care. Our 100,000 Babies campaign demonstrated the efficacy of the National Group approach to quality improvement. Our renewed 100,000 Babies and our new 100,000 Moms campaigns are putting important quality improvement tools in the hands of our clinicians. We do not cede the descriptor, "academic", to anyone. It is not a term that solely applies to university systems or children's hospitals. It applies to us as well. Our clinicians published over 60 research articles in 2019. Our physicians personally presented 11 different research projects at the 2019 Pediatric Academic Society Meeting (sic) [ Pediatric Academic Societies Meeting ], which is one of the premier pediatric research meetings in the world. Additionally, our doctors were co-authors on another 26 research presentations at that meeting. Our leaders in quality improvement and safety are known nationally and are viewed as important resources by organizations like the American Academy of Pediatrics. Our Vice President of Coding, Dr. David Kanter, is a widely respected expert, whose experience helps guide the national discussion on appropriate coding of women and children's care. Our doctors teach nurse practitioner students, PA students, medical students, residents and fellows across the country every day. We are not here simply to provide care, but to continuously learn how to provide better care and to share what we're learning with our larger medical community. I firmly believe that these are things that not only make us different. They make us better each day. Every day, and for that matter, every night, our doctors and nurse practitioners are devoting their energy and talent to what we're all committed to doing: taking great care of the patient. Our National Medical Group is a critically important part of the delivery of health care to women and children in the United States. Every year, we provide care to 1 million babies. Every day, we see about 1 out of every 4 babies in the NICU in the country. Daily, we see about 1 out of 10 normal newborns. We provide newborn hearing screening services in over 500 hospitals. And we just don't see babies. Every day, we see almost 2,000 women with high-risk pregnancies. Our OB hospital has provided a safety net for laboring women in hospitals across the country. And in addition to mothers and babies, we take care of a lot of pediatric patients. In our inpatient pediatric and critical care services, we see almost 600 patients every day. Our pediatric ambulatory clinics see patients in cardiology, neurology and developmental medicine, just to name a few. And our surgical practices see kids in urology, ENT, general surgery and plastic surgery as examples. We care for the full gamut of maternal pediatric patients. Hospitals and health systems across the country trust Pediatrix/Obstetrix to direct and develop their maternal and pediatric services as good partners and as good stewards of the resources with which we are all jointly entrusted. Our national scope and resources are foundational to our path to future success. Pediatrix/Obstetrix does not exist simply to staff units and clinics. We are experts in developing significant and sustainable clinical programs that align with our health system partner strategic priorities. Our successful focus on partnership and program development differentiate us and make us the partner of choice in maternal and child health throughout the country. The focus on partnerships and program developments is also evident in the growth of our organization in recent years. Despite the broader birth trends in the United States during that period, our revenue has nonetheless increased at a modest yet persistent annual rate. From this strong foundation, we believe we can accelerate our growth opportunities across our core businesses. Since the formation last year of our dedicated leadership and support structure for Pediatrix/Obstetrix, our work has been focused on the structure that optimizes our daily work, maintains and strengthens our health system relationships, which are critical to our business retention and organic growth. And we've invested in a growth infrastructure to help us identify and close new business opportunities in our core businesses or advantageous adjacent opportunities. These efforts are bearing fruit. Just to give you an example on our NICU business alone, since July of 2019, we have started or have signed contracts for 20 new NICU sites of service. I think this recent growth dynamic is an excellent reflection of our focus on hospital relationships, the development of robust programs and our unique position as the largest national medical group in the country for women and children's services. I also believe it validates our outlook that meaningful opportunities exist to accelerate our growth with Pediatrix/Obstetrix. I want to give you a clear picture of the true breadth and diversification of our organization. Pediatrix/Obstetrix today has almost 300 discrete affiliated practices in both hospital and ambulatory settings. We provide services in almost 400 NICUs. And as I previously noted, we currently perform hearing screening services in over 500 hospitals. We have over 80 ambulatory practices, with most having significant inpatient service components and most having multiple sites of service within an individual practice. Both our hospital-based and ambulatory practices have a geographic footprint that's diverse with a meaningful presence in attractive and growing markets across the country. Pediatrix has its origins as a neonatology medical group, in addition to obstetrics and pediatric cardiology early in its history and in maternal and peds specialty components. We continue to have a significant focus in all these core service areas, but these aren't the only things we do. Our service lines are increasingly diversified beyond our legacy and still very important NICU, MFM and cardiology businesses. We have growing OB hospital services in multiple states. Our pediatric specialty services are growing to include pediatric medical specialties in gastroenterology, neurology, endocrinology, and developmental medicine. We continue to add pediatric surgical specialties in general surgery, ENT, urology, ophthalmology and plastic surgery. And to give you an example of our current state, our children's business is about 80% of our overall business with women's services about 20%. It's interesting to note that our women's businesses is growing at a faster rate than our children's. Our services remain weighted towards the hospital base with about 3/4 in the hospital. For those of you who remember, this does represent a trend for meaningful diversification away from a mostly inpatient service orientation in the Pediatrix of a decade ago. With respect to our children's businesses, we remain very successful in our core neonatology service line, but we are increasingly diversifying in the pediatric medical and surgical specialties in markets where there's a demonstrated need to be met for our health system partners. And finally, our women's health care business is, today, predominantly in maternal-fetal medicine. However, our OB hospital service continues to grow, and we'll be at almost 40 practices by the end of 2020. As many of you already know, Pediatrix Medical Group is a truly unique organization dedicated to women and children's services. And over the past 4 decades, we've grown to become the largest provider of these services in the country. This is particularly the case in our core NICU services, but also for the many other services we provide in both the women and children's side. We believe opportunities continue to exist in our core maternal and pediatric businesses. Although Pediatrix/Obstetrix is the nation's largest provider by a number of clinicians in a given