Ladies and gentlemen, thank you for standing by, and welcome to the fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer series. Instructions will be given at that time. If you should require assistance during the call, you can press star and then zero. As a reminder, this call is being recorded. I'd now like to turn the call over to our host, Mr. Charles Lynch. Please go ahead, sir. Thank you, operator. Good morning, everyone. I'll quickly read our forward-looking statements, and then we'll get into the call. Certain statements and information during this conference call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions and assessments made by Pediatrix' management in light of their experience and assessment of historical risk, historical trends, current conditions, expected future developments, and other factors they believe to be appropriate. Any forward-looking statements made during this call are made as of today, and Pediatrix undertakes no duty to update or revise any such statements, whether as a result of new information, future events, or otherwise. Important factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements are described in the company's most recent annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K, including the sections entitled Risk Factors. In today's remarks by management, we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly reports on Form 10-Q and our annual report on Form 10-K, and on our website at www.pediatrix.com. With that, I'll turn the call to our Executive Chair, Mark Ordan. Thanks, Charlie. Good morning, everyone. I'm here with Dr. Jim Swift, our Chief Executive Officer, and Marc Richards, our Chief Financial Officer. We announced in December my transition from CEO to Executive Chair and Dr. Jim Swift's move from COO to CEO. This has been a naturally smooth transition since we had worked so closely on virtually all issues. It also capped a year-long process to sharply reduce executive leadership and other people-related overhead costs, which has also enabled fully qualified and proven leaders to assume larger roles at Pediatrix. Over the course of 2022, we saw overall stable volumes and payor mix, both of which ended the year on a strong note. We reduced leverage and improved on our sector-leading financial position. Our revenue cycle transition process, as we have reported, has been very difficult and remains a key operational priority. Within our fourth quarter results, the revenue headwinds caused by our RCM vendors' delays in billing activities and extended AR persisted but were largely offset by negotiated direct financial support provided by the vendor. Marc Richards will detail these offsetting factors in his discussion of the quarter. This poor performance persists today, just as in the latter part of 2022, we expect our vendor to provide all necessary support to repair this situation as they knew was necessary in Q4. We believe the plans we discussed on our last call to address this shortfall are the right ones, and Jim will detail where we are today with those plans. Last week, we continued to be overwhelmingly in-network with constructive dialogue with payors in places where we're not. We along with our government relations team and outside advisors continue to work hard to help defend against improper rules applied to what we viewed as a fair and bipartisan No Surprises Act. I'll turn the call over to our Chief Executive Officer, Jim Swift. Thanks, Mark, good morning, everyone. I'm pleased to speak to you today as the CEO of Pediatrix, a company I joined almost 15 years ago. I've had the privilege of serving expanding roles during my tenure here, which has allowed me the honor of working closely with our great physician and clinical leaders, our operating team, and of course, our leadership team and board of directors. For many of you, I hope I'm also a familiar face and voice, having participated in these calls as well as other events over the past several years, touching on our strategy and growth. This morning, I'm pleased to announce that following my appointment, we have named Dr. Curt Pickert, formerly our Chief Physician Executive, as Chief Operating Officer, and Lee Wood, formerly our Senior Vice President of National Operations, as Executive Vice President of National and Market Operations. I want to congratulate Curt and Lee, both long-standing Pediatrix leaders, in their new roles for our operating team. I'll speak plainly about our outlook for 2023, which reflects the continued burden from our RCM transition activities. Mark Ordan has spoken during the past few years of our view that Pediatrix has fundamental earnings power, which we define as adjusted EBITDA of $250 million and above. We believe that were it not for the shortfall from the RCM transition, we would today be reaffirming this position for 2023. Marc Richards will give additional details underpinning our preliminary 2023 outlook. At a high level, this outlook contemplates a similar headwind to the adjusted EBITDA that we experienced in 2022 related to our