The skies are clearing for Pediatrix Medical Group Inc.
The Fort Lauderdale-based healthcare services company, which used to be called Mednax, recently completed the migration of its revenue cycle management operations to a hybrid system using in-house staff and Guidehouse consultants, and it appears it will cost less than anticipated . Sales of most of the company’s practices are on track to be completed by the end of the year, leaving CEO Jim Swift and his team focused on hospital businesses and maternal-fetal practices. AND Third quarter adjusted EBITDA increased approximately 20 percent although revenue only increased slightly from the previous year.
Those developments, as well as stronger cash flows, have Swift ready to get back into the M&A game.
“We think there’s a real opportunity that will present itself at the end of the year and then into 2025,” Swift said on a Nov. 1 conference call with analysts. “We believe there are a significant number of acquisitions that we can get down the road on now.”
A big help in allowing Pediatrix to return to purchasing mode – Swift’s sweet spot; (he was the company’s chief development officer from 2013 to 2022) is the successful move of its RCM function, which had been an operational and financial weak point for about two years while Pediatrix attempted to integrate its billing with R1 RCM systems. Newly appointed CFO Kasandra Rossi told analysts that Pediatrix’s collaboration with Guidehouse has required the addition of about 135 people, about 10 percent fewer employees than expected.
“The fact that between March 2024 and September 2024 we moved $1.6 billion in revenue and $800 million in [accounts receivable] without material interruptions is a feat,” Rossi said. “And now we’re going to move into automation, looking for ways to improve performance. […] “We absolutely hope for better performance.”
Another potential tailwind for Pediatrix’s finances could come from ending most of its office-based practices. Executives had previously said those sales should increase adjusted EBITDA by $30 million annually, but Rossi said Nov. 1 that figure could grow as a slimmed-down organization uncovers more cost-saving opportunities.
Good news about RCM’s transition and optimistic outlook led to Pediatrix stock (Ticker: Maryland) a big bang on November 1st. They jumped from $12.32 to $15.31, a 23 percent move that left them at their highest level since March 2023 and increased the company’s market capitalization to $1.3 billion.
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