specialty, there remains significant room for expansion in both the MFM, OB hospitals and peds specialty services. Overall, in our current service lines alone, the total population of physicians in the United States is almost 19,000, of which our National Medical Group represents only 12 -- about 12%. Within each group, even though Pediatrix/Obstetrix employs more of these maternal and pediatric specialists than anyone else in the country, there remains room for continued growth in our neonatology core business. These opportunities are large in the maternal space and the MFM and OB hospital space as well as in the pediatric specialty service space. To put this in a different perspective, within the service lines that are currently part of Pediatrix/Obstetrix, our addressable market is significant. Overall, we estimate that on an annual basis, this market totaled almost $10 billion in 2019. This has been and is estimated to continue to be a growing market. Our success going forward simply isn't a function of the percentage of providers, who are part of Pediatrix/Obstetrix. One of the things that makes us truly unique is the spectrum of care we offer in the women and children's health care continuum. From the time a mother knows she's pregnant to a normal delivery or an unanticipated neonatal problem, or a mother with issues that make her our pregnancy high-risk has -- who has an ill newborn, Pediatrix/Obstetrix is there for the mother and the baby with the ability to integrate the care of both the mom and child. Our specialist book medical, such as our cardiologists or surgical, like our general pediatric surgeons, work with both our maternal physicians and neonatologists to provide integrated care. And we don't simply stop there. Our pediatric hospitals and pediatric critical care doctors see every age range of children, and they're supported by our diverse array of pediatric medical and surgical specialists. From pregnancy, and sometimes even before pregnancy for preconception counseling, through birth and childhood, Pediatrix/Obstetrix can and does care for you, your baby and your child. I wanted to address the questions likely on people's minds. How do we think we can grow neonatal and pediatric services in a country that's seeing declining birth rates? Well, first about births. We're in relatively favorable markets. In our core markets, the birth rate in these markets is not reflective of the overall national birth rate decline. Secondly, we provides services for infants and children that are not solely in neonatology. This diversification is an important part of our growth story. Our normal newborn businesses were on the high single digits annually for the last several years. Our peds hospitals and pediatrics critical care services had an annual double digit growth over the past few years. Third, we're successful competitors for new business. The majority of the 20 new NICU sites of service that I previously mentioned were competitively awarded, meaning we won a competitive RFP process. In this group, we won over children's hospitals, over university health systems and over private and national groups. We're confident in our ability to continue to do so. And finally, we aren't simply growing by adding new practices. We're successfully developing programs that attract business to our hospital partners and subsequently to our units. We are collaboratively working to grow the service lines we already have. As a result, our neonatology business, our PICU business and our pediatric hospital businesses have consistently increased in year-over-year patient days. This is a testament of our ability to grow programs and our constant work to maintain and strengthen health system partnerships and relationships over time. And just to note about the Pediatrix/Obstetrix organization going forward. Starting in Q3 of 2019, we significantly flattened the organizational structure to ensure we can most effectively optimize, promote business retention and to grow. And the structure is a market-based leadership structure with each market president working directly with our clinical leadership to enhance quality and safety, the experience of our health system partners with Pediatrix/Obstetrix to deliver strong financial performance and to drive growth. The structure has largely been in place since the first of the year, and we are already seeing positive results. I do want to pause here briefly to discuss COVID-19. While helping our hospital and health system partners prepare for the anticipated surge of COVID patients, and while caring for some COVID-positive moms and children, our clinicians continue to provide exceptional care for moms and kids. In ways both large and small, our physicians and nurse practitioners not only met the challenges of COVID-19, and continue to do so, but they also work to do more. And just to give you one example. Some of our pediatric critical care doctors in less affected areas volunteered to travel to harder hit areas in the nation to take care of not pediatric but adult COVID patients. It's a remarkable testament to the dedication of our team. This new structure I described for you significantly enhanced our national group's ability to do the following during the COVID-19 pandemic: to rapidly respond to PPE needs across our national practices; to proactively plan for specialty-specific coverage in case of COVID-19 exposure or illness; to deliver a national maternal and pediatric perspective on COVID-19 to all of our clinicians; to create national specialty-specific clinical forums for COVID care issues. It allowed us to disseminate clinical lessons that we learned from our early COVID-19 geographies, particularly in the Bay Area and the Pacific Northwest to our national group. It allows us to have close alignment with our local health systems to prepare for and treat COVID-19 patients and the ability to share this national expertise on our approach. And it also fosters some unique collaborations. Our pediatric critical care doctors and our pediatric radiologists are creating a joint database to follow the multisystem inflammatory syndrome, COVID, that we're now seeing in pediatric patients. I don't want to leave the impression that we're unscathed by COVID-19 because we're not, just like any other health care organization, but I do fundamentally believe this crisis has reinforced the idea that there is benefit and value of being part of a national medical group. Pediatrix/Obstetrix has proven its durability, and this resilience makes us a destination of choice for clinicians and private practices, and it makes us an attractive partner of choice for hospitals and health systems going forward. Pediatrix has an important history, and I've been proud to be a part of it. But more importantly, I'm excited about what's in front of us. I love that everybody in this organization gets up every day thinking about how to provide better care for women and kids. There simply isn't another national medical group with that kind of focus. I firmly believe that as a national medical group, we are in a unique position as physicians and leaders in our field to influence how that care gets delivered. And finally, I'm confident that Pediatrix Medical Group has achievable and impactful opportunities in the greater women's and children's health care space. Everyone in this organization went into health care to make a difference, and that's what we've done for 40 years and what we intend to keep doing by integrating our services, by innovating in new and creative ways, and, I firmly believe, by disrupting historic care delivery models. We're looking forward to the next 40 years. With that, let me hand this over to Nikos Nikolopoulos, our Chief Growth and Strategy Officer, to discuss our growth plans going forward.

