The skies are clearing for Pediatrix Medical Group Inc.
The Fort Lauderdale-based physician services company that used to be called Mednax recently completed the migration of its revenue cycle management operations to a hybrid system that uses both in-house staffers and consultants from Guidehouse—and looks set to cost less than forecast. Sales of most of the company’s office-based practices are on track to be completed by year’s end, leaving CEO Jim Swift and his team focused on hospital-based business and maternal fetal office practices. And third-quarter adjusted EBITDA jumped about 20 percent even though revenues only rose slightly from the prior year.
Those developments, as well as stronger cash flows, have Swift ready to jump back into the M&A game.
“We think there’s a real opportunity there coming up at the tail end of the year here and then into ’25,” Swift said on a Nov.1 conference call with analysts. “We think there’s a meaningful number of acquisitions that we can start down the path on now.”
A big help in letting Pediatrix move back into buying 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 pain point for about two years as Pediatrix attempted to integrate its billing with R1 RCM’s systems. Newly named CFO Kasandra Rossi told analysts that Pediatrix’s collaboration with Guidehouse has called for about 135 people to be added, roughly 10 percent fewer employees than had been expected.
“The fact that between March of 2024 and September of 2024 that we moved $1.6 billion of revenue and $800 million of [accounts receivable] with no material disruptions is a feat,” Rossi said. “And now we’re going to move to automation, looking for ways we can improve performance […] We absolutely expect there will be improved performance.”
Another potential tailwind for Pediatrix’s finances could come from the completion of most of its office-based practices. Executives had previously said those sales should boost adjusted EBITDA by $30 million annually but Rossi said Nov. 1 that figure could grow as a slimmed-down organization digs up more cost-saving opportunities.
The good RCM transition news and upbeat outlook gave shares of Pediatrix (Ticker: MD) a big pop Nov. 1. They jumped from $12.32 to $15.31, a 23 percent move that left them at their highest level since March 2023 and grew the company’s market capitalization to $1.3 billion.
