Executives
Vivian Lopez-Blanco - Chief Financial Officer
Analysts
Gary Taylor - Citi
MEDNAX, Inc. (MD) Citi Global Healthcare Conference February 26, 2013 10:20 AM ET
Gary Taylor - Citi
Today to talk with MEDNAX, we have Vivian Lopez-Blanco who is the Chief Financial Officer with us today. MEDNAX, as I am sure most of you know, through its professional corporation employs more than almost 1900 physicians now at 34 states. Primary specialty is neonatal, but also increasingly into anesthesia provide services of over 300 NICUs in an anesthesia. Right now, it has more than 600 anesthesiologists I thought it was over 800, but am I including the other….
Vivian Lopez-Blanco - Chief Financial Officer
Right, you are including the…
Gary Taylor - Citi
Close to 900 with the extenders.
Vivian Lopez-Blanco - Chief Financial Officer
Right.
Gary Taylor - Citi
So, welcome, thanks for joining our fireside chat. First question, I want to ask just kind of big picture question, one of the conference being this year, it’s a value imperative and really as a team we have tried to think about one of the major challenges faced in the healthcare industry over the next 5 to 10 years is trying to transition or navigate a move the way from paying for volume of services provided to both government and private payers wanting to pay for value of service that’s being provided. However, that value is being defined. So, the first question is do you think that this is right, why or why not? And if it is, what does MEDNAX have to do with anything that to succeed in that changing payer environment?
Vivian Lopez-Blanco - Chief Financial Officer
Sure. So, first off, as far as value goes, we definitely believe in that thesis even before it became popular and basically a point of conversation now with the Affordable Care Act and Obamacare and everything else. Just from the late 90s, on the neonatology side, basically pediatrics has the largest clinical data warehouse of outcomes, which now over 50 million and over 800,000 patients in it. So, we have been measuring outcomes and hopefully impacting the quality of care for neonates for all of these years. On the anesthesia side, we have also started with a clinical data warehouse that does measure the outcomes of patients in the different settings under the care of anesthesia.
And so we definitely believe in that theory and it’s one that frankly for the company currently is playing out very well, because that’s one of the value propositions we bring to physicians. I think as we go through this evolution of healthcare and how healthcare is going to be – the delivery of healthcare is going to change in our country here over the next years or so. I do believe that we are well-positioned to be able to deal with that, because we have been doing that for a long time. Last year, we published over 70 articles and our physicians really doing great with that concept and even with the anesthesiologists when they come in that being a newer specialty for us. That’s really one of the reasons why they come to MEDNAX versus going to potentially another employer. Because at the end of the day, they know that we are going to make an investment in basically being able to measure these outcomes, participate in clinical trials. And so it is something that for us is top of mind all the time.
Gary Taylor - Citi
There is a lot of discussion in the marketplace about payment model reform again I think KeyBanc has really driven a lot of that conversation. I think the most investors when they think about that that means providers taking more risk in some form or another. And usually that means you have to have a primary care piece really to be able to do that and the specialists tend to be carved out somewhere further along the line. Is there any natural evolution where you think MEDNAX and your physicians either side of your business get paid differently or do you think the paradigm where hospitals or primary care groups might be taking some postulation risk on the front end carving out the specialties on the back, is that the most logical way that this plays out?
Vivian Lopez-Blanco - Chief Financial Officer
Well, I am not sure if that’s exactly how it’s going to play out. I do think that there will be different payment models. And frankly at the moment who knows how they are going to evolve, we have a couple of programs that we are basically piloting in several – one of our hospitals namely one in our hospital in Georgia that’s called the High Reliability Organization because I do believe again I think the point there on the scene is going to be really painful performance and how can you basically really represents that you are going to be able to make a bigger difference on the hospital as it relates to the money that they are going to save, because the outcomes are better by using one of our groups. And so I do think that basically this is kind of in the infancy stages, Gary. I think that we will see how all of this develops. But again really keeping with the theme that I talked about in the last question I do think that having this information to be able to measure outcomes and be able to say exactly how you can drive the cost, because of these better outcomes, it’s going to be very impactful, because I think you are going to have to make yourself relevant and demonstrate that there is a difference, because it’s something that you have been able to improve upon.