Thank you, Mack, and good morning, everyone. My name is Nikos Nikolopoulos. I'm the Chief Growth Strategy Officer of MEDNAX. Over the last 9 months, I've partnered with Mack to deploy strategies and capabilities to not just sustain this wonderful Pediatrix franchise, but to better position the platform to deliver differentiated care and solutions to the broader women's and children's health care space, and also to accelerate our growth platform for many years to come. I'd like to first talk a little bit about what we've been doing over the last 9 months on revenue, sales, business development and strategy front. Last summer, we took the decision to unify all revenue activities under a newly created growth group, which I lead. By unifying all elements of revenue, for example, new bookings, customer retention, health management, customer and practice integration, M&A and managed care innovation, we have created a more scalable, more predictable and effective revenue management platform. We have leveraged best-in-class consulting resources to rapidly put this revenue growth capability in place starting last summer, and we've brought in external talent to help us execute this strategy. At the same time, we took the decision to align these new capabilities within each of our individual businesses, pediatrics, radiology and anesthesia, pushing down into these organizations dedicated sales and marketing and other growth resources. Prior to then, our growth teams were centralized and were spread across all businesses. With the announcement of dedicated service line and P&L leadership for each of our businesses last year, we believe that focused teams fully aligned with these leaders would be far more effective to driving and executing our growth strategies. On the Pediatrix strategy front, we spent 6 months doing a deep dive into the broader women's and children's health care market by talking to customers, patients and doing deep market studies in the top health care markets across the United States. What we concluded is that Pediatrix franchise is incredibly well positioned to participate in a much broader market opportunity, and this further supports our accelerated growth strategy. Now I'd like to walk you through what we see as our top line growth potential and discuss our 4 core growth initiatives. We are positioning for incremental growth. Over the last few years, Pediatrix has seen average year-over-year revenue growth of approximately 3%. We believe that we can build on this baseline level of growth and accelerate it into the mid- to high single digits. We believe the drivers of this top line acceleration will be the continued expansion of our sales infrastructure and capabilities, accelerated tuck-in M&A, investments and partnerships in broader market adjacencies, and investing in scaling care and delivery models across the women's and children's care continuum to improve patient and customer outcomes and experiences. The investment in growth infrastructure capabilities we made in the second half of 2019 have already started to drive incremental revenue growth. In Q1 of this year, we saw core revenue growth on an adjusted basis of 4.1%. This was primarily driven by a higher level of organic sales of tuck-in M&A. Another important contribution to Q1 revenue growth was the improvement in customer revenue retention, which improved from 97% to 98%. Let me now turn to what we did in the second half of 2019 to improve those sales capabilities and position for accelerating growth. As you can see from the charts on this page, we have increased bookings over our baseline by 3x in Q4 of last year and 4x in Q1 of this year. Our Q4 bookings were part of the reason for the accelerated revenue performance in Q1 of this year. Q1 bookings for new accounts and services should support revenue flow-through in Q2 and Q3 of this year, given the 45- to 60-day lag between bookings and revenue. The accelerated level of bookings in Q4 and Q1 were not, by chance, they're by design. In order to build a scalable more disciplined sales platform to drive and sustain incremental growth, we first started by hiring a seasoned health care sales team. We then designed a robust sales coverage model, tripled sales resources, put in place inside sales and account management capability and made improvements to our service activation team. We then embedded these teams with the Pediatrix business to grow total alignment with local practices and field operators to optimize our hospital partners sales activities. We then focused on building new pipeline. In a matter of months, we were able to double our pipeline by launching several sales and marketing campaigns. More recently, at the beginning of this year, we reintroduced Pediatrix/Obstetrix brands with a digital and traditional media campaign to further support pipeline build. This pipeline has been sustained at these levels since last September. I'd like to also note that this pipeline is a higher-quality pipeline than our historic pipeline, and is a significant reason for the higher win rates we have also been experiencing recently. I want to now turn briefly to cover some of the tools and processes we deployed last year to support our acceleration efforts. Working with a health strategy firm, we were able to quickly develop comprehensive customer profiles and multiyear account management strategies for all of our top hospital customers, representing more than 50% of our revenue. On a way of reference, our top customers are the leading hospital health systems in the country, and we have been experiencing a higher level of growth with them compared to many of our other customers. These new tools and investments are not only meant to drive existing growth, but also to retain business and to identify new opportunities by closely partnering with our customers to develop new service lines and care delivery models. As you can also see, we have put in place product management tools and capabilities as well as enhancing our field test and service activation capabilities to accelerate time to revenue. Lastly, we are principally focusing our sales activities in our top 20 markets. This focus on top customers and top markets has allowed us in a very disciplined fashion to deploy sales and marketing resources in the most effective and productive way. All these tools and processes have been hardwired in our sales infrastructure and processes since last year, and we are pretty darn excited about our growth objective going forward. Moving to the M&A growth lever. Over the last 8 years, we have averaged about $50 million a year in acquisition spend in our Pediatrix business. This acquisition spend has generated an average of approximately $50 million of annual revenue and $10 million of annual margin contribution. Clearly, these acquisitions have been highly accretive as well as strategic for the buildout of our service lines in our core markets and have been part of Pediatrix growth engine for the last 4 years. In fact, through our affiliated physician practices, we have done over 200-plus pediatrics deals over the last 4 years. We know how to do these deals. By way of background, a typical pediatrics practice deal is a 5 to 6 doctor practice and is less than $10 million in purchase price versus certain other practice specialties, which could be much larger practices and can mean much higher purchase price multiples. With our realignment last summer, we began to focus our business development resources exclusively on developing Pediatrix pipeline and closing Pediatrix deals. This refocused team closed 5 deals in the last 4 months of last year, which helped drive the accelerated Q1 revenue performance I mentioned earlier. The team has also entered into several other lines in Q1 that we are diligently working through as the economy begins to reopen. As we reemerge from COVID, our practice leaders and growth teams have also reached out to our hospital partners and independent practices across the country to gauge the impact COVID has had on their business models. What we are seeing is that there is likely to be an increased desire by our hospital partners to further outsource elements of their women's and children's services to Pediatrix and, equally, an increased desire of our independent practices wanting to affiliate with us. We believe this will lead to a potentially significant increase in our growth opportunities. Now I'd like to turn to our long-term strategy and how we see Pediatrix evolving in the women's and children's space in the coming years. As you may know, we've historically started as a neonatology group in 1979. Our core, therefore, is the NICU. But there is an enormous ecosystem that can be built around the NICU, and we've been building these ecosystems over the last 4 years. For example, we moved into pediatric cardiology and intensive care in 1992, then moved into maternal-fetal medicine in the late 1990s, added OB hospital programs in 2007, and then moved into pediatric subspecialty areas, such as urology, surgery, neurology, infectious disease, to name a few. By building these ecosystems and servicing our patients and hospital customers more holistically, we have grown revenue and, over time, moved our addressable market from $4 billion to $10 billion. We believe, given the forces that are impacting health care today, including consumerization, convenience of access, patient experience, health tech, telehealth and administrative waste and so on, that we are extremely well positioned to move more broadly into the women's and children's care continuum by integrating and enabling the key elements of care. We believe this confluence of market forces expands our addressable market by fivefold from $10 billion to $55 billion. Today, we have 387 NICUs in service or under contract. Again, the NICU is the foundation of our growth model. It's how we build our care delivery ecosystem. That's why we've been focused over the last 9 months on reaccelerating the growth of our NICU footprint. In 2018 and 2019, we had some pluses and minuses with our aggregate NICU portfolio. We've won some NICUs, but also wound down several unprofitable NICUs. This led to a flat profile in our NICU footprint during this period. However, beginning last summer, we focused both our sales and BD teams on NICU growth and tasked them with onboarding 15 NICUs within a year. As of the end of April in 9 months, the team has already added 20 NICUs, as Mack said, 17 from sales and 3 that were acquired. By way of reference, there are approximately 1,500 NICUs across the country. We are currently focusing on continuing to grow our NICU programs in our top markets with our top customers. As of today, our sales and BD teams are working a qualified pipeline of an additional 90 NICUs. Our focus is on shaping a dense ecosystem with our top systems in our top markets. As we think more broadly about how and where we deploy our resources in building our NICU-based ecosystems, we intend to also increasingly look to de novo practice builds, conversion of in-house hospital programs to the Pediatrix platform as well as using partnering and alliances to stitch together and integrate a broader continuum of women and children's care. This partnering will extend beyond work with just physician partners and will include partnering with technology companies and other elements of the health delivery network. Moreover, with outpatient care being a more convenient and cost-effective care environment for non-acute care, we also believe joint venture arrangements and MSO and physician affiliation models can and will be utilized in building out each of our core markets. Although we are in 40 states, the 20 markets, the metropolitan service areas we've identified are our focus markets and represent a significant portion of our current business as well as our future growth potential. And it is why, again, we will be dedicating resources in these markets. An integrated model better serves patients, improves outcomes and secures customer lifetime value. The U.S. health care system is valued at more than $3.6 trillion. Labor and delivery and related pediatric, obstetric and fertility care is valued at about $175 billion, $55 billion for physician services, and $120 million for hospital and facility care, less than 5% of the total health care market. But labor and delivery are critical to hospitals in terms of customer lifetime value. Labor and delivery is the biggest reason for hospitalizations in the United States. If mothers and families had a great experience with labor and delivery at a hospital, they have a very high likelihood to return to the same hospital for future care. This simple point is why building out a holistic and integrated care delivery platform for our hospital customers is so strategic to their economic model. Industry studies suggest that physicians direct perhaps 80% or more of health care spend. Physicians are the architects of care delivery. Our affiliated physicians have been designing integrated care delivery and improving outcomes for years for high risk and specialty and subspecialty women's and children's care. However, the remaining components of labor and delivery as well as the broader women's and children's health system is very fragmented, and we intend to begin to unfragment it with our ecosystem strategy. In short, there is a huge market need, and we believe we have the platform to serve that need and to support higher level growth for years to come. In summary, we are building a better women's and children's care delivery model for the future. The Pediatrix franchise is an incredible franchise that has improved health care outcomes over the years for high-risk mothers and children. By continuing to leverage our core NICU and MFM capabilities and our network of specialists and subspecialists, we aim to continue to grow our care ecosystems to better address the needs of the market. A confluence of market forces, coupled with the needs of our patients and hospital partners, are driving the need to integrate and enable care across the entire care continuum. We believe our investments in ecosystem build, research and innovation and technology enablement and our unmatched clinical data warehouse will allow us to meet this market need. With today's announcement, we are singularly focused as Pediatrix pursues this goal, and we are excited about our prospects. Thank you, and I'd like to pass the call now to Stephen Farber, our CFO.

