ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) |
(Zip Code) |
Title of Each Class |
Trading Symbol |
Name of Each Exchange on Which Registered | ||
☒ |
Accelerated filer |
☐ | ||||
Non-accelerated filer |
☐ |
Smaller reporting company |
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Emerging growth company |
PART I |
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3 |
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30 |
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50 |
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50 |
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50 |
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50 |
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PART II |
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51 |
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54 |
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56 |
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74 |
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75 |
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109 |
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109 |
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109 |
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PART III |
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111 |
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111 |
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111 |
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111 |
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112 |
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PART IV |
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113 |
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117 |
ITEM 1. |
BUSINESS |
• | Build upon core competencies . |
• | Promote same-unit and organic growth . |
• | Acquire physician practice groups. |
• | Strengthen and broaden relationships with our partners . |
• | Focus on transformation and restructuring initiatives |
external resources. We believe these strategic initiatives, together with our continued plans to invest in focused, targeted and strategic organic and acquisitive growth, position us well to deliver a differentiated value proposition to our stakeholders while continuing to provide the highest quality care for our patients. |
• | Clinical Research. in-depth look at our specialties. This nationwide perspective allows us to better anticipate future needs and opportunities. |
• | Quality and Safety. |
• | Continuous Quality Improvement (“CQI”) . |
• | Patient Safety Organization (“PSO”). |
and analysis of quality data. As a federally-listed PSO, our mission to improve the safety of care rendered is supported by the dissemination of best practices information and implementation of patient safety programs. Both our anesthesiology HRO program and Women’s and Children’s HRO program aim to provide “Just Culture” training to our clinicians. The complex curriculum has been customized to meet our affiliated physician practices’ needs and is based on principles outlined by the Agency for Healthcare Research and Quality (“AHRQ”), Institute for Healthcare Improvement, National Patient Safety Foundation and Team STEPPS, the teamwork system developed by the AHRQ and the Department of Defense. |
• | Simulation. in situ low-volume critical situations. To meet the needs of our health care providers, hospital and ASC partners, as well as our patients, MEDNAX offers a variety of customized simulation programs with the aim of instilling competence and confidence with one goal in mind: improved outcomes. Our Simulation Program has gained provisional accreditation by the Society for Simulation in Healthcare, a required first step towards attaining full accreditation, and currently offers highly interactive programs for neonatology, anesthesiology and hospital-based medicine practices. The effects of simulation are proven as a performance improvement method and are known to lead to enhanced communication and improved patient outcomes. |
• | Education. |
• | Innovation. point-of-care diagnostics and advanced data analytics are currently shaping the future of medicine. Our team is actively engaged in designing projects that we believe will allow us to prevent disease, offer precision care and further optimize patient outcomes. |
• | BabySteps ® . |
MEDNAX Clinical App (“MCA”). The NICU version will be referred to as “BabySteps 2.0,” but this advance provides an opportunity to expand use of the application to our other hospital-based specialties. MCA/BabySteps 2.0 is currently being piloted in certain locations with a plan to roll it out across additional NICUs in 2020. The plan for broader use across other hospital-based specialties is under development. |
• | Clinical Data Warehouse. de-identify and transfer data from our electronic health records that reside in BabySteps to our “clinical data warehouse” that since inception has accumulated clinical information on more than 1.5 million patients and over 27 million patient days. With comprehensive reporting tools, our physicians are able to use this information to benchmark outcomes, enhance clinical decision-making and advance best practices at the bedside. Using a variety of clinical performance markers, our de-identified data warehouse also helps us track medication and procedure interactions, link treatments to outcomes and identify opportunities to enhance patient outcomes. Our clinical data warehouse also helps us to identify which prospective clinical trials are most important and allows us to monitor the impact of our continuous quality improvement initiatives. |
• | MEDNAX Qualified Clinical Data Registry (“QCDR”) |
• | Nextgen ® . |
• | Charge Capture. |
• | Radiology Clinical Data Warehouse. |
• | MEDNAX Learning Center ® . web-based education platforms also function as important educational adjuncts to our affiliated physician groups, providing |
a rich source of ongoing medical education for our physicians and enabling physicians to discuss cases with one another through various clinical resources. |
• | Unit Management |
• | Staffing and Scheduling non-medical personnel for our affiliated physician groups. |
• | Recruiting and Credentialing |
• | Billing, Collection and Reimbursement |
physicians. We provide our affiliated physicians and other clinicians with a training curriculum that emphasizes detailed documentation of and compliant coding protocols for all procedures performed and services provided, and we provide comprehensive internal auditing processes, all of which are designed to achieve compliant coding, billing and collection of revenue for physician services. Generally, our billing and collection operations are conducted from our business offices located across the United States and in Puerto Rico, as well as our corporate offices. |
• | Risk Management |
• | Compliance |
• | Other Services |
• | a Chief Compliance Officer who reports to the Board of Directors on a regular basis; |
• | a Compliance Committee consisting of our senior executives; |
• | a formal internal audit function, including a Senior Director of Internal Audit who reports to the Audit Committee on a regular basis; |
• | our Code of Conduct |
• | our Code of Professional Conduct – Finance |
• | a disclosure program that includes a mechanism to enable individuals to disclose on a confidential or anonymous basis to the Chief Compliance Officer or any person who is not in the disclosing individual’s chain of command, issues or questions believed by the individual to be a potential violation of criminal, civil, or administrative laws or of company policies or procedures; |
• | an organizational structure designed to integrate our compliance objectives into our corporate offices, regions and practices; and |
• | education, monitoring and corrective action programs designed to establish methods to promote the understanding of our Compliance Program and adherence to its requirements. |
ITEM 1A. |
RISK FACTORS |
