Mednax, Inc. — FY2021 Form 10-K
Entity and period: The supplied filing is Mednax, Inc.’s annual report for the fiscal year ended December 31, 2021, not a standalone Q4 report. Mednax identifies itself as the successor to Pediatrix Medical Group, Inc.; the filing’s registrant is Mednax, Inc.
Business context
Mednax provides physician services in neonatal, maternal-fetal, pediatric cardiology and other pediatric specialties across 38 states and Puerto Rico. Its network included more than 2,400 affiliated physicians at year-end. Continuing operations are reported as one segment.
Financial performance
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Net revenue | $1.911 billion | $1.734 billion | Up 10.2%; same-unit revenue rose 9.8%. |
| Income from operations | $202.9 million | $98.1 million | Operating margin increased to 10.6% from 5.7%. |
| Income (loss) from continuing operations | $108.0 million | $(9.6) million | Diluted continuing-operations EPS was $1.26 versus $(0.11). |
| Net income (loss) | $131.0 million | $(796.5) million | Includes discontinued operations; FY2020 included substantial divestiture-related losses. |
| Adjusted EBITDA from continuing operations | $265.5 million | $219.9 million | Non-GAAP measure; excludes specified items. |
| Adjusted EPS from continuing operations | $1.63 | $0.95 | Non-GAAP measure; excludes specified items. |
| Cash from continuing operations | $113.8 million | $153.9 million | Down $40.1 million, primarily reflecting working-capital movements. |
| Cash and cash equivalents | $387.4 million | $1.124 billion | Decrease primarily associated with redemption of the 2023 Notes. |
| Debt at December 31 | $1.0 billion | $1.75 billion | Year-end 2021 debt was fixed-rate senior notes; no revolver borrowings. |
Practice salaries and benefits were 67.9% of revenue, compared with 68.9% in 2020; general and administrative expenses were 13.8%, versus 14.4%. The 2021 income-tax rate was 20.1%, including discrete tax benefits; management reported 29.1% excluding discrete tax impacts.
Year-end current assets were $840.6 million and current liabilities were $427.4 million. The filing states working capital of “$413.2 billion,” which appears inconsistent with the balance sheet; the balance-sheet amounts imply approximately $413.2 million. DSO rose to 55.2 days from 52.3 days. Gross continuing-operations receivables were $1.39 billion, with a $1.092 billion allowance for contractual adjustments and uncollectibles.
Material changes versus prior periods
- Revenue and patient volumes recovered from COVID-19 impacts; management said service volumes returned to pre-pandemic levels during 2021. Same-unit revenue growth reflected higher volumes and improved reimbursement factors, including a lower share of patients in government programs, higher hospital administrative fees and modest managed-care contracting gains.
- Continuing-operations income improved from a loss in 2020. Restructuring and transformation costs fell to $22.1 million from $73.8 million, while practice salaries and benefits increased 8.7% as pandemic-related reductions in 2020 unwound and incentive compensation rose.
- Discontinued-operations results improved markedly: 2020 included losses related to divestitures of anesthesiology and radiology businesses; 2021 included a net gain from adjustments to the anesthesiology sale loss, partly offset by a radiology sale adjustment.
- Mednax acquired nine physician practices in 2021 for total consideration of $34.9 million. It also made a $20.0 million strategic investment in a pediatric primary, urgent-care and telehealth company.
Outlook, financing, risks and unusual items
- Outlook: The filing provides no specific revenue, earnings or margin guidance. Management expected operating cash, cash on hand and credit availability to fund working capital, anticipated acquisitions, capital expenditures and other needs for at least 12 months from the report date.
- Post-year-end refinancing: On February 11, 2022, Mednax issued $400 million of 5.375% senior notes due 2030 and amended its credit agreement, including a $250 million term loan and a $450 million revolving facility. These proceeds, borrowings and cash on hand funded redemption of $1.0 billion of 6.25% notes due 2027 and associated costs. This transaction occurred after the reporting date.
- Cash flow and liquidity: The $759.8 million cash outflow for debt redemption was the largest financing use in 2021. Management noted that physician incentive payments typically make first-quarter operating cash flow negative. A/R growth also reduced 2021 operating cash generation.
- Key risks: Medicaid and other reimbursement changes, the No Surprises Act and related payment disputes, declining U.S. birth rates, dependence on hospital contracts, clinician recruitment and compensation, COVID-19 uncertainty, and concentration in five states (62% of 2021 revenue, with Texas at about 30%). The company also faces healthcare billing and compliance, malpractice and cybersecurity risks.
- Contingencies and estimates: Professional-liability reserves totaled $308.8 million, including retained liabilities from divested businesses; the company self-insures a significant portion. Government audits and investigations may arise in the ordinary course, but the filing did not record an accrual for those matters because potential liability could not be reasonably estimated. The auditor identified valuation of patient-service receivables and the allowance for contractual adjustments and uncollectibles as a critical audit matter.
- Other notable items: CARES Act relief payments to continuing operations were $26.1 million in 2021 and $22.0 million in 2020. A $7.3 million gain on sale of a building and a $14.5 million loss on early debt extinguishment affected 2021 results. The auditor gave unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Confirm the applicable issuer and reporting scope: the supplied document is Mednax, Inc.’s FY2021 10-K, although the request names Pediatrix Medical Group.
- Check the reported working-capital figure: the text says $413.2 billion, while balance-sheet current assets less current liabilities indicate approximately $413.2 million.
- Review receivables, collection trends and allowance assumptions, including the increase in DSO and the auditor’s critical audit matter.
- Assess the February 2022 refinancing’s final debt balance, variable-rate exposure, covenant headroom and interest savings; those developments postdate the December 31, 2021 balance sheet.
- Separate continuing-operations performance from discontinued operations and evaluate non-GAAP Adjusted EBITDA and Adjusted EPS reconciliations.
- Track reimbursement and out-of-network payment effects, clinician costs, birth trends, hospital contract renewals and geographic concentration.