Thanks, Nikos, and good morning. Thank you all for joining the call. I'll give a few comments about our preliminary financial views for Pediatrix, which we also shared in the slide information we provided this morning. As Mack and Nikos referenced, Pediatrix/Obstetrix generated roughly $1.8 billion in revenue in 2019. And prior to being impacted by the COVID-19 pandemic, the organization has been growing at roughly 3% a year through a combination of sustained growth, new business and modest acquisitions. As Nikos discussed, we believe there's an opportunity to accelerate growth into the mid- to high single digits through sales and marketing initiatives, strategic and methodical pursuit of acquisitions, and innovations and advancements into adjacent service lines and businesses. From a margin standpoint, we view Pediatrix as beginning with a mid-teens adjusted EBITDA margin profile, which, based on current annual revenue, would put adjusted EBITDA in the roughly $270 million area. We think this represents a fairly straightforward walk-through from our original financial outlook for 2020. If you recall, prior to the COVID-19 pandemic, we provided adjusted EBITDA guidance for 2020 of $470 million at the midpoint, with American Anesthesiology, prior to our divestiture of that business, representing roughly $100 million of this amount; and MEDNAX Radiology Solutions, as we provided in our press release this morning, generating roughly $90 million of this amount. By basic math, subtracting both of these items, this would put Pediatrix adjusted EBITDA at roughly $280 million. But there are more -- some cost considerations that arise from us moving from a $3.5 billion business to a $1.8 billion business. That said, we've been moving aggressively to identify cost efficiencies we can achieve in the near term. Following the sale of anesthesiology, we've been focused on our practice support functions and identifying cost improvements we can make as we rightsize to a smaller revenue base. Over the past several weeks, we have identified and are in the process of completing approximately $10 million in incremental annualized savings as part of these efforts. On a preliminary basis, we believe there is a similar amount of dollars for us to still address over the next couple of quarters in order for us to get to the $270 million range of initial adjusted EBITDA for Pediatrix. We see this as highly achievable. From this initial margin profile, we believe there is a highly viable and practical path to move Pediatrix margins from the mid-teens into the high teens, driven by continued reshaping of our support infrastructure, and, particularly, by operating leverage as revenue increases. This would move our dollar EBITDA up to and well through the $300 million level, which we believe is achievable over the next couple of years. Beyond our preliminary adjusted EBITDA profile, we also view Pediatrix as having highly attractive cash flow dynamics with routine CapEx of perhaps $10 million to $20 million per year and, consequently, a very high conversion of EBITDA to true cash. This suggests a meaningful capability to fund our M&A pipeline internally, absent any significant platform-style deals, which we may identify. And lastly, we intend to maintain a very strong balance sheet. In terms of our current balance sheet profile, as we announced this morning, during May, we repaid all of the borrowings on our revolving credit facility. You'll recall that concurrent with our bank amendment in late March, we drew down roughly $300 million of our revolver in order to maintain a cash balance in the face of the uncertainties caused by the COVID pandemic. Based on the trends in our business and cash flows, we no longer saw the need to carry this balance. As a result, as of May 31, our total borrowings consisted only of our $1.75 billion of senior notes, and we had approximately $90 million in cash on our balance sheet at May 31. So our net debt as of last week was only roughly $1.66 billion. And let me remind you that is prior to whatever proceeds we may receive for the sale of Radiology. We believe that there is a strong argument for maintaining modest leverage given the business we are in. It enhances our ability to attract and retain clinicians in the women's and children's field, who see real value in being part of an organization with the staying power to represent a permanent home for their practice. And we found that it is also important to our hospital partners, who see value for the same reason. In fact, our ability to demonstrate this staying power has been front and center in the past couple of months, as many hospitals that we have relationships with have expressed concerns about the ability of other groups they contract with to make it through the kind of crisis we've all had to face this spring. As a result, and as we indicated in our press release, we currently expect to use the proceeds of the sale of Radiology to repay debt and rightsize our borrowings to the adjusted EBITDA profile of stand-alone Pediatrix. I'm hopeful that this high-level view of normalized revenue and margins for Pediatrix is helpful to you, particularly in the context of the growth and margin trends we believe are available to us through our strategic and operating plans. As we continue to move forward in the months and quarters ahead, we'll also continue to refine these views for your modeling purposes. And with that, I'll turn it back to Roger.