• | federal laws (including the federal FCA) that prohibit entities and individuals from intentionally (or with reckless disregard or deliberate ignorance) presenting or causing to be presented false or fraudulent claims to Medicare, Medicaid and other government-funded programs, or improperly retaining known overpayments; |
• | When an entity is determined to have violated the federal FCA, it must pay three times the actual damages sustained by the government, plus mandatory civil penalties of between $11,463 and $22,927 for each separate false claim. Suits filed under the federal FCA, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals (known as “relators” or, more commonly, as “whistleblowers”) may share in any amounts paid by the entity to the government in fines or settlement. In addition, certain states have enacted laws modeled after the federal FCA. Qui tam actions have increased significantly in recent years, causing greater numbers of healthcare companies to have to defend a false claim action, even before the validity of the claim is established and even if the government decides not to intervene in the lawsuit. Healthcare entities may decide to agree to large settlements with the government and/or whistleblowers to avoid the cost and negative publicity associated with litigation. |
• | The ACA amended federal law to provide that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the federal civil FCA. Criminal prosecution is possible for knowingly making or presenting a false or fictitious or fraudulent claim to the federal government. |
• | a provision of the Social Security Act, commonly referred to as the federal “anti-kickback” statute, that prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration, in cash or in kind, in return for the referral or recommendation of patients for, or for the purchasing, leasing, ordering or arranging for, items and services for which payment may be made, in whole or in part, by federal healthcare programs, such as Medicare and Medicaid; |
• | The definition of “remuneration” has been broadly interpreted to include anything of value, including such items as gifts, discounts, the furnishing of supplies or equipment, credit arrangements, waiver of payments, and providing anything at less than its fair market value. The HHS Office of the Inspector General has issued regulations, commonly known as safe harbors, that set forth certain provisions which, if satisfied in their entirety, will assure healthcare providers and other parties that they will not be prosecuted under the federal anti-kickback statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy each applicable safe harbor element may result in |
increased scrutiny by government enforcement authorities or invite litigation by private citizens under state or federal false claims statutes. |
• | Our relationships with referral sources, including GHC Program patients, are subject to scrutiny under the federal anti-kickback statute and must be structured in a manner to promote compliance. |
• | The penalties for violating the federal anti-kickback statute include imprisonment for up to ten years, fines of up to $100,000 per violation and possible exclusion from federal healthcare programs such as Medicare and Medicaid. Many states have adopted prohibitions similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not only by the government programs such as Medicare and Medicaid. |
• | a provision of the Social Security Act, the federal Physician Self-Referral Law, commonly referred to as the Stark Law, that, subject to certain exceptions, prohibits physicians from making a referral to an entity for certain “designated health services” or “DHS” payable by Medicare if the physician, or an immediate family member of the physician, has a direct or indirect financial relationship (including ownership interests and compensation arrangements) with the entity. The Stark Law also prohibits such an entity from presenting or causing to be presented a claim to Medicare for DHS provided pursuant to a prohibited referral, and provides that certain collections related to any such claims must be refunded in a timely manner. Although the Stark Law is drafted to apply only to Medicare claims, the DOJ has taken the position that it applies to Medicaid claims under an extension of the federal FCA and several courts, including courts in Florida and Texas, have agreed. |
• | The Stark Law is a strict liability statute and therefore, any referrals for Medicare DHS pursuant to a financial relationship that does not meet an exception will be nonpayable and subject to refund to Medicare. In 2010, Congress instructed that any Medicare “overpayment” (that is, Medicare funds to which a person is not entitled) must be returned within 60 days of identification—or risk liability under the FCA’s “obligation” provision. Therefore, claims relating to Stark Law violations must be timely refunded to Medicare or we would risk liability under the federal FCA. |
• | All of our relationships with referring physicians will implicate the Stark Law, including our ownership, physician employment, independent contractor physicians, lease arrangements with physicians, nonmonetary compensation to physicians, and our relationships with hospitals and other entities. Each such financial relationship must satisfy a Stark Law exception. |
• | Because our practices provide DHS within the practice (e.g., radiology services, outpatient drugs, laboratory services, etc.), an exception to the Stark Law must be met with respect to those referrals. Generally, the In-Office Ancillary Services (“IOAS”) Exception is utilized for referrals of DHS made within a physician’s group practice. Alternatively, the Physician Services Exception could also be used to shield referrals of physician services within a physician group. In order to utilize both the IOAS Exception and the Physician Services Exception, the group must, among other things, satisfy the Stark Law’s definition of a “group practice.” The group practice definition also encompasses how a physician practice may compensate its physician shareholders, employees, and independent contractors. For example, group practices are not permitted to distribute profits derived from DHS based directly on the volume or value of referrals. However, there are a number of ways that a group practice can distribute profits, including DHS profits, to its physicians, based indirectly upon referrals, without running afoul of the Stark Law. Our ancillary services revenues must be allocated in a compliant manner to avoid falling outside of the Group Practice definition, which would result in all of our Medicare (and potentially, Medicaid) DHS referral revenues becoming nonpayable and subject to refund. |
• | Violations of the Stark Law result in civil penalties and program exclusions for knowing violations, civil assessment of up to three times the amount claimed. federal law such as the Civil Monetary Penalties Law (“CMPL”) that imposes substantial civil monetary penalties against an entity that |
engages in prohibited activities including but not limited to violations of the Stark or Anti-Kickback laws, knowing submission of a false or fraudulent claim, employment of an excluded individual and the provision or offer of anything of value to a Medicare or Medicaid beneficiary that the transferring party knows or should know is likely to influence beneficiary selection of a particular provider for which payment may be made in whole or in part by Medicare or Medicaid; |
• | “Remuneration” is defined under the CMPL as any transfer of items or services for free or for less than fair market value. There are certain exceptions to the definition of remuneration for offerings that meet the Financial Need, Preventative Care, or Promoting Access to Care exceptions. Sanctions for violations of the CMPL include civil monetary penalties and administrative penalties up to and including exclusion from participation in federal health care programs. |