Gary Taylor - Citi
Got it. Keeping on kind of the healthcare reform subject, how much have you guys thought about the concept, which come up before just kind of Medicaid crowd out whereas you expand Medicaid eligibility up the income scale that once you stayed showing or once you kind of go above 100%, you go to 133% where a lot of states are going to go through apparently forward it’s going to go through. I guess, there are some people that have minimum wage jobs and do have some forms of commercial coverage that could kind of slide into Medicaid, and obviously Medicaid pays you a lot less than commercial does. So, have you had much time to kind of model out or think about you think there is potentially any material financial impact on the company from payer mix shift as enrollment really gets going?
Vivian Lopez-Blanco - Chief Financial Officer
Yeah, we really don’t believe so on the pediatrics side, because as you well said all of our states really pretty much were at the 133% level currently and that is really related to women and infants. And so pretty much with that said, we don’t believe that, that will be impactful for us at all. I mean on the anesthesia side there is very slight Medicaid businesses. So, it’s not really on our radar.
Gary Taylor - Citi
And even in Texas, which clearly has very low levels of overall eligibility requirements for Medicaid, so they are well below 133%, but for children and women they are higher there?
Vivian Lopez-Blanco - Chief Financial Officer
Correct, yeah, that’s what happens, because it’s really for that class, that it’s higher.
Gary Taylor - Citi
Okay that’s great. And other kind of reforms you are just going through what I am sure is becoming a favorite topic of conversation in Medicaid period, would you think that was going to come up? So, you guys spent some time talking about on the last call, my question is really just kind of spirit of the law. I guess, clearly few physicians or few primary care docs in the country voluntarily take incremental Medicaid patients today. The administration here there is going to be a bolus of Medicaid patients coming with expansions. And I think wanting to raise those primary care rates, so these office-based physicians would actually accept these new patients coming through.
And I guess my thinking is maybe the spirit of the law was that this parity bump was really for office-based physicians not hospital-based physicians. But then when you actually get into the nuance of how do you define what primary care is the way they ended up defining made a good portion of your physicians eligible for payment. And maybe I am just characterizing how you think that’s developed so correct me if I have, but is there any concern that I guess investors are concerned that after a proposed rule, a common period of final rule on three clarifications from CMS, there still is more to come in terms of guidance how parity should be implemented? And is there any concern that maybe just a class somehow of hospital-based physicians won’t be eligible for that bump?
Vivian Lopez-Blanco - Chief Financial Officer
Yeah. And I think that maybe there has been some noise on that, because I know that one of -- another company in our space basically has talked about some concerns that they potentially might have on who is qualifying on that, but as we speak to our physicians and as we obviously have people on the ground that have been looking over this rule. Again for us basically the neonatologist is a board certification that is specifically addressed in the rule. So, I think – and I think the other one is pediatric emergency medicine. And so it is related to physicians that are in those board certified specialties and so for us there is approximately like 99% of our physicians are a board certified in those specialties. And then obviously the other qualifier on that is that you have to have 60% of the codes that basically you are going to be billing for have to be in that set of codes that CMS has defined that are covered under this parity rule. And that really includes neonatal intensive care and critical care codes.
And so from our perspective, I don’t have that same level of, I guess, questioning regarding that at the moment as it relates to the government and as it relates to implementation of the rules. It’s very interesting that, that has happened recently, but as far as from our perspective right now, what I have said even a couple of weeks ago, Gary on our call as you know is that we are still just waiting for the, what I am describing as the practical aspect of this rule at the moment, which is basically getting through the process of that gestation and getting through the process of the states submitting their applications to CMS, which is due at the end of March. And then CMS has 90 days to review the state’s applications on basically how the states are describing, how they are going to actually implement this rule and how they are going to be able to submit to CMS the reimbursement. And so that’s really what we are waiting for at the time. From our perspective, we felt that was pretty clear on that we are eligible based on the board’s certification of our physicians as well as the codes that are included in the subset for CMS.