Thank you, Stephen. Before turning the call over to questions, I want to discuss the last item we announced this morning, which is our intent to rename the company as Pediatrix Medical Group. Following our decision to sell MEDNAX Radiology Solutions, we are wholly focused on maternal and pediatric care as a national medical group providing services across the full continuum from mother to baby to child. There is no other organization in the world with the scope and breadth of ours, and the Pediatrix name fully represents the decades that it has required for us to build what we have today. We also have a true national medical group. From Mack and myself and across hundreds of medical practices, our clinical organization is dedicated to taking great care of our patients. At the bedside, in our clinical research and education and as advocates for our specialties, the clinicians that make up Pediatrix will always be committed to that goal. Fortunately, as Pediatrix, we have decades of experience in pursuing this goal and acting on behalf of all of our stakeholders as we do so. And today, as we return to focus all of our resources and efforts of Pediatrix Medical Group, I am excited, humbled and confident when I look at the opportunities for us to succeed, to grow, and to be there for our patients every step of the way. We got this. With that, operator, I'll open up the call for questions.

[Operator Instructions] Our first question will come from the line of A.J. Rice with Crédit Suisse.

I'm not sure how I can get this into one, but 2 basic quick things here. One is it sounds like there was a process ongoing for the Radiology business, and then it got put on hold with the pandemic. Do you see yourself having to restart everything? And therefore, we're sort of starting from scratch again? Or is this a process that's well underway? And therefore, you have reasonably high confidence you can get it done by the end of the year or something like that? And then I was just going to ask about the 3 -- growth from 3% to 6%. You've got 3 buckets in your slide deck that you're talking about accelerated sales, incremental tuck-in and adjacencies and innovation. What is the time frame for getting from the 3% to 6%? And I'm assuming that will take several years, but is there any way to flesh that out? And it looks like on the slide deck that each one of those buckets is about the same. Is that the way you think about it in terms of contributing to that increasing sales performance?

A.J., it's Stephen. Thank you for that compounded question. Just quickly on the rad side, no, A.J., it's not a total do-over in terms of restarting the process. We had a lot of momentum a couple of months ago, and we tied it up in a bow and put it on the shelf during COVID. And as the volumes return and as the markets return, we will restart an existing process as opposed to having to take the time for a fresh process. In terms of the growth outlook, look, we're very optimistic about it. And we don't think that it's several years at all. In fact, we've already seen, as Nikos was describing, really great, great pickup over the past couple of quarters. I mean, obviously, COVID was disruptive with it, but we have already brought in-house a great number of the people that we need to execute this. I think Nikos mentioned that we've tripled our sales force. We have all sorts of other people focused on account management and other specific elements. And they're in their chairs, and they're working now, and we have already begun to see results. And in terms of bucketing it, I do think it's hard to bucket it, except from the perspective that we think each individual bucket has the opportunity to represent a significant portion of that doubling or more of growth, right? So we have suggested a mid- to upper single digit growth from what has historically been more like the 3%. So it -- there is the opportunity, if all of these areas hit on all cylinders, that we could drive our way pretty quickly up that percentage range.