• | similar state law provisions pertaining to anti-kickback, fee splitting, self-referral and false claims, and other fraud and abuse issues which typically are not limited to relationships involving government-funded programs. In some cases these laws prohibit or regulate additional conduct beyond what federal law affects, including applicability to items and services paid by commercial insurers and private pay patients. Penalties for violating these laws can range from fines to criminal sanctions; |
• | provisions of 18 U.S.C. § 1347 that prohibit knowingly and willfully executing a scheme or artifice to defraud a healthcare benefit program or falsifying, concealing or covering up a material fact or making any material false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services; |
• | federal and state laws related to confidentiality, privacy and security of personal information such as HIPAA, including medical information and records, that limit the manner in which we may use and disclose that information, impose obligations to safeguard that information and require that we notify third parties in the event of a breach; |
• | HIPAA violations can result in both civil monetary penalties and criminal sanctions. HIPAA has ranges of increasing minimum penalty amounts tiered according to the entity’s degree of culpability, with a maximum penalty of $1,500,000 for all violations of an identical provision within a year. Further, HHS has obtained increasingly high dollar settlements from covered entities relating to HIPAA violations over the past several years. |
• | Unsecured Breaches of PHI may also result in unexpected costs in the millions of dollars to us through third party litigation, contractual breaches, and breach notification and remediation. In addition, we may experience reputational harms and a negative market perception when it comes to protecting patient data that could influence our future operations. |
• | state laws that prohibit general business corporations from practicing medicine, controlling physicians’ medical decisions or engaging in certain practices, such as splitting fees with physicians; |
• | federal and state laws governing participation in GHC Programs could result in denial of our application to become a participating provider or revocation of our participation or billing privileges, which in turn, could cause us to not be able to treat patients covered by the applicable program or prohibit us from billing for the treatment services provided to such patients; |
• | federal and state laws that prohibit providers from billing and receiving payment from Medicare and Medicaid for services unless the services are medically necessary, adequately and accurately documented and billed using codes that accurately reflect the services rendered; |
• | federal and state laws pertaining to the provision and coverage of services by non-physician practitioners, such as advanced nurse practitioners, physician assistants and other clinical professionals, physician supervision of such services and reimbursement requirements that may be dependent on the manner in which the services are provided and documented; and |
• | federal laws that impose civil administrative sanctions for, among other violations, inappropriate billing of services to federal healthcare programs, inappropriately reducing hospital inpatient lengths of |
stay for such patients, or employing individuals who are excluded from participation in federally funded healthcare programs. |
• | Provisions of HIPAA that limit how covered entities and business associates may use and disclose PHI, provide certain rights to individuals with respect to that information and impose certain security requirements; |
• | HITECH, which required the OCR to strengthen and expand the HIPAA Privacy Rule and Security Rule and imposes data breach notification obligations; |
• | Other federal and state laws restricting the use and protecting the privacy and security of personal information, including health information, many of which are not preempted by HIPAA, and certain states have proposed or enacted legislation that will create new data privacy and security obligations for certain entities, such as the California Consumer Protection Act (CCPA); |
• | Federal and state consumer protection laws; and |
• | Federal and state laws regulating the conduct of research with human subjects. |
• | We may not be able to identify suitable acquisition candidates or strategic opportunities or implement successfully or realize the expected benefits of any suitable opportunities. In addition, we compete for acquisitions with other potential acquirers, some of which may have greater financial or operational resources than we do. This competition may intensify due to the ongoing consolidation in the healthcare industry, which may increase our acquisition costs. |
• | We may not be able to complete acquisitions of physician practices or services companies or we may complete acquisitions on less favorable terms as a result of changes in tax laws, financial market or other economic or market conditions. |
• | We may not be able to successfully integrate completed acquisitions, including our recent acquisitions. Integrating completed acquisitions into our existing operations involves numerous short-term and long-term risks, including diversion of our management’s attention, failure to retain key personnel, long-term value of acquired intangible assets and acquisition expenses. In addition, we may be required to comply with laws, rules and regulations that may differ not only from those of the states in which our operations are currently conducted but from an expansion in the service offerings we provide in certain states for which the laws, rules and regulations may be different. |
• | We cannot be certain that any acquired business will continue to maintain its pre-acquisition revenue and growth rates or be financially successful. In addition, we cannot be certain of the extent of any unknown or contingent liabilities of any acquired business, including liabilities for failure to comply with applicable laws, or liabilities relating to medical malpractice claims. Generally, we obtain indemnification agreements from the sellers of businesses acquired with respect to pre-closing acts, omissions and other similar risks. It is possible that we may seek to enforce indemnification provisions in the future against sellers who may no longer have the financial wherewithal to satisfy their obligations to us. Accordingly, we may incur material liabilities for past activities of acquired businesses. |
• | We could incur or assume indebtedness and issue equity in connection with acquisitions. The issuance of shares of our common stock for an acquisition may result in dilution to our existing shareholders and, depending on the number of shares that we issue, the resale of such shares could affect the trading price of our common stock. |
• | We may acquire businesses that derive a greater portion of their revenue from GHC Programs than what we recognize on a consolidated basis or that have business models with lower operating margins than ours. These acquisitions could affect our overall payor mix or operating results in future periods. |
• | Acquisitions of practices and services companies could entail financial and operating risks not fully anticipated. Such acquisitions could divert management’s attention and our resources. |
• | An acquisition could be subject to a challenge under the antitrust laws either before or after it is consummated. Such a challenge could involve substantial legal costs and divert management’s attention and resources and could result in us having to abandon the transaction or make a divestiture. |
• | We may not be able to expand the services that our affiliated physicians provide to our hospital partners or the services provided by our services companies to their customers. |
• | We may not be able to attract referrals to our office-based practices or neonatology transports to our hospital-based units. |
• | We may not be able to execute new contractual arrangements with hospitals, including through joint ventures, where we either currently provide or do not currently provide physician services. |