Gary Taylor - Citi
Good. Another issue that it’s kind of been over the last year or so bit of recurring investor concerns, just around the whole issue of elective deliveries, and I think LeapFrog just has some data out last week that if it’s to be believed show that elective deliveries were down 30% or 40% or something in 2012. And Dave actually sent me some good information that you guys had internally, but I have had some questions from investors that have kind of a hard time squaring what – maybe what the LeapFrog data shows. And if that data was true, how your same-store NICU statistics possibly could be as good as they are? So, either that data is no good or you guys haven’t been doing these elective deliveries for sometime, which I know Roger has talked about being at the forefront supporting not doing that etcetera, but maybe just help us kind of bridge kind of where we have been, where we are and maybe reasons why some of this data that looks like there is dramatic movement in that market isn’t really impacting kind of volumes that you are seeing?
Vivian Lopez-Blanco - Chief Financial Officer
Yeah. So, as Gary mentioned, this discussion has been around even last year, I think it had come up. And so for us there is a couple of things. First of all, I don’t really know the LeapFrog’s survey really. I know they have I think 800 hospitals in it or whatnot, but I really don’t know basically the composition of those hospitals. What I can’t speak for is our internal data, because obviously when things like this come up, I look at it and I talk to our clinicians about it. And so from our perspective as Gary said, we have those HR guidelines are really no new guidelines, when we look at our clinical data warehouse which is the data warehouse that I talked about earlier today that has about 15 million entries in it and about 800,000 patients in it. We look at that.
We can’t really differentiate between elective C-sections and C-sections, but what I can tell you is that the overall C-sections is really not such a big number and we have it by number of weeks. And so when we look at that, we don’t really see changes in that again. When we talk to our clinicians, our clinicians will tell you that they do believe that certainly and potentially in some rural areas, areas where you didn’t have such high activity centers, you have to look at whenever you are looking at the 300 or so NICUs that we are in typically a large percentage of those are in very high acuity centers. And so really the idea that you are doing an elective C-section on a neonate is just not really when we talk to our docs it’s just not something that happens like that. And so we haven’t seen it, because I don’t think that again our population of babies that are pretty sick, kids are really going to be in that area. And so we just haven’t seen the change in our data.
Gary Taylor - Citi
Do you get the sense, so that outside of MEDNAX, the industry and some lower net levels, NICUs, that practice of medicine on this particular issue really is changing dramatically as the LeapFrog data showed and Florida went from 19% elective deliveries before 39 months to 14%, all in one year, which just almost like staggers, but that could really be accurately moving by a third or fourth in a single year. Do you get any thought that the industry outside of MEDNAX is moving that quickly or?
Vivian Lopez-Blanco - Chief Financial Officer
Yeah, there is a couple of things. I think that generally again as we talk to our docs about it, it’s more that I think it’s not so much I think in some of these more urban centers, but I think there is more of a general awareness. And certainly like I said in more rural areas, where a less acuity hospitals were, CMS is coming out with all of these things that by the way, we totally support on a better prenatal care and all of these things that really do improve the quality of care. And so we do think that there is some of that occurring generally, because that’s kind of the day that we are living in and we support all of that, because I think last year when some of this came up, we had talked even about some of the initiatives that were – we were participating in, in the State of Taxes on some of their programs to basically improve the quality of care per month etcetera. And so, we believe that I do think there is some of that in the country. Again, I think that from the population of the neonates and the very sick babies that we take care of, you are not going to really see that, because basically there isn’t a big part of that.
Gary Taylor - Citi
Speaking with the pediatric side of business, it seems like the last couple of years has been pretty active on the acquisition side and I guess at one point I was thinking that maybe all the pending tax law changes were driving potential acceleration in physicians wanting to sell their practice? And then overall certainly there is air of uncertainty for any small physician group, I think steering down (PPAC) and wondering how they are going to navigate that. Now that we are in 2013, any material change in terms of how active that pipeline is, is this still an elevated level of uncertainty with quick physicians and this is kind of a unique market for you, because you guys have a fourth or the third of the non-academic market, you have done it for 25 years plus, you’ve probably talked to every single neonatal group at one point or another that’s out there, but what are you hearing from those guys?