Our next question comes from the line of Ralph Giacobbe from Citi.

Just, I guess -- I just -- can you help us on the visibility on the 6% growth? And maybe what have been the impediments of showing that growth over recent history? And if you could, how do you think about same-unit growth between sort of volume and price as well?

Sure, Ralph. Look, I'll start and see if any of the others here want to add in. I think it's really hard to -- in terms of impediments to growth, I think, as Nikos was describing, a lot of these efforts are fairly new. We did reorganize the way that leadership functions within the company last summer, as we've been discussing. Since then, that then and simultaneously began completing the organization, as Mack and Nikos described, of the growth functions. So we have a tremendously larger and more sophisticated team focused exclusively on the growth of Pediatrix/Obstetrix for the past few quarters. Of course, they ran into COVID, but, up until then, we're really having been -- in their chairs and building and getting organized for really only a short period of time, they've already had a high degree of accomplishment. I think the visibility of that, to some extent, has been diffused over what was, call it, a $3.6 billion business that is on its way to being a business half its size, but with tremendous growth. And the negative trends, particularly in the anesthesia business, really offset a tremendous amount of positive and constructive things that were happening with other parts of the company, particularly Pediatrix. In terms of same-unit growth, I think it's a bit premature for us to frac that out. It really does depend practice-by-practice and how you go about defining same unit. But we feel very -- but we feel optimistic about the opportunity for same-unit growth as well as new contract wins as well as acquisitions and both tuck-ins and the occasional platform opportunity and service extensions. So it's really a pretty long list of ands and ands and ands of saying that we are very positive about. But I'm sure, as you've seen with many other companies, Ralph, there is extraordinary value with focus. And it is simply not possible, no matter how good an organization is, to love all their children equally and drive each piece of the business at the same rate. We feel very strongly that we have enormous opportunity with Pediatrix as an incredibly resilient and critical business for health care delivery in this country, and we couldn't be more excited about where we think we can take this with our 100% focus.

Our next question comes from the line of Matt Gillmor with Baird.

I wanted to see if you had any updated views to share with respect to debt leverage and sort of where your leverage might shake out once you complete the radiology sale. And are we still comfortable around sort of a 3x level with an eye towards getting it down a little bit?

Sure. I mean, the answer basically is yes. As we mentioned on our earnings call, I guess, 4 weeks ago yesterday, during the whole COVID situation and with the anesthesia transaction, all of the activity, our leverage basically got into the high 4s on a somewhat adjusted basis to make it a sensible number. We feel very comfortable that with the sale of rad -- and that was up from, call it, kind of a mid- to high-3s-type leverage number before that and, if you look back a while, kind of more of a lower 3s, high-2s-type of leverage. We are very comfortable that with the sale of radiology, we will get our leverage back to the same ballpark where we were prior to all of this disruption. And I think while we're still fine-tuning our leverage ambition, I think I made clear with my comments a few minutes ago that our preference for leverage is less, not more. And it's not so much just uniquely or distinctly a MEDNAX or Pediatrix preference. It's that our hospital partners and our clinician partners, particularly after seeing what's happened with people's balance sheets and with their financial risk during the COVID disruption, that there is a very strong and vocal presence or preference from our hospital partners and our physician partners for us to be less leveraged, not more. And I think that's how you should think about us on what our ambition is.

Our next question will come from the line of Pito Chickering with Deutsche Bank.

Can you talk a little bit about salaries and benefits cost structure for Pediatrix? Going back to 2007, progress S&P was running in the high 50% range versus 70% in 2019. Obviously, a lot has occurred over the last 13 years, including anesthesiology and radiology as well as reimbursement pressure. But like if you take a multiyear view on what practice expense should be for the Pediatrix business, say, in 2022, 2023, where should it settle out as a percentage of revenues?

Pito, it's Charlie. Not the easiest thing to answer in the midst of everything that we're working through for the reshaping of this company. I think what I would say just briefly is, if you take a look in a basic sense at our -- the complexion of our P&L as it might look today, I think you'd see some comparability between the Pediatrix Medical Group organization and the radiology organization, which would shoot out a somewhat comparable profitability profile, as we laid out related to our expectations for rad this year. So that's a good place to start. And in terms of trends in SWB expense, again, that's an unknown. For the past several years, we've been in effectively full employment account. As of the past 2 months, we have not. And while that doesn't always impact clinical compensation expense, over time, it does. And that's something that has been a modest challenge for Pediatrix in the last several years, particularly related to Anesthesiology, but nonetheless a little bit hotter than we've seen in the more distant past. So moving forward, I think you'd start and take a look in terms of the overall percentage of revenue and think about, in one sense, the performance we provided last month, which are relatively clean related to clinical compensation and the pro forma adjustments and take that going forward. But it's a little tough to put a crystal ball on what the inflation of those expenses might be, particularly coming out of the environment we've been in the last couple of months.

Our next question will come from the line of Brian Tanquilut with Jefferies.

So I just want to get back to the question on organic growth and the 6% growth outlook you've posted. On the organic side, I mean, as we head into a recession, I look back to the '07, '08 time frame, how are you thinking about what would be different this time in terms of payer mix and volumes on the NICU side? Then I guess, as I recall, Roger, back in those days, I mean, one of the reasons you expanded out of NICU was kind of topping out on M&A opportunities. And I look at your slide deck with 21% share in NICU. So how much more can you really consolidate without bumping into local-level FTC challenges?