RCM transition activities, or roughly $15 million. The key difference is in 2022, we bore the brunt of that impact in the latter part of the year, while in 2023, it is far heavily weighted in the first half of the year, followed by expected improvements in the second half. Since last fall, we have added meaningful internal RCM staffing, some at a senior corporate level, more at a regional level, and in some instances, at a practice level. Our primary focus is to ensure full continuity throughout the RCM functions, particularly at the front end, where we identified the most prominent root causes of documentation and billing delays, avoidable denials, and other critical steps that have extended our AR cycle. Just as important, we've been able to isolate those areas where we've identified underperformance in order to validate that they are indeed gaps on the part of our and our vendors' operations, and not driven by external forces. To be clear, as of today, our overall RCM performance has not yet improved on a sustained basis. However, we have been able to demonstrate that additional staffing, properly deployed, can correct the front-end deficiencies we identified. In the areas we first targeted, we've seen performance improvement in the form of reduced backlogs, better connectivity through the step functions of the front-end processes. Moving from these early positive steps to full sustained improvement at scale is taking time. We believe we are on the right track. Our vendor is committed to the increased operational support required to improve the process. A result of this work, we are confident that we can enable a highly functional RCM infrastructure. We and our vendor continue to push our improvement plans, our goal is that this progress translates to our reported results over the coming several quarters. Turning from our focus and urgent efforts on revenue cycle, I'll back up and speak at a higher level. I am enthusiastic about the opportunities we have to build on the core fundamental strengths of our organization, which deserves mention. Demand for the services that our affiliated clinicians provide has been strong. For 2022, our same- unit patient volume increased by approximately 2%, highlighted by acceleration in the fourth quarter. Same-unit births across the hospitals where we provide services rose moderately for the year, despite a difficult comparison in 2021. We have successfully removed a major layer of executive-level overhead, as well in other targeted and important to note, non-clinical areas. We don't have a crystal ball on the ultimate effects of the No Surprises Act, we do continue to be overwhelmingly in-network. As Mark mentioned, we are in constructive discussions to be back in-network in certain instances where we are not in-network today. We also continue to look closely at the labor market and possible challenges we may face. Volatility in our costs has been muted compared to other areas of healthcare. We have a strong balance sheet. We repaid substantially all of our borrowings on our revolving credit facility in the fourth quarter, we began 2023 with a conservative and durable debt structure with low leverage, significant borrowing capacity, and extended maturities following last year's refinancings. We believe our hospital and clinician relationships are strong and, combined with this financial strength, offer us the opportunities for both organic and inorganic growth. We are focused directly on these hospital relations and on a very close working relationship with our world-class affiliated clinicians. Most important, our mission: Take great care of the patient. It's a clear one. The commitment to that mission spans our entire organization, both clinical and non-clinical. As a physician, I know firsthand that this is vital. It informs all of our decision-making. Our passion for our patients, clinician, hospital partners, coupled with our adherence to strong and conservative business principles, gives us real confidence in turbulent times. This also provides a foundation of care, careful growth. We are in promising discussions with a number of health systems on ways we can expand what we do. We believe there are opportunities for targeted acquisitive growth in our core, we continue to expand and refine our pediatric primary and urgent care platform. As noted in our press release this morning, we believe that our outlook for the coming year represents a realistic, achievable near-term financial profile for our company, it is both my privilege and priority to build on that outlook as we look beyond 2023. To summarize, we have many strengths and many opportunities. We believe that once we can look back on our current RCM challenges, we can have a platform that's stronger and more efficient than anything we could have done on our own. Working with Curt, Lee, and our senior team alongside our affiliated clinicians and support team, I am confident and excited by what's ahead. With that, I'll turn the call over to Marc Richards. Thanks, Jim. Good morning, everyone. I'll start with