Vivian Lopez-Blanco - Chief Financial Officer
Basically, the pipeline is more robust than ever. And I think it’s because of some of the things that you mentioned Gary, which is really I don’t think the uncertainty in healthcare is going away anytime soon. I think there is basically going to be changes in, as I said earlier, in the delivery of healthcare in the United States and I think it’s really hard for a single physician practice to be able to do it all on their own. I mean, there has been a lot of loss that had been passed certainly on the HIPPA high tax, all security type, electronic medical records etcetera. And really – that’s really hard for a small physician group practice. I mean, they did not go to medical school to figure out how to implement the system basically a lot of them have smaller practices, where they don’t really have managed care professionals or IT people etcetera, a lot of the stuff sometimes get outsourced.
And so I think again for us yes, the environment is very robust, because frankly where we are headed towards with healthcare being part of a national physician group practice that basically allows you to go back and really concentrate on taking care of the patients and delivering quality healthcare and not have to worry about the backend of this really it’s just the prime opportunity. And so even though Gary is correct especially on the neonatology side, where pretty much we know all the groups that are out there, a lot of them have come to us recently, even though they have known Roger for many years and have known pediatrics for many years, basically because it is really hard for them to navigate in the uncertainty of the healthcare system without really having all of the infrastructure that a company like ours has, even to deal with something as simple as might sound as the parity rule, because physicians have to basically have to register for that in order to get the reimbursement.
Some of the single physicians really didn’t even know the rule that’s out there, because they really are not really in rune with what’s happening day-to-day on the government relations side. And so really we have a department of that that focuses on government relations. So, we are out there reading what’s going on everyday. And so, I don’t think that that’s changing anytime soon. So, it is really creates a claim opportunity for us to be able to have physicians that do want to become part of a national group practice.
Gary Taylor - Citi
Good. Roger on the last call he made some interesting comments that kind of juxtapose one paradigm versus the paradigm I think investors are very worried about or ask a lot about and what they are concerned about is all we hear is physician employment, physician employment, physician employment, hospital employing physicians and somehow from that derive this vertical integration that’s here is creating some sort of reimbursement risks are – not reimbursement sorry, investment risk for MEDNAX and that somehow you are not going to be able to continue to grow this outsource staffing model, if hospitals are doing all this physician employment. And so I get a lot of questions about that. On the other hand, Roger on the call was talking about some new opportunities to do outsource staffing around the pediatric subspecialties for hospitals and hospitals increasingly asking for help doing that. So, can you talk a little bit about why vertical integration risk doesn’t threaten MEDNAX and then following to that just give us a little more color on some of these new opportunities that we were highlighting?
Vivian Lopez-Blanco - Chief Financial Officer
Yeah. And so for the first part of Gary’s question is on physician employment in general, typically hospitals do not employ physicians that are in the neonatology space or anesthesiology space. And there is just a financial overview on why that is which is primarily that those types of specialties are not really impacting the utilization of the hospital. And so the hospital is not going to want to employ or purchase a physician group practice that really isn’t going to necessarily change their revenue stream. And so again neonatologists are pretty much supporting maternal-fetal medicine, physicians or OB/GYN. And as you know anesthesiologists are going to be basically supporting surgeons in the hospital etcetera. So that’s the first part of the answer to Gary’s question.
The second part is yes because one of the things that has been really a critical part of the MEDNAX model for many years has been really this development with the relationships of the hospitals that to was critical to our model. And we have the what I have described and some of you that have head me talk before and Roger before we talk about that is being one of the key strength of our model and we foster those hospital relationships. Hospitals have had to reinvest themselves in recent times, because they have been the hardest fit on some of these reimbursement issues.