• | We may not be able to work with our hospital partners to develop integrated services programs for which we become a multi-specialty provider of solutions within the maternal-fetal, newborn, pediatric continuum of care. |
• | We may not accurately project same-unit and organic growth performance, or we may experience a shift in the mix of services that certain of our customers request from us, potentially resulting in lower margins. |
• | a substantial portion of our cash flow from operations will be required to service interest and principal payments on our debt and will not be available for operations, working capital, capital expenditures, expansion, acquisitions, dividends or general corporate or other purposes; |
• | our ability to obtain additional financing in the future may be impaired; |
• | we may be more highly leveraged than our competitors, which may place us at a competitive disadvantage; |
• | our flexibility in planning for, or reacting to, changes in our business and industry may be limited; and |
• | we may be more vulnerable in the event of a downturn in our business, our industry or the economy in general. |
ITEM 1B. |
UNRESOLVED STAFF COMMENTS |
ITEM 2. |
PROPERTIES |
ITEM 3. |
LEGAL PROCEEDINGS |
ITEM 4. |
MINE SAFETY DISCLOSURES |
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
|
Base Period |
Years Ended December 31, |
||||||||||||||||||||||
Company/Index |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
||||||||||||||||||
MEDNAX, Inc. |
$ | 100.00 |
$ | 108.40 |
$ | 100.83 |
$ | 80.83 |
$ | 49.92 |
$ | 42.04 |
||||||||||||
S&P 500 Index |
$ | 100.00 |
$ | 99.27 |
$ | 108.74 |
$ | 129.86 |
$ | 121.76 |
$ | 156.92 |
||||||||||||
S&P 600 Health Care |
$ | 100.00 |
$ | 120.39 |
$ | 122.73 |
$ | 165.05 |
$ | 181.17 |
$ | 217.65 |
||||||||||||
NYSE Composite Index |
$ | 100.00 |
$ | 93.58 |
$ | 102.01 |
$ | 118.17 |
$ | 104.94 |
$ | 128.36 |
Period |
Total Number of Shares Repurchased (a) |
Average Price Paid per Share |
Total Number of Shares Purchased as part of the Repurchase Programs |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Repurchase Programs (a) |
||||||||||||
October 1 – October 31, 2019 |
— |
$ | — |
— |
|
(a) | ||||||||||
November 1 – November 30, 2019 |
— |
— |
— |
|
(a) | |||||||||||
December 1 – December 31, 2019 |
13,577 |
$ | 26.12 |
(b) | — |
|
(a) | |||||||||
Total |
13,577 |
$ | 26.12 |
— |
|
(a) |
(a) | We have two active repurchase programs. Our July 2013 program allows us to repurchase shares of our common stock up to an amount sufficient to offset the dilutive impact from the issuance of shares under our equity compensation programs, which was estimated to be approximately 1.3 million shares for 2019, although no shares were repurchased under that program in 2019. Our August 2018 program allows us to repurchase up to an additional $500.0 million of shares of our common stock, of which we repurchased $392.8 million, leaving $107.2 million available as of December 31, 2019. |
(b) | Represents shares withheld to satisfy minimum statutory withholding obligations of $0.4 million in connection with the vesting of restricted stock. |
ITEM 6. |
SELECTED FINANCIAL DATA |
(in thousands, except per share and other operating data) |
2019 |
2018 |
2017 |
2016 |
2015 |
|||||||||||||||
Consolidated Income Statement Data: |
||||||||||||||||||||
Net revenue |
$ | 3,513,542 |
$ | 3,454,810 |
$ | 3,253,391 |
$ | 3,183,159 |
$ | 2,779,996 |
||||||||||
Operating expenses: |
||||||||||||||||||||
Practice salaries and benefits |
2,508,778 |
2,426,376 |
2,227,335 |
2,031,220 |
1,753,505 |
|||||||||||||||
Practice supplies and other operating expenses |
112,766 |
108,851 |
106,444 |
118,416 |
98,480 |
|||||||||||||||
General and administrative expenses |
404,643 |
403,934 |
385,864 |
372,572 |
305,915 |
|||||||||||||||
Depreciation and amortization |
78,860 |
83,832 |
78,856 |
89,264 |
64,228 |
|||||||||||||||
Transformational and restructuring related expenses |
95,329 |
— |
— |
— |
— |
|||||||||||||||
Goodwill impairment |
1,449,215 |
— |
— |
— |
— |
|||||||||||||||
Total operating expenses |
4,649,591 |
3,022,993 |
2,798,499 |
2,611,472 |
2,222,128 |
|||||||||||||||
(Loss) income from operations |
(1,136,049 |
) | 431,817 |
454,892 |
571,687 |
557,868 |
||||||||||||||
Investment and other income |
5,671 |
5,211 |
4,385 |
2,019 |
1,844 |
|||||||||||||||
Interest expense |
(119,381 |
) | (88,789 |
) | (74,556 |
) | (63,092 |
) | (23,110 |
) | ||||||||||
Equity in earnings of unconsolidated affiliates |
7,779 |
6,825 |
952 |
3,185 |
3,127 |
|||||||||||||||
Total non-operating expenses |
(105,931 |
) | (76,753 |
) | (69,219 |
) | (57,888 |
) | (18,139 |
) | ||||||||||
(Loss) income from continuing operations before income taxes |
(1,241,980 |
) | 355,064 |
385,673 |
513,799 |
539,729 |
||||||||||||||
Income tax benefit (provision) |
91,886 |
(96,453 |
) | (80,231 |
) | (189,203 |
) | (204,038 |
) | |||||||||||
(Loss) income from continuing operations |
(1,150,094 |
) | 258,611 |
305,442 |
324,596 |
335,691 |
||||||||||||||
(Loss) income from discontinued operations, net of tax |
(347,608 |
) | 10,018 |
14,930 |
318 |
629 |
||||||||||||||
Net (loss) income |
$ | (1,497,702 |
) | $ | 268,629 |
$ | 320,372 |
$ | 324,914 |
$ | 336,320 |
|||||||||
Per Common and Common Equivalent Share Data: |
||||||||||||||||||||
(Loss) income from continuing operations: |
||||||||||||||||||||
Basic |
$ | (13.78 |
) | $ | 2.84 |
$ | 3.31 |
— |
— |
|||||||||||
Diluted |
$ | (13.78 |
) | $ | 2.82 |
$ | 3.29 |
— |
— |
|||||||||||
(in thousands, except per share and other operating data) |
2019 |
2018 |
2017 |
2016 |
2015 |
|||||||||||||||
(Loss) income from discontinued operations: |
||||||||||||||||||||
Basic |
$ | (4.16 |
) | $ | 0.11 |
$ | 0.16 |
— |
— |
|||||||||||
Diluted |
$ | (4.16 |
) | $ | 0.11 |
$ | 0.16 |
— |
— |
|||||||||||
Net (loss) income: |
||||||||||||||||||||
Basic |
$ | (17.94 |
) | $ | 2.95 |
$ | 3.47 |
$ | 3.52 |
$ | 3.61 |
|||||||||
Diluted |
$ | (17.94 |
) | $ | 2.93 |
$ | 3.45 |
$ | 3.49 |
$ | 3.58 |
|||||||||
Weighted average common shares: |
||||||||||||||||||||
Basic |
83,495 |
91,104 |
92,431 |
92,422 |
93,077 |
|||||||||||||||
Diluted |
83,495 |
91,606 |
92,958 |
93,109 |
93,960 |
|||||||||||||||
Other Operating Data: |
||||||||||||||||||||
Number of physicians at end of year |
4,327 |
4,214 |
4,083 |
3,617 |
3,240 |
|||||||||||||||
Number of births |
792,040 |
793,918 |
808,465 |
807,285 |
803,311 |
|||||||||||||||
NICU admissions |
114,864 |
113,485 |
112,965 |
112,184 |
111,407 |
|||||||||||||||
NICU patient days |
2,014,166 |
1,977,516 |
1,990,521 |
1,977,204 |
1,960,768 |
|||||||||||||||
Number of anesthesia cases |
1,793,349 |
1,844,451 |
1,924,952 |
1,827,194 |
1,533,089 |
|||||||||||||||
Number of radiology studies (1) |
12,028,009 |
11,505,524 |
10,166,227 |
5,755,853 |
5,317,309 |
|||||||||||||||
Consolidated Balance Sheet Data (Continuing Operations): |
||||||||||||||||||||
Cash and cash equivalents |
$ | 112,767 |
$ | 25,491 |
$ | 46,357 |
$ | 55,698 |
$ | 51,572 |
||||||||||
Working capital |
189,689 |
129,008 |
55,565 |
138,179 |
98,998 |
|||||||||||||||
Total assets |
4,145,901 |
5,246,297 |
5,160,065 |
5,339,400 |
4,547,214 |
|||||||||||||||
Total liabilities |
2,646,905 |
2,790,168 |
2,747,133 |
2,578,633 |
2,109,368 |
|||||||||||||||
Borrowings under credit facility |
— |
739,500 |
1,110,500 |
963,500 |
533,500 |
|||||||||||||||
Senior notes outstanding |
1,750,000 |
1,250,000 |
750,000 |
750,000 |
750,000 |
|||||||||||||||
Total equity |
1,498,996 |
2,456,129 |
2,412,932 |
2,760,767 |
2,437,846 |
(1) |
Represents estimated annualized number of studies for years in which acquisitions took place. Does not include studies for the radiology practice acquisition that took place on December 31, 2019. |
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Contracted managed care |
69 |
% | 70 |
% | 70 |
% | ||||||
Government |
24 |
% | 24 |
% | 25 |
% | ||||||
Other third-parties |
5 |
% | 4 |
% | 4 |