certain components of our fourth quarter results. Our same unit volumes were strong and payor mix was stable. Within the pricing component of our same- unit revenue, we detailed in our press release the impact of the funds received from the CARES program, which were significant in the prior year. Underlying RCM performance presented a similar headwind to what we discussed in Q3, but was largely offset by an advance against older AR provided by our RCM vendor. On the cost side, this incremental Q4 revenue largely flowed through variable comp within practice salaries and benefits, and our malpractice expense was also elevated, which we view as specific to the quarter and not an ongoing trend. As a result, adjusted EBITDA was within our expected range for the quarter. Turning to 2023, we expect net revenue of $2 billion-$2.1 billion. G&A expense as a percent of revenue should be comparable to 2022 or just under 12%. Our preliminary outlook for adjusted EBITDA of $235 million-$245 million contemplates a rough $15 million RCM headwind, which as Jim discussed, is expected to be heavily weighted towards the first half of the year. For reference, we estimate that the headwinds resulting from our RCM transition activities totaled roughly $15 million-$20 million in adjusted EBITDA in 2022. In terms of our quarterly earnings progression, we anticipate that our first quarter adjusted EBITDA will represent 16%-18% of full year adjusted EBITDA, which is largely due to the normal seasonality of our financial results, but also to our outlook for the impact of ongoing RCM transition activities. Finally, we do not anticipate any additional CARES funds in 2023, which in 2022 contributed $6.7 million in adjusted EBITDA, mostly in the first quarter of last year. Turning finally to our balance sheet, we repaid substantially all remaining revolver borrowings and ended the year with net debt of just under $640 million, leverage of 2.6 x. With that, now I will turn the call back over to Jim. Thank you, Marc. Operator, let's now open up the call for questions. Certainly. Thank you. Ladies and gentlemen, if you do wish to ask a question, please press one and then zero on your telephone keypad. You can withdraw your question at any time by repeating the one-zero command, and if using a speaker phone, please pick up the handset before pressing those numbers. Once again, if you have a question, you may press one then zero at this time. Let me give it just 1 moment here. Looks like we'll go to Ryan Daniels with William Blair. Please go ahead. Hey, guys. This is Jack Senft on for Ryan Daniels. Just wanted to start off and touch on the margin expectations. Just kind of curious how we should be kind of thinking about margins heading into 2023, especially as it relates to the AR reserves. You know, just given that you kind of expect the headwinds to subside more in the second half, I just kind of wanted to, you know, make sure that your expectations or what your expectations are for the second half of this year, and just kind of wanted to see if you're, you know, on track to still kind of see the margins improve in the second half. Thank you. Hey, Jack. It's Marc Richards. Good morning. I would expect margin trends in 2023 to continue very similar to what we saw in 2022. Certainly with our expected ramp relative to our RCM transaction activities, we'd expect those to marginally improve towards the second half of the year. Entering into 2023, I'd expect similar margins as we saw in 2022. Okay. Awesome. Thank you. Just as a quick follow-up too. Just kinda curious how the recovery efforts have trended this quarter. I mean, I think it was cumulative $20 million prior to this quarter. Before, you know, I know it seemed that it was the recovery efforts were a tad slower than you originally expected, and you know that this is an area that you were monitoring and addressing. Just kinda curious how those efforts have progressed and, you know, if the success rates have increased. Thanks. Recovery efforts relative to our RCM activities? Yes, correct. Yeah. I'd say they remained relatively unchanged, moving from the third quarter into the fourth quarter in terms of our core RCM activity. Okay. Awesome. Thank you. Just a quick last question here. I'm just kinda curious how labor has trended this quarter and kinda what your expectations are for 2023. Thanks. Yeah. We've seen, labor trends in the quarter with respect specifically to, clinical compensation in the 5% range, kind of quarter-over-quarter. Jim's got some more details in terms of A fair amount of that is related to our contract labor as we brought new programs on, organic programs on, in the last quarter. Again, we don't see that necessarily as a trend going forward, and we really have not seen material effects of the, you know, the volatility as I stated. Awesome. Thanks, guys. Next we go to A.J. Rice with Credit Suisse. Please go ahead. Hi, everybody. Just because you mentioned a couple of times in the prepared remarks, are you seeing any more activity on the part of payors to try to move you