And so as they figure out what really what can we do to change some of our reimbursement structures a lot of them have come to us because we’re in that hospital system with them. And so for another specialty, etcetera and have decided hey, how about if you guys help us with our OB/GYN hospital list program or our pediatrics hospital list program. And so basically what’s happening as what Gary has said that we discussed on our last call is that we’re seeing opportunities for us to basically continue to expand what we describe and the continuing of care on a pediatric side because there are these opportunities for us to basically partner with our hospital partner there and be able to develop these specialties that pretty much are available to us as opportunities in anyone of those hospitals.
Gary Taylor - Citi
It wasn’t clear to me or maybe I’ve forgotten, but as you see some of these opportunities do you anticipate bringing some of those subspecialties into that existing neonatal group and you’re managing a practice of several different subspecialties or is there some different sort of contractual arrangement you will end up passing or are you really just doing that recruiting and credentialing in the hospital employing those physicians or is it all across the board?
Vivian Lopez-Blanco - Chief Financial Officer
It’s all across the board. But typically what happens so is that they are dedicated physicians to that and there is a whole different fee arrangement for that. And so it’s not part of the not necessarily part of the neonatal practice. Some of them do rollup to the practice. But basically it is a different structure that you have with the hospital list program. The other one that we’ve done too Gary is just to expand a little bit more and it is some of the pediatric surgeon practices and those are definitely separate practices and we’ve acquired a couple of those in a last couple of years the first one was in San Antonio, Texas. Again there with the hospital system that we are very involved with and they came to us and basically thought that it would be a good partnership for us to be able to acquire those physicians and then in Dallas as well. And so that’s another type of specialty care, where consider that continuum of care and those physicians are, it’s a separate practice.
Gary Taylor - Citi
And you expect that in the next few years that can be material to same-store revenue growth on that side of the business? So, the pediatric side of the business has been growing same-store revenue 2%, 3% kind of range, can we get to a point where in a year or two, there is an extra percentage point of revenue growth from some of these expanded relationships, is that in the realm of how material it could be or?
Vivian Lopez-Blanco - Chief Financial Officer
Yeah, I mean it’s certainly in the realm. I really haven’t quantified it, because as we described on the call, we view that as opportunistic at best and as I was having conversations with some of your colleagues on the investment banking side, what I am telling them. And I think other companies are saying the same thing is that we don’t view this as a national platform. These types of opportunities are market-driven. And really it’s just has to do with who the hospital players are in that given market. And so some of them will roll up in the same unit, some of them might not roll up in same unit, because like I said some of them are distinct practices like those pediatric surgeon practices. But nonetheless so with another arm of the acquisition of growth that we would potentially have. But these things are really more market-driven, and so I am not really willing to quantify an impact on same unit like that, because I think there will be a lot of variability with that and there will be a lot of variability within markets, because some of these will just be new acquisitions.
Gary Taylor - Citi
So, despite my best efforts, I am not getting a new revenue guidance?
Vivian Lopez-Blanco - Chief Financial Officer
No, but that was a good try.
Gary Taylor - Citi
Let me try earnings.
Vivian Lopez-Blanco - Chief Financial Officer
I must admit that was a good try.
Gary Taylor - Citi
How about the earnings, can we try?
Vivian Lopez-Blanco - Chief Financial Officer
That will be more obvious so...
Gary Taylor - Citi
Yeah, I try to be more subtle than that. On the anesthesia side, I think a lot of questions I get from investors are they see other companies public and private doing acquisitions, they know there is some private equity guys there etcetera. And I guess from a financial standpoint, and there is you are paying more for those practices and the margins aren’t – they are good, they are very good. They are not as great as the neonatal margins are. There is things that feel in sound different financially about that opportunity than the neonatal opportunity and something that I think is underestimated having talk to enough of your neonatal physicians over time. Is the value that they ascribe to national group practice, to the electronic medical records platform that you have there to the collaboration they do across the country with their colleagues, like this is a really significant clinical enterprise that isn’t as simple as you pay 7 times EBITDA to buy something, you expect margin and here is how accretive it is, how Wall Street seems to think of this. So, if Karl was here, he could give us a lot more than 12 minutes that we have left, but where do you feel you are in terms of recreating that national group practice that’s done very well pediatric at American Anesthesia? And I think I know the answer you are going to say, but how material is that in terms of closing transactions that you want to close?