Yes. And that's exactly why, 13 years ago, we decided to take a look at something else. But the world has changed a lot in the last 13 years. And what has happened is our market, as we said earlier, has grown from neonatology, neonatal ICU into a bunch of other opportunities within the women and children's field. And so, I mean, I think the OB hospitalist specialty, which is now a big part of our business, probably didn't even exist back then or there weren't too many of those. And our hospital partners have asked us. And we noticed a few years ago that we kept getting more and more requests from our hospital partners to take over or to provide them with different specialties within the field. And so maternal-fetal medicine, we keep getting asked over and over again by our hospital partners to build them maternal-fetal medicine practices or pediatric urology or hearing screens or well newborns or neurology or pediatric plastic surgery. So there's just been a lot of inflation or growing, if you will, of the different opportunities for us within the environment in which we practice. So I think that that's a big difference, the major difference. But I also think that physicians are perhaps a little more willing today to look at joining a group such as ours that has, as has been said a number of times before, a certain stability and a certain presence within the field. And so I think that those -- that clearly presents new opportunities for us. Finally, our hospital partners, we are seeing a number of hospitals who are thinking, "Wait a minute. I saw what just happened with this pandemic. And maybe I can't afford to have just any small group of whatever specialties caring for the critical care services in their hospitals, whether it's the emergency room or neonatology or maybe they need to rethink who is taking care of all of these patients in their hospitals." And we see that as a potential opportunity for us as well, again, to have the staying power. And they're thinking that there may be another wave, if you will, of the pandemic coming in the near future. And some of the practices that took big hits the last time may not be able to withstand a second wave. So I think that there are a number of opportunities now in the world. It's just very different from what it was 13 years ago.

Our next question will come from the line of Gary Taylor with JPMorgan.

I wanted to talk a little bit more about maternal-fetal medicine. And one, is the ballpark 1x revenue, 5x EBITDA, is that still sort of prevailing market acquisition economics? And then also just, Roger, how are these groups organized? Are these still primarily private independent physician groups? Has there been any trend towards employment? And sort of what's kind of a typical size you might find of these types of practices?

Gary, it's Charlie. On the valuation side, I think we tend to look across all of the practice areas that Nikos referenced in his discussion. And we've talked about it a lot and don't really delve into specific details around each individual subspecialties, its dynamics or the valuations. That said, I think if you look at that broader value of M&A activity we've had across Pediatrix over the last 5 or 10 years, and probably imagine that there's a bell curve to it with a pretty high-density towards the middle of that. I'll let Roger talk about the nature of the practices.

Thanks, Charlie. Look, Gary, I think, historically, you know what multiples we talked about in our world of neonatology. And I have no reason to believe that any of those multiples may have changed. So I hope that answers your question. No, we haven't seen -- we are the largest group of maternal-fetal medicine physicians today. And we see that as a small group, actually, as you saw in maybe one of those slides. But we think it gives us an opportunity to -- again, by developing the research and the safety, the database, the implication of the quality, all the stuff that we add on top of the patient care abilities, to continue to bring them together. But there is no group of MFMs out there that is trying to -- there are still small practices of physicians that are in the private sector of taking care of patients.

Our next question comes from the line of Kevin Fischbeck with Bank of America.

Great. So I guess, I'm really just trying to understand the change in the trajectory that you're talking about. The order of magnitude is pretty dramatic. I mean, I think one of the earlier questions went back to like 2006 or 2007 as kind of a baseline last time we had core Pediatrix. And margins were 28%. Now they're mid-teens. So we've been seeing pretty consistent declines in margins for the last 15 years, seeing very modest top line growth over that time period. And I guess, if you took out deals, if you really are buying $10 million of EBITDA per year, the organic EBITDA growth has been solidly negative. And now the things that you're talking about all sound good but a lot of these things, I think, you've been talking about for a number of years. So really trying to understand, I guess, one, why the pressures on the EBITDA margin over the last decade are not going to continue; and two, why all of a sudden, the growth trajectory has really started to improve. I mean, you talked a little bit about it, but would love to just get a little bit more color there.

Kevin, it's Stephen. I'll start, and I'll pass it to Charlie. I guess, I'd point out a couple of things. We've spoken a bit this morning about how our Pediatrix business today is a very different business from a decade ago. And the -- and part of that has been -- I would not really characterize it as margin decline. I mean, I guess, the margins in that business has come down, but I believe it relates much more to the composition of the business than -- and the types of services that we have added as opposed to ratable change in the core business that existed previously. And so if you think about it, we've added a tremendous number of office-based practices. We've added lots of different things that are hospital-based. And they each have their own unique and individual margin profile and sort of financial hydraulics to them. And so I think that is much more what is reflected in the margin that we're talking about. I also, again, will come back to, you asked the question, well, okay, this looks pretty different. Why so much difference in terms of the expected growth? And I'll come back to essentially the power of focus and the significant investments that we have made in fundamentally changing and dramatically upsizing our efforts to grow. It's a very different thing when you're running 4 or 5 different businesses than when you're running one. And I think it's a fair thing to say that a tremendous amount of focus from this company and over the past few years has been around the challenges with the anesthesia business. And in a lot of ways, that threw a tremendous number of resources away from the Pediatrix business. And notwithstanding that, the Pediatrix business still managed to grow at 3% without anything beginning to approach the level of resources that we are now deploying against it. So hopefully, that helps. And Charlie, do you have a couple of comments you wanted to make?

I think you touched on it, Stephen.

Nikos, you want to say something?