% | ||||||
Private-pay patients |
2 |
% | 2 |
% | 1 |
% | ||||||
100 |
% | 100 |
% | 100 |
% | |||||||
• | There are fewer calendar days in the first and second quarters of the year, as compared to the third and fourth quarters of the year. Because we provide services in NICUs on a 24-hours-a-day basis, 365 days a year, any reduction in service days will have a corresponding reduction in net revenue. |
• | The majority of physician services provided by our office-based and anesthesia practices consist of office visits and scheduled procedures that occur during business hours. As a result, volumes at those practices fluctuate based on the number of business days in each calendar quarter. |
• | A significant number of our employees and our associated professional contractors, primarily physicians, exceed the level of taxable wages for social security during the first and second quarters of the year. As a result, we incur a significantly higher payroll tax burden and our net income is lower during those quarters. |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
(Loss) income from continuing operations |
$ | (1,150,094 |
) | $ | 258,611 |
$ | 305,442 |
|||||
Interest expense |
119,381 |
88,789 |
74,556 |
|||||||||
Income tax (benefit) provision |
(91,886 |
) | 96,453 |
80,231 |
||||||||
Depreciation and amortization |
78,860 |
83,832 |
78,856 |
|||||||||
Transformational and restructuring related expenses |
95,329 |
— |
— |
|||||||||
Goodwill impairment |
1,449,215 |
— |
— |
|||||||||
Adjusted EBITDA from continuing operations |
$ | 500,805 |
$ | 527,685 |
$ | 539,085 |
||||||
Years Ended December 31, |
||||||||||||||||||||||||
2019 |
2018 |
2017 |
||||||||||||||||||||||
Weighted average diluted shares outstanding |
83,495 |
91,606 |
92,958 |
|||||||||||||||||||||
(Loss) income from continuing operations and diluted income from continuing operations per share |
$ | (1,150,094 |
) | $ | (13.78 |
) | $ | 258,611 |
$ | 2.82 |
$ | 305,442 |
$ | 3.29 |
||||||||||
Adjustments (1) : |
||||||||||||||||||||||||
Amortization (net of tax of $13,192, $14,793 and $20,452) |
35,668 |
0.43 |
39,743 |
0.43 |
32,042 |
0.34 |
||||||||||||||||||
Stock-based compensation (net of tax of $9,544, $10,284 and $11,223) |
25,807 |
0.31 |
27,626 |
0.30 |
17,555 |
0.19 |
||||||||||||||||||
Transformational and restructuring related expenses (net of tax of $25,739) |
69,590 |
0.83 |
— |
— |
— |
— |
||||||||||||||||||
Goodwill impairment (net of tax of $147,215) |
1,302,000 |
15.59 |
— |
— |
— |
— |
||||||||||||||||||
Net impact from discrete tax events |
(773 |
) | — |
— |
— |
(70,014 |
) | (0.75 |
) | |||||||||||||||
Adjusted income and diluted EPS from continuing operations |
$ | 282,198 |
$ | 3.38 |
$ | 325,980 |
$ | 3.55 |
$ | 285,025 |
$ | 3.07 |
||||||||||||
(1) | Tax rates of 27.0%, 27.1% and 39.0% were used to calculate the tax effects of the adjustments for the year ended December 31, 2019, 2018 and 2017, respectively. The tax rates used for the years ended December 31, 2019 and 2017 exclude the impact of discrete tax events. |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Net revenue |
100.0 |
% | 100.0 |
% | 100.0 |
% | ||||||
Operating expenses: |
||||||||||||
Practice salaries and benefits |
71.4 |
70.2 |
68.5 |
|||||||||
Practice supplies and other operating expenses |
3.2 |
3.2 |
3.2 |
|||||||||
General and administrative expenses |
11.5 |
11.7 |
11.9 |
|||||||||
Depreciation and amortization |
2.2 |
2.4 |
2.4 |
|||||||||
Transformational and restructuring related expenses |
2.7 |
— |
— |
|||||||||
Goodwill impairment |
41.3 |
— |
— |
|||||||||
Total operating expenses |
132.3 |
87.5 |
86.0 |
|||||||||
(Loss) income from operations |
(32.3 |
) | 12.5 |
14.0 |
||||||||
Non-operating expense, net |
3.0 |
2.2 |
2.1 |
|||||||||
(Loss) income from continuing operations before income taxes |
(35.3 |
) | 10.3 |
11.9 |
||||||||
Income tax benefit (provision) |
2.6 |
(2.8 |
) | (2.5 |
) | |||||||
(Loss) income from continuing operations |
(32.7 |
)% | 7.5 |
% | 9.4 |
% |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Operating activities |
$ | 338,467 |
$ | 274,108 |
$ | 483,367 |
||||||
Investing activities |
121,878 |
(124,380 |
) | (552,990 |
) | |||||||
Financing activities |
(393,070 |
) | (170,594 |
) | 90,345 |
Payments Due |
||||||||||||||||||||
Obligation |
Total |
2020 |
2021 and 2022 |
2023 and 2024 |
2025 and Later |
|||||||||||||||
Senior notes (1) |
$ | 2,344,116 |
$ | 101,875 |
$ | 203,750 |
$ | 911,094 |
$ | 1,127,397 |
||||||||||
Operating leases |
102,184 |
25,060 |
41,703 |
22,214 |
13,207 |
|||||||||||||||
$ | 2,446,300 |
$ | 126,935 |
$ | 245,453 |
$ | 933,308 |
$ | 1,140,604 |
|||||||||||
(1) |
Amounts include interest payments at the applicable rate as of December 31, 2019 and assume the amount outstanding under our 2023 Notes and the 2027 Notes will be paid on their maturity dates of December 1, 2023 and January 15, 2027, respectively. |
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Page |
||||
Consolidated Financial Statements |
||||
76 |
||||
80 |
||||
81 |
||||
82 |
||||
83 |
||||
84 |
||||
Financial Statement Schedule |
||||
113 |
/s/ PricewaterhouseCoopers LLP |
Miami, Florida |
February 20, 2020 |
December 31, |
||||||||
2019 |
2018 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | |
$ | |
||||
Restricted cash |
|
|
||||||
Short-term investments |
|
|
||||||
Accounts receivable, net |
|
|
||||||
Prepaid expenses |
|
|
||||||
Other current assets |
|
|
||||||
Assets held for sale |
|
|
||||||
Total current assets |
|
|
||||||
Investments |
|
|
||||||
Property and equipment, net |
|
|
||||||
Goodwill |
|
|
||||||
Intangible assets, net |
|
|
||||||
Operating lease right-of-use assets |
|
|
||||||
Deferred income tax assets |
|
|
||||||
Other assets |
|
|
||||||
Assets held for sale |
|
|
||||||
Total assets |
$ | |
$ | |
||||
LIABILITIES & SHAREHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | |
$ | |
||||
Current portion of finance lease liabilities |
|
|
||||||
Current portion of operating lease liabilities |
|
|
||||||
Income taxes payable |
|
|
||||||
Liabilities held for sale |
|
|
||||||
Total current liabilities |
|
|
||||||
Line of credit |
|
|
||||||
Long-term debt and finance lease liabilities, net |
|
|
||||||
Long-term operating lease liabilities |
|
|
||||||
Long-term professional liabilities |
|
|
||||||
Deferred income tax liabilities |
|
|
||||||
Other liabilities |
|
|
||||||
Liabilities held for sale |
|
|
||||||
Total liabilities |
|
|
||||||
Commitments and contingencies |
|
|
|
|
|
|
|
|
Shareholders’ equity: |
||||||||
Preferred stock; $ par value; |
|
|
||||||
Common stock; $ par value; |
|
|
||||||
Additional paid-in capital |
|
|
||||||
Retained earnings |
|
|
||||||
Total shareholders’ equity |
|
|
||||||
Total liabilities and shareholders’ equity |
$ | |
$ | |
||||
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Net revenue |
$ |
|
$ |
|
$ |
|
||||||
Operating expenses: |
||||||||||||
Practice salaries and benefits |
|
|
|
|||||||||
Practice supplies and other operating expenses |
|
|
|
|||||||||
General and administrative expenses |
|
|
|
|||||||||
Depreciation and amortization |
|
|
|
|||||||||
Transformational and restructuring related expenses |
|
|
|
|
|
|
|
|
|
| ||
Goodwill impairment |
|
|
|
|||||||||
Total operating expenses |
|
|
|
|||||||||
(Loss) income from operations |
( |
) |
|
|
||||||||
Investment and other income |
|
|
|
|||||||||
Interest expense |
( |
) |
( |
) |
( |
) | ||||||
Equity in earnings of unconsolidated affiliates |
|
|
|
|||||||||
Total non-operating expenses |
( |
) |
( |
) |
( |
) | ||||||
(Loss) income from continuing operations before income taxes |
( |
) |
|
|
||||||||
Income tax benefit (provision) |
|
( |
) |
( |
) | |||||||
(Loss) income from continuing operations |
( |
) |
|
|
||||||||
(Loss) income from discontinued operations, net of tax |
( |
) |
|
|
||||||||
Net (loss) income |
$ |
( |
) |
$ |
|
$ |
|
|||||
Per common and common equivalent share data: |
||||||||||||
(Loss) income from continuing operations: |
|
|
|
|
|
|
|
|
| |||