Vivian Lopez-Blanco - Chief Financial Officer
I think that is absolutely the number one differentiating factor of why physicians come to MEDNAX? And it’s not because I sit here in this room and say it or Rogers says it or Dave Parker says it, it’s because that’s what the physicians tell us. And so for us it’s always been worth, MEDNAX and the ALL Pediatrics was a physician-centric run company. And that really hasn’t change with the evolution of anesthesia, and the anesthesiologists see that. And so basically what happens is when they have and there is other folks as Gary has alluded to that are interested in acquiring these anesthesia practices. So, there is that differentiating factor, because they know when they come to MEDNAX, they are going to be able to participate in these clinical quality initiatives. We are going to make the investments in this clinical data warehouse. So that when their hospital partner comes in and says well, how are you going to make my life better, how are you going to be able to improve outcomes, how are you going to be able to have us reduce cost? Well, this is the reason why they are able to do that. And so it’s not a financial rollup model, which again at this time is really playing right on the side of how Roger has really built this company over the last 32 years. And that really hasn’t changed with anesthesia.
And so we are rolling out that platform, which is a clinical data warehouse that we have for anesthesia which is called Quantum. That’s a little bit different than the pediatrics one, because for that one the way it works just from a practical point of view. There is work groups in each one of the practices Gary that basically determine based on how they – their relationship with their hospital partners, what metrics do you guys want to measure that’s really important for the hospital at the moment, because the hospitals themselves are going through surveys and being able to say let’s say this is something that we need to need to home in here. And so we have work groups that are driven by the Medical Director that has been assigned to determine what’s important in their practice to measure. I mean there are, as you know, from what the government has put out on measuring outcomes for anesthesia. There is roughly about 65 in them or so, that I think that list was basically cut down from about 135 or so. But so those are types of things that we are working on and so that makes a huge difference to these physicians. And like I said it’s not because we sit here in these investment meetings and say it our self, it’s because the docs on the street are saying that and they can see it.
Gary Taylor - Citi
(Indiscernible)
Vivian Lopez-Blanco - Chief Financial Officer
Yeah, the best reference that we ever get from any physician group that we are acquiring is just is one of their own peers, because typically even though there is roughly almost 50,000 anesthesiologists in the United States invariably somebody knows somebody else. And if they don’t know they will try to find out because that’s really the reference that they want to get. So, for us that’s very important and we drive on that because that’s exactly what we have done for many years on pediatrics and are really building that same relationship with anesthesia.
Gary Taylor - Citi
Okay. Any questions from the audience? Bring the microphone on.
Question-and-Answer Session
Unidentified Analyst
(Question Inaudible)
Vivian Lopez-Blanco
Well, I am sure Gary would have left for me to answer that question. So, did you place that question out there in the audience. Sure, but anyway we have not disclosed and frankly for competitive reasons because we were just talking about that here for the last half an a hour or so basically there is competition for anesthesia practices and so we don’t specifically talk about them all going forward.
Unidentified Analyst
Did you see more – do you see just less neonatal opportunities in the market than anesthesia. I feel like I have seen a lot more anesthesia acquisitions than neonatal?
Vivian Lopez-Blanco
Yeah, for sure because just to put some numbers around that. So, the folks here can understand that there is roughly about 5,000 board-certified neonatologists in the United States. We employed roughly a little bit over 1,000 of them. And there is about another 1,200 or so that it’s what we describe as an un-addressable market at the time, because they are in academia.
Unidentified Analyst
Okay.
Vivian Lopez-Blanco
On the anesthesia side of the house, there is roughly like I said over 48,000 of them board-certified in the United States and we employee over 600 of them. So, as you can see just shear numbers of that. Yes, so there is a lot of anesthesia opportunities plus from a MEDNAX perspective we have described the anesthesia platform as you know obviously the growth vehicle for the company for the next years to come.