Yes. Just on -- to provide a little bit of perspective on why the growth feels different. Just on the core business, I want to stress first that the revenue management soup to nuts approach is an important one. Because before, retention was -- had local visibility. Growth was also local, but it was also at a central sales point of view. What was happening besides rate and volume was we had sales, but then we also had revenue retention, and they equaled each other. But what we gained is what we -- what was churned every year. And so what we've been doing with the sales activities at a central level being actually started in 2016, we've leveraged that, invested in that. And now what we're doing is we're seeing higher retention end-to-end. And we're incrementing our capability on net sales by aligning our sales force with our practices and our field operators. And that's why just on the core business, we're actually breaking out of the churn of gain and then revenue loss being equal. That's the first basis. And then there's the tuck-in M&A. And then, ultimately, the ecosystem that we believe now is bringing together the higher growth in women's services and other areas that we think we can leverage.

Yes. Kevin, I'll just add one quick final point to that, going off of Nikos' comments. If you think about -- I mean, we -- Nikos mentioned during his presentation that our recent retention has gone from 97% to 98%. I mean, those are extraordinary retention rates. And we actually -- we were talking about this yesterday. We still have the first customer of Pediatrix from almost 41 years ago. Our average contract life is measured in decades. And I think we are very focused now on this concept of lifetime contract value. And the -- and we have -- even through everything that's occurred over the past decade, we have continued to retain the vast majority of this business. When you put that in the context of lifetime contract value, you -- or we can invest very heavily in the sales effort and the marketing effort and the sort of business-building effort because the lifetime contract value is really truly extreme relative to many other elements of health care.

Next, we will go to the line of Matthew Borsch with BMO.

If I could ask just on the -- back on the organic growth again. To the extent you're looking at demographics, and I know you sort of tried to shy away from that sometimes because there's been a lot of speculation and not much has changed over the years. But I do notice that the largest age cohort, if we look at it either 5 or 10 years, is right around the coming in on the cusp of the birth year. And I'm just curious what your forecasting tells you when you look at that.

Matt, it's Charlie. We have done an inordinate amount of work around the planning and the strategies for Pediatrix Medical Group. And we've been around this business for over 40 years. To date, we haven't found a crystal ball. And that's not without efforts that we've put into place. That said, I think you do hit on something that is important. And it's been a point of frustration for us. That -- whatever terms you might have, the echo boomers, the millennial population is very large. Taken in its entirety, it's larger than the baby boomer population, and it is moving into the years that you're discussing. The point of frustration has been that, that has not led to a change in trajectory for total births in the country. And that's a subject for a lot of discussion about why. But I think one thing to take away, Matt, from your question is related to the broader basis of our organization and some of the focus that we have within that related to the mother. The women's health component of what could be available to us potentially can be increasingly important to our business over the next several years. And we're happy about that. And the broader picture of the demographics of the United States do play into that view. And they also play into what we've learned, and particularly through Nikos' organization, what we've observed in terms of the opportunities that come from that. So I'll just put it that way. We don't have some kind of internal artificial intelligence forecasting of what each 33-year-old individual will do over the next 5 years. But just like you, we do know that there's going to be more of them over the next 5 years.

Next, we'll go to the line of Rishi Parekh with Barclays.

I have 2 questions. Now it seems, to me, based upon your target leverage, that the market multiples of radiology might be in that 8 to 10x range. I just -- I know your target leverage is in that 3x range, but, post the sale of Radiology, do you believe in terms of how -- I just want to better understand how we should be thinking about your starting leverage point. Is it going to be in that low to mid-4s? And I think the reason why I'm asking this, I just want to also understand how we should think about the revenue and margin growth needed to get to your low-3x range and what you're assuming around the UNH contract.

Rishi, it's -- Yes. Rishi, it's Charlie. Look, any kind of thoughts about, call it, starting range for leverage is going to be dependent on any transaction we might ultimately achieve from radiology. And then we're not here to discuss any type of potential multiple ranges of potential proceeds. So that's one of the unknowns. What we did try to provide is our best view of the starting denominator for Pediatrix Medical Group and our current state of total net debt. And it's not a known answer to how to get from one to the other related to radiology transaction. So I think I would leave it at Stephen's comments that we would have an interest in repayment of debt through any proceeds of the transaction, whatever those may be, and a philosophical intent to maintain a very strong balance sheet and a moderate leverage profile.

And then -- sorry. As you think about your pro forma capital structure post the sale of Radiology, do you think you need more prepayable debt given your high free cash flow? Or just can you talk about your capital allocation post the radiology sale?

It's Stephen. I don't -- look, we only have 2 bonds outstanding, and we have an undrawn $1.2 billion credit facility. So while -- I'm not going to speak to the specifics of how we may deploy those proceeds, but there aren't that many options. In terms of general capital allocation going forward, I think we've given you most of the moving parts. I mean, if you look at the -- as the discussion around -- the goal is to drive towards, call it, $300-plus million of EBITDA over the next couple of years. And you think about the capitalization or the leverage we have today, a range of whatever expected proceeds you might come up with on your own for radiology, it's fairly clear that we should have a substantial amount of free cash flow to cover and very little in terms of CapEx, such that we can internally fund a very significant level of acquisition-driven growth before even having to think about additional capital markets activity.

Next, we will go to the line of Whit Mayo with UBS.

I just had couple of really quick questions. Most has been covered already. But payer mix for Pediatrix, can you just remind us what it looks like on volume and then on revenue? I'm just trying to remember the differential between commercial reimbursement and government reimbursement at this point.

Yes. Whit, it's Charlie. Across the Pediatrix Medical Group, as I think you know, our sources of the -- our payer sources are predominantly commercial insurance and Medicaid. Across our patient population, some are in the range of -- half or more of the patient population, particularly in the neonatology is Medicaid ultimately. But that makes up a significantly lesser percent of net revenue just because of the lower payer rates across states for Medicaid. And that's how we've always looked at it.

And at this time, I'm showing no further questions in queue. Please continue.

Okay. Thank you, Cynthia. If there are no further questions, thanks, everyone, for participating this morning. And we look forward to speaking with you at the end of the quarter.

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