Basic |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Diluted |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
(Loss) income from discontinued operations: |
|
|
|
|
|
|
|
|
| |||
Basic |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Diluted |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Net (loss) income: |
|
|
|
|
|
|
|
|
| |||
Basic |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Diluted |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Weighted average common shares: |
|
|
|
|
|
|
|
|
| |||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
||||||||||||||||
|
Number of Shares |
|
Additional Paid-in Capital |
Retained Earnings |
Total Equity |
|||||||||||||||
|
Amount |
|||||||||||||||||||
Balance at December 31, 2016 |
|
$ | |
$ | |
$ | |
$ | |
|||||||||||
Net income |
— |
— |
— |
|
|
|||||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
|
|
|
— |
|
|||||||||||||||
Issuance of restricted stock |
|
|
( |
) | — |
— |
||||||||||||||
Issuance of restricted stock for acquisition consideration |
|
|
|
— |
|
|||||||||||||||
Stock-based compensation expense |
— |
— |
|
— |
|
|||||||||||||||
Forfeitures of restricted stock |
( |
) | ( |
) | |
— |
— |
|||||||||||||
Repurchased common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Balance at December 31, 2017 |
|
$ | |
$ | |
$ | |
$ | |
|||||||||||
Net income |
— |
— |
— |
|
|
|||||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
|
|
|
— |
|
|||||||||||||||
Issuance of restricted stock |
|
|
( |
) | — |
— |
||||||||||||||
Stock-based compensation expense |
— |
— |
|
— |
|
|||||||||||||||
Stock swaps |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Forfeitures of restricted stock |
( |
) | ( |
) | |
— |
— |
|||||||||||||
Repurchased common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Balance at December 31, 2018 |
|
$ | |
$ | |
$ | |
$ | |
|||||||||||
Net loss |
— |
— |
— |
( |
) | ( |
) | |||||||||||||
Unrealized holding gain on investments, net of tax(1) |
|
|
||||||||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
|
|
|
— |
|
|||||||||||||||
Issuance of restricted stock |
|
|
( |
) | — |
— |
||||||||||||||
Stock-based compensation expense |
— |
— |
|
— |
|
|||||||||||||||
Stock swaps |
( |
) | |
( |
) | ( |
) | |||||||||||||
Forfeitures of restricted stock |
( |
) | ( |
) | |
— |
— |
|||||||||||||
Repurchased common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Balance at December 31, 2019 |
|
$ | |
$ | |
$ | |
$ | |
|||||||||||
(1) |
Presented within retained earnings on both the Consolidated Balance Sheets and the Consolidated Statements of Equity as the balance is immaterial. |
Years Ended December 31, |
||||||||||||
2019 |
||||||||||||
Cash flows from operating activities: |
||||||||||||
Net (loss) income |
$ |
( |
) |
$ |
$ |
|||||||
Loss (income) from discontinued operations |
( |
) |
( |
) | ||||||||
Adjustments to reconcile net income to net cash provided from operating activities: |
||||||||||||
Depreciation and amortization |
||||||||||||
Goodwill impairment |
||||||||||||
Amortization of premiums, discounts and issuance costs |
||||||||||||
Stock-based compensation expense |
||||||||||||
Deferred income taxes |
( |
) |
( |
) |
( |
) | ||||||
Other |
( |
) |
( |
) | ||||||||
Changes in assets and liabilities: |
||||||||||||
Accounts receivable |
( |
) |
||||||||||
Prepaid expenses and other current assets |
( |
) |
( |
) |
( |
) | ||||||
Other long-term assets |
( |
) | ||||||||||
Accounts payable and accrued expenses |
||||||||||||
Income taxes payable |
( |
) |
( |
) |
||||||||
Payments of contingent consideration liabilities |
( |
) |
( |
) |
( |
) | ||||||
Long-term professional liabilities |
( |
) |
||||||||||
Other liabilities |
( |
) |
( |
) |
( |
) | ||||||
Net cash provided by operating activities – continuing operations |
||||||||||||
Net cash provided by operating activities – discontinued operations |
||||||||||||
Net cash provided by operating activities |
||||||||||||
Cash flows from investing activities: |
||||||||||||
Acquisition payments, net of cash acquired |
( |
) |
( |
) |
( |
) | ||||||
Purchases of investments |
( |
) |
( |
) |
( |
) | ||||||
Proceeds from maturities or sales of investments |
||||||||||||
Purchases of property and equipment |
( |
) |
( |
) |
( |
) | ||||||
Proceeds from sales of businesses |
||||||||||||
Other |
||||||||||||
Net cash provided by (used in) investing activities – continuing operations |
( |
) |
( |
) | ||||||||
Net cash used in investing activities – discontinued operations |
( |
) |
( |
) |
( |
) | ||||||
Net cash provided by (used in) investing activities |
( |
) |
( |
) | ||||||||
Cash flows from financing activities: |
||||||||||||
Borrowings on credit agreement |
||||||||||||
Payments on credit agreement |
( |
) |
( |
) |
( |
) | ||||||
Proceeds from issuance of senior notes |
||||||||||||
Payments for financing costs |
( |
) |
( |
) |
( |
) | ||||||
Payments of contingent consideration liabilities |
( |
) |
( |
) |
( |
) | ||||||
Payments on finance lease obligations |
( |
) |
( |
) |
( |
) | ||||||
Proceeds from issuance of common stock |
||||||||||||
Contribution from noncontrolling interests |
||||||||||||
Repurchases of common stock |
( |
) |
( |
) |
( |
) | ||||||
Net cash (used in) provided by financing activities – continuing operations |
( |
) |
( |
) |
||||||||
Net cash used in financing activities – discontinued operations |
( |
) |
( |
) | ||||||||
Net cash (used in) provided by financing activities |
( |
) |
( |
) |
||||||||
Net increase (decrease) in cash and cash equivalents |
( |
) |
||||||||||
Cash, cash equivalents and restricted cash at beginning of year |
||||||||||||
Less cash and cash equivalents of discontinued operations at end of year |
( |
) |
( |
) | ||||||||
Cash and cash equivalents and restricted cash at end of year |
$ |
$ |
$ |
|||||||||
Supplemental disclosure of cash flow information: |
||||||||||||
Cash paid for: |
||||||||||||
Interest |
$ |
$ |
$ |
|||||||||
Income taxes |
$ |
$ |
$ |
|||||||||
Non-cash investing and financing activities: |
||||||||||||
Value of common stock issued for acquisitions |
$ |
$ |
$ |
|||||||||
Equipment financed through finance leases |
$ |
$ |
$ |
|||||||||
Property and equipment included in accounts payabl e |
$ |
$ |
$ |
1. |
General: |
2. |
Summary of Significant Accounting Policies: |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Women’s and Children’s services |
% | % | % | |||||||||
Anesthesiology and related |
% | % | % | |||||||||
Radiology |
% | % | % | |||||||||
% | % | % | ||||||||||
Fair Value |
||||||||||||
Fair Value Category |
December 31, 2019 |
December 31, 2018 |
||||||||||
Assets: |
||||||||||||
Money market funds |
Level 1 |
$ | $ | |||||||||
Short-term investments |
Level 2 |
(1) | ||||||||||
Company-owned life insurance |
Level 2 |
|||||||||||
Mutual funds |
Level 1 |
|||||||||||
Liabilities: |
||||||||||||
Contingent consideration |
Level 3 |
(1) |
Investments were measured at carrying value as of December 31, 2018. See table below. |
December 31, 2019 |
December 31, 2018 |
|||||||||||||||
Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
|||||||||||||
Assets: |
||||||||||||||||
Short-term investments |
$ | (2) |
$ | (2) |
||||||||||||
Long-term investments |
(2) |
(2) |
||||||||||||||
Liabilities: |
||||||||||||||||
2023 Notes |
||||||||||||||||
2027 Notes |
(2) |
Investments were measured at fair value as of December 31, 2019. See table above. |
3. |
Investments: |
December 31, 2019 |
December 31, 2018 |
|||||||||||||||
Short- Term |
Long-Term |
Short-Term |
Long-Term |
|||||||||||||
Corporate securities |
$ | $ | $ | $ | ||||||||||||
Municipal debt securities |
||||||||||||||||
Federal home loan securities |
||||||||||||||||
Certificates of deposit |
||||||||||||||||
$ | $ | $ | $ | |||||||||||||
4. |
Accounts Receivable and Net Revenue: |
December 31, |
||||||||
2019 |
2018 |
|||||||
Gross accounts receivable |
$ | $ | ||||||
Allowance for contractual adjustments and uncollectibles |
( |
) | ( |
) | ||||
$ | $ | |||||||
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Net patient service revenue |