Unidentified Analyst
Okay. Thank you.
Gary Taylor - Citi
Thank you.
Unidentified Analyst
Can you talk about both your electronic health record and also your data warehouse, were those home-grown solutions, or are those purchased off the shelf from – by another provider?
Vivian Lopez-Blanco
Sure, so the question is regarding the electronic medical records that we have on the pediatric side of the house it’s called BabySteps. And basically yes it is home-grown although I will tell you that we started that in by the way the late 90s. And so it’s been around for a long time, but more importantly it has been certified by the certifying bodies in Washington that certified all the electronic medical records which is CCHIT. So, that has been our module has been certified by them.
Unidentified Analyst
Data warehouse?
Vivian Lopez-Blanco
Well basically that is basically how we get the information to be able to put into the data warehouse.
Unidentified Analyst
And then you are building a similar data warehouse and technology on the anesthesia side of the business, so that’s the Quantum system?
Vivian Lopez-Blanco
No, that was purchased, but basically we have – we continued to develop in our style.
Gary Taylor - Citi
Any other questions?
Unidentified Analyst
So, in your neonatal business, do you also operate PICUs as well or just NICUs?
Vivian Lopez-Blanco
So, that’s a very god question. So, yes in our neonatal business we do have PICUs absolutely we do.
Unidentified Analyst
But what’s the procedure more weighted towards NICU.
Vivian Lopez-Blanco
Yes, absolutely, yes.
Unidentified Analyst
What’s the bad debt in NICU?
Vivian Lopez-Blanco
There is hardly any bad debt in NICU because most of it is covered by insurance, so there is really not.
Unidentified Analyst
Because you have like maybe patients like mothers that come in that don’t have it, maybe on the poor scale and it comes to ER then have to go emergency delivery or whatever?
Vivian Lopez-Blanco
Yeah, but those typically covered in the Medicaid. And so as Gary said reimbursement for that is much lower, but there is no bad debt although you could I guess say that’s the whole Medicaid environment.
Unidentified Analyst
Yeah.
Vivian Lopez-Blanco
But basically there is not a lot of bad debt because it gets covered under Medicaid.
Gary Taylor - Citi
Even if parents don’t have the coverage almost always gets the baby.
Vivian Lopez-Blanco
The baby can get coverage that’s exactly what has Gary mentioned.
Unidentified Analyst
And you get paid on the baby.
Vivian Lopez-Blanco
Yeah, we get paid on the baby exactly.
Unidentified Analyst
Okay. And what’s the typical margin I don’t know it’s been published or not just curious?
Vivian Lopez-Blanco
Well, basically that the margins what we talked about is we talk about our consolidated margin. So, there has been discussion on that and I can talk about it directionally neonatal margins are typically the highest ones albeit in the last couple of years they have been impacted because of the volatility in volumes and some of the move to government payer mix, but nonetheless those are the highest margins. So, we have seen some of our margins vary because of the fact that we’ve gotten a lot more percentage of our revenue now is coming in from anesthesia, which is typically a little bit lower margin. And so its always by the way maternal-fetal medicine and pediatric cardiology.
Unidentified Analyst
(Question Inaudible)
Vivian Lopez-Blanco
Yes.
Unidentified Analyst
If you see back up three or four years on the income statement, you are looking at primarily neonatal income statement without much anesthesia. So, if we can see what that business looks like right so?
Vivian Lopez-Blanco
Yeah, if you look at our 10-K that we filed a couple of weeks ago just from 2011 to ’12, I mean, top line anesthesia revenue was 21% in 2011 and 2012 it’s 20%. So, we expect that to continue. More questions from some of those familiar faces there please.
Gary Taylor - Citi
Well, I’m going to dismiss class three minutes early and…
Vivian Lopez-Blanco - Chief Financial Officer
Okay, thank you, Gary, I appreciate the time.
Gary Taylor - Citi
Thank you.
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