$ | $ | $ | |||||||||
Hospital contract administrative fees |
||||||||||||
Other revenue |
||||||||||||
$ | 3,513,542 |
$ | $ | |||||||||
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Contracted managed care |
% | % | % | |||||||||
Government |
% | % | % | |||||||||
Other third-parties |
% | % | % | |||||||||
Private-pay patients |
% | % | % | |||||||||
% | % | % | ||||||||||
5. |
Property and Equipment: |
December 31, |
||||||||
2019 |
2018 |
|||||||
Building |
$ | $ | ||||||
Land |
||||||||
Equipment and other |
||||||||
Accumulated depreciation |
( |
) | ( |
) | ||||
$ | $ | |||||||
6. |
Business Acquisitions: |
7. |
Goodwill and Intangible Assets: |
December 31, 2019 |
||||||||||||
Gross Carrying Value |
Accumulated Amortization |
Net Carrying Value |
||||||||||
Physician and hospital agreements |
$ | $ | ( |
) | $ | |||||||
Customer relationships |
( |
) | ||||||||||
Trade names |
( |
) | ||||||||||
Patented and other technology |
( |
) | ||||||||||
$ | $ | ( |
) | $ | ||||||||
December 31, 2018 |
||||||||||||
Gross Carrying Value |
Accumulated Amortization |
Net Carrying Value |
||||||||||
Physician and hospital agreements |
$ | $ | ( |
) | $ | |||||||
Customer relationships |
( |
) | ||||||||||
Trade names |
( |
) | ||||||||||
Patented and other technology |
( |
) | ||||||||||
$ | $ | ( |
) | $ | ||||||||
2020 |
$ | |||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
8. |
Discontinued Operations: |
December 31, 2018 |
||||
Assets |
||||
Cash and cash equivalents |
$ | |||
Accounts receivable, net |
||||
Prepaid expenses and other assets |
||||
Property and equipment, net |
||||
Goodwill |
||||
Intangible assets, net |
||||
$ | ||||
Liabilities |
||||
Accounts payable, accrued expenses and other liabilities |
$ | |||
Deferred income taxes |
||||
$ | ||||
9. |
Accounts Payable and Accrued Expenses: |
December 31, |
||||||||
2019 |
2018 |
|||||||
Accounts payable |
$ | $ | ||||||
Accrued salaries and bonuses |
||||||||
Accrued payroll taxes and benefits |
||||||||
Accrued professional liabilities |
||||||||
Accrued contingent consideration |
||||||||
Accrued interest |
||||||||
Other accrued expenses |
||||||||
$ | $ | |||||||
10. |
Operating Leases: |
December 31, 2019 |
||||
Assets: |
||||
Operating lease right-of-use assets |
$ | |||
Liabilities: |
||||
Current portion of operating lease liabilities |
||||
Long-term portion of operating lease liabilities |
||||
Other Information: |
||||
Weighted-average remaining lease term |
||||
Weighted average discount rate |
% |
Year Ended December 31, 2019 |
||||
Operating lease costs |
$ | |||
Variable lease costs |
||||
Other equipment rent |
||||
Other operating lease costs |
||||
Total operating lease costs |
$ | |||
December 31, 2019 |
||||
Operating cash flows for operating leases |
$ |
December 31, 2019 |
||||
2020 |
$ | |||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
||||
Thereafter |
||||
Total minimum lease payments |
||||
Less: Amount of payments representing interest |
( |
) | ||
Present value of future minimum lease payments |
||||
Less: Current obligations |
( |
) | ||
Long-term portion of operating leases |
$ | |||
11. |
Accrued Professional Liabilities: |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Balance at beginning of year |
$ | $ | $ | |||||||||
Assumed liabilities through acquisition |
||||||||||||
Provision (adjustment) for losses related to: |
||||||||||||
Current year |
||||||||||||
Prior years |
||||||||||||
Total provision for losses |
||||||||||||
Claim payments related to: |
||||||||||||
Current year |
( |
) | ( |
) | ( |
) | ||||||
Prior years |
( |
) | ( |
) | ( |
) | ||||||
Total payments |
( |
) | ( |
) | ( |
) | ||||||
Balance at end of year |
$ | $ | $ | |||||||||
12. |
Line of Credit, Long-Term Debt and Finance Lease Obligations: |
December 31, 2019 |
||||||||||||
Principal |
Unamortized Debt Issuance Costs |
Total |
||||||||||
Senior n otes |
$ | $ | ( |
) | $ |
|||||||
Revolving line of credit |
— |
( |
) | ( |
) | |||||||
Total |
$ | $ | ( |
) | $ | |||||||
December 31, 2018 |
||||||||||||
Principal |
Unamortized Debt Issuance Costs |
Total |
||||||||||
Senior n otes |
$ | $ | ( |
) | $ | |||||||
Revolving line of credit |
( |
) | ||||||||||
Total |
$ |
$ | ( |
) | $ | |||||||
December 31, |
||||||||
2019 |
2018 |
|||||||
2023 Notes |
$ | $ | ||||||
2027 Notes |
December 31, |
||||||||
2019 |
2018 |
|||||||
Finance lease obligations |
$ | $ | ||||||
Less: Current portion |
( |
) | ( |
) | ||||
Long-term portion |
$ | $ | ||||||
13. |
Income Taxes: |
December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Federal: |
||||||||||||
Current |
$ | $ | $ | |||||||||
Deferred |
( |
) | ( |
) | ( |
) | ||||||
( |
) | |||||||||||
State: |
||||||||||||
Current |
||||||||||||
Deferred |
( |
) | ( |
) | ||||||||
( |
) | |||||||||||
Total |
$ | ( |
) | $ | $ | |||||||
December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Tax at statutory rate |
% | % | % | |||||||||
State income tax, net of federal benefit |
||||||||||||
Non-deductible expenses |
( |
) | ||||||||||
Change in accrual estimates relating to uncertain tax positions |
— |
|||||||||||
Capital loss on liquidation |
— |
— |
||||||||||
Change in valuation allowance |
( |
) |
— |
— |
||||||||
Impairments |
( |
) |
— |
— | ||||||||
Other, net |
( |
) | ||||||||||
Change in tax law |
— |
( |
) | ( |
) | |||||||
Income tax provision |
% | % | % | |||||||||
December 31, |
||||||||
2019 |
2018 |
|||||||
Allowance for uncollectible accounts |
$ | $ | ||||||
Reserves and accruals |
||||||||
Stock-based compensation |
||||||||
Loss carryforwards |
||||||||
Property and equipment |
||||||||
Other |
||||||||
Deferred tax assets before valuation allowance |
||||||||
Less: Valuation allowance |
( |
) | ( |
) | ||||
Deferred tax assets, net of valuation allowance |
||||||||
Gross deferred tax liabilities: |
||||||||
Amortization |
( |
) | ( |
) | ||||
Accounting method changes |
( |
) | ( |
) | ||||
Accrual to cash adjustment |
— |
( |
) | |||||
Other |
( |
) | ( |
) | ||||
Total deferred tax liabilities |
( |
) | ( |
) | ||||
Net deferred tax assets ( liabilities ) |
$ | $ | ( |
) | ||||
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Balance at beginning of year |
$ | |
$ | |
$ | |
||||||
Increases related to prior year tax positions |
|
|
|
|||||||||
Decreases related to prior year tax positions |
— |
— |
( |
) | ||||||||
Increases related to current year tax positions |
|
|
|
|||||||||
Decreases related to lapse of statutes of limitation |
( |
) | ( |
) | ( |
) | ||||||
Balance at end of year |
$ | |
$ |
|
$ | |
||||||
14. |
Common and Common Equivalent Shares: |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Weighted average number of common shares outstanding |
|
|
|
|||||||||
Weighted average number of dilutive common share equivalents (a) |
— |
|
|
|||||||||
Weighted average number of common and common equivalent shares outstanding |
|
|
|
|||||||||
Antidilutive securities not included in the diluted net income per common share calculation |
|
|
|
|||||||||
(a) |
Due to a loss for the year ended December 31, 2019, no incremental shares are included because the effect would be antidilutive. |
15. |
Stock Incentive Plans and Stock Purchase Plans: |
Number of Shares |
Weighted Average Fair Value |
|||||||
Non-vested shares at January 1, 2019 |
|
$ | |
|||||
Awarded |
|
$ | |
|||||
Forfeited |
( |
) | $ | |
||||
Vested |
( |
) | $ | |
||||
Non-vested shares at December 31, 2019 |
|
$ | |
|||||
Number of Stock Options |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (in years) |
Aggregate Intrinsic Value (in millions) |
|||||||||||||
Outstanding at January 1, 2019 |
|
$ | |
|||||||||||||
Exercised |
( |
) | $ | |
$ | |
||||||||||
Outstanding and exercisable at December 31, 2019 |
|
$ | |
|
$ | — |
||||||||||
16. |
Common Stock Repurchase Programs: |
17. |
Retirement Plans: |
18. |
Commitments and Contingencies: |
19. |
Selected Quarterly Financial Information (Unaudited): |
2019 Quarters |
||||||||||||||||
First |
Second |
Third |
Fourth |
|||||||||||||
Net revenue |
$ | $ |
$ | $ | ||||||||||||
Operating expenses: |
||||||||||||||||
Practice salaries and benefits |
||||||||||||||||
Practice supplies and other operating expenses |
||||||||||||||||
General and administrative expenses |
||||||||||||||||
Depreciation and amortization |
||||||||||||||||
Transformational and restructuring related expenses |
||||||||||||||||
Goodwill impairment |
— |
— |
— |
|||||||||||||
Total operating expenses |
||||||||||||||||
Income (loss) from operations |
( |
) | ||||||||||||||
Investment and other income |
||||||||||||||||
Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Equity in earnings of unconsolidated affiliates |
||||||||||||||||
Total non-operating expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Income (loss) from continuing operations before income taxes |
( |
) | ||||||||||||||
Income tax (provision) benefit |
( |
) | ( |
) | ( |
) | ||||||||||
Income (loss) from continuing operations |
( |
) | ||||||||||||||
(Loss) income from discontinued operations, net of tax |
( |
) | ( |
) | ( |
) | ||||||||||
Net (loss) income |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||
Per common and common equivalent share data (1): |
||||||||||||||||
Income (loss) from continuing operations: |
||||||||||||||||
Basic |
$ | $ | $ | ( |
) | $ | ||||||||||
Diluted |
$ | $ | $ | ( |
) | $ | ||||||||||
(Loss) income from discontinued operations: |
||||||||||||||||
Basic |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
Diluted |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
Net (loss) income: |
||||||||||||||||
Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||
Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||
Weighted average common shares: |
||||||||||||||||
Basic |
||||||||||||||||
Diluted |
||||||||||||||||
(1) | Basic and diluted per share amounts are computed for each of the periods presented. Accordingly, the sum of the quarterly per share amounts may not agree with the full year amount. |
2018 Quarters |
||||||||||||||||
First |
Second |
Third |
Fourth |
|||||||||||||
Net revenue |
$ | $ | $ | |||||||||||||
Operating expenses: |
||||||||||||||||
Practice salaries and benefits |
||||||||||||||||
Practice supplies and other operating expenses |
||||||||||||||||
General and administrative expenses |
||||||||||||||||
Depreciation and amortization |
||||||||||||||||
Total operating expenses |
||||||||||||||||
Income from operations |
||||||||||||||||
Investment and other income |
||||||||||||||||
Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Equity in earnings of unconsolidated affiliates |
||||||||||||||||
Total non-operating expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Income from continuing operations before income taxes |
||||||||||||||||
Income tax provision |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Income from continuing operations |
||||||||||||||||
Income (loss) from discontinued operations, net of tax |
( |
) | ||||||||||||||
Net income |
$ | $ | $ | |||||||||||||
Per common and common equivalent share data (2): |
||||||||||||||||
Income from continuing operations: |
||||||||||||||||
Basic |
$ | $ | $ | $ | ||||||||||||
Diluted |
$ | $ | $ | $ | ||||||||||||
Income (loss) from discontinued operations: |
||||||||||||||||
Basic |
$ | $ | $ | $ | ( |
) | ||||||||||
Diluted |
$ | $ | $ | $ | ( |
) | ||||||||||
Net income: |
||||||||||||||||
Basic |
$ | $ | $ | $ | ||||||||||||
Diluted |
$ | $ | $ | $ | ||||||||||||
Weighted average common shares: |
||||||||||||||||
Basic |
||||||||||||||||
Diluted |
||||||||||||||||
(2) | Basic and diluted per share amounts are computed for each of the periods presented. Accordingly, the sum of the quarterly per share amounts may not agree with the full year amount. |
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. |
CONTROLS AND PROCEDURES |
ITEM 9B. |
OTHER INFORMATION |
ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. |
EXECUTIVE COMPENSATION |
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exerciseprice of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||
(a) |
(b) |
(c) |
||||||||||
Equity compensation plans approved by security holders |
72,808 |
(1) | $ | 32.49 |
9,404,824 |
(2) | ||||||
Equity compensation plans not approved by security holders |
N/A |
N/A |
N/A |
|||||||||
Total |
72,808 |
$ | 32.49 |
9,404,824 |
||||||||
(1) | All shares are issuable under the Amended and Restated 2008 Incentive Plan. |
(2) | Under the Amended and Restated 2008 Incentive Plan, 8,321,355 shares remain available for future issuance, and under the ESPP and the SPP, an aggregate of 1,083,469 shares remain available for future issuance. |
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES |
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULE |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Allowance for contractual adjustments and uncollectibles: |
||||||||||||
Balance at beginning of year |
$ | 1,486,672 |
$ | 1,284,565 |
$ | 1,222,998 |
||||||
Amount charged against operating revenue |
9,383,853 |
8,944,637 |
8,285,317 |
|||||||||
Accounts receivable contractual adjustments and write-offs (net of recoveries) |
(9,425,730 |
) | (8,742,530 |
) | (8,223,750 |
) | ||||||
Balance at end of year |
$ | 1,444,795 |
$ | 1,486,672 |
$ | 1,284,565 |
||||||
(a)(3) |
Exhibits |
(b) |
Exhibits |
2.1 |
||||
2.2** |
||||
3.1 |
||||
3.2 |
||||
4.1 |
||||
4.2 |
4.3 |
||||
4.4 |
||||
4.5 |
||||
4.6 |
||||
4.7 |
||||
4.8 |
||||
4.9 |
||||
4.10+ |
||||
10.1 |
||||
10.2 |
10.3 |
||||
10.4 |
||||
10.5 |
||||
10.6 |
||||
10.7 |
||||
10.8 |
||||
10.9 |
||||
10.10 |
||||
10.11 |
||||
10.12 |
||||
10.13 |
||||
10.14 |
||||
10.15 |
||||
10.16 |
||||
10.17 |
10.18 |
||||
10.19 |
||||
10.20 |
||||
10.21 |
||||
10.22 |
||||
10.23 |
||||
10.24 |
||||
10.25+ |
||||
10.26 |
||||
10.27 |
||||
21.1+ |
||||
23.1+ |
||||
31.1+ |
||||
31.2+ |
||||
32++ |
||||
101.1+ |
Inline Interactive Data File | |||
101.INS+ |
Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||
101.SCH+ |
Inline XBRL Schema Document. | |||
101.CAL+ |
Inline XBRL Calculation Linkbase Document. |
101.DEF+ |
Inline XBRL Definition Linkbase Document. | |||
101.LAB+ |
Inline XBRL Label Linkbase Document. | |||
101.PRE+ |
Inline XBRL Presentation Linkbase Document. | |||
104+ |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* | Management contracts or compensation plans, contracts or arrangements. |
** | Portions of this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K because they are both (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed. The schedules and similar attachments to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. |
+ | Filed herewith. |
++ | Furnished herewith. |
ITEM 16. |
FORM 10-K SUMMARY |
MEDNAX, INC. | ||||||
Date: February 20, 2020 |
By: |
/s/ Roger J. Medel, M.D. | ||||
Roger J. Medel, M.D. | ||||||
Chief Executive Officer |
Signature |
Title |
Date | ||
/s/ Roger J. Medel, M.D. Roger J. Medel, M.D. |
Chief Executive Officer, Director (Principal Executive Officer) |
February 20, 2020 | ||
/s/ Stephen D. Farber Stephen D. Farber |
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
February 20, 2020 | ||
/s/ John C. Pepia John C. Pepia |
Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) |
February 20, 2020 | ||
/s/ Cesar L. Alvarez Cesar L. Alvarez |
Director and Chairman of the Board |
February 20, 2020 | ||
/s/ Manuel Kadre Manuel Kadre |
Lead Independent Director |
February 20, 2020 | ||
/s/ Karey D. Barker Karey D. Barker |
Director |
February 20, 2020 | ||
/s/ Waldemar A. Carlo, M.D. Waldemar A. Carlo, M.D. |
Director |
February 20, 2020 | ||
/s/ Michael B. Fernandez Michael B. Fernandez |
Director |
February 20, 2020 | ||
/s/ Paul G. Gabos Paul G. Gabos |
Director |
February 20, 2020 | ||
/s/ Pascal J. Goldschmidt, M.D. Pascal J. Goldschmidt, M.D. |
Director |
February 20, 2020 | ||
/s/ Carlos A. Migoya Carlos A. Migoya |
Director |
February 20, 2020 | ||
/s/ Michael A. Rucker Michael A. Rucker |
Director |
February 20, 2020 | ||
/s/ Enrique J. Sosa, Ph.D. Enrique J. Sosa, Ph.D. |
Director |
February 20, 2020 |