out-of-network and then go to arbitration, or is it still steady state? I couldn't really tell from the prepared remarks. Yeah, A.J., this is Jim. No, it's steady state. We really have not seen additional activity or change in behavior by payors where we are in-network. Again, as stated, you know, we're working concertedly right now with some of those out-of-network issues, and we have, you know, we feel very strongly that we're gonna be successful. No, no material changes. Okay. Usually, the last number of calls, the pediatric urgent care effort has been a topic of discussion, and you didn't really spend any time on that. Any update on what's happening there? Yeah. We're continuing to open up locations in parts of the country in certain geographies, and we have a, you know, a team of folks working on that, inclusive of a new physician that we brought on board who's going to be leading our primary care initiatives with those clinics. The activity continues. Okay. Then maybe my last one. You called out, well, two expense items. I said I think in the quarter, a little step up in malpractice. I wondered if that was just a normal year-end true up, or is there anything else going on there? Then the incremental labor that's been taken on to deal with the revenue cycle management issue, is that is that on your books? Is that gonna continue to be on your books, or is that part of, as well as getting the revenues right, but part of, why the outlook improves in the back half of the year that some of that will go away? Hey, A.J., it's Marc. With respect to the incremental staffing efforts that both we and our RCM vendor have made, some of that additional cost will be borne by us and some of it will be borne by the vendor. Okay. Does that fade out at some point, or is that a permanent step up on labor? I'd say that remains unknown at this point. Okay. Then on your malpractice comment, anything there? With respect to the spike in the fourth quarter, this is really related to normal year-end activity and settlements related to that activity. Okay. All right. Thanks. Next, we'll go to Pito Chickering with Deutsche Bank. Please go ahead. Yeah. Good morning, guys. Thanks for taking my question. Just a follow-up to A.J.'s question there. You know, you talked about making sure that your commercial payors are following proper rules for the No Surprises Act. I guess a couple of questions here. What percent of commercial cases are going to arbitration? Is your win ratio still 75%? Can you quantify the revenues lost in those cases? You know, what the revenue contraction was in those cases? Yeah, I think you know, from our standpoint. Well, one thing on the IDR process, we feel that we have a very robust process for the claims that we submit. It's a very small number of claims that we've entered into that process. I would say that we've been largely successful in doing that. We've won over 80% of the time with our packet that's submitted in the IDR. We're fairly confident, and we think that sends a message to the payors, by the way, that they see that with that success rate, that they're gonna move to have us come back in- network. I think, again, we've been largely successful there. Second question, on the transactional costs here. They spiked to almost $20 million in the fourth quarter. You know, that's a pretty big jump versus we haven't seen those levels since 2020. We're doing all the consulting fees. Can you give us details of sort of what was in that number and what you assume for transactional costs for 2023? Sure. It's Marc Richards again. That number represented exit costs associated with those executives that were terminated at the end of the year. There were a significant amount of executives in that pool. Going into 2023, we do not expect any transition and restructuring expenses. Okay, great. The last question here, just you're looking at the net leverage ratio, I guess 2.6x. You know, with EBITDA flat-ish or down the last couple of years, you know, what's the right leverage it should be running at? Does the leverage ratios on the 2023 EBITDA guidance or change how you look at acquisitions for next year? Thanks. No, I don't think so. We've said in the past that we're very comfortable in the 3x range. Certainly, our leverage will move from quarter to quarter as we make draws on our credit facility. I would say as a general rule of thumb, we like 3 x. Yeah, and we also have plenty of cash flow in order to do transactions such as acquisitions. I will say, you know, we've talked about in previous quarters that we're being prudent with regard to No Surprises Act and how we look at targeted acquisitions, and that kind of principle will continue through. We do think there's opportunity, but we'll be wise and conservative in that regard. Great. Thank you so much. Next, we can go to Whit Mayo with SVB Securities. Please go ahead. Thanks, guys. You guys have made some material progress reducing G&A, you know, in 2022 or 2022. I feel like you've communicated previously that the target for 2022 was $250 million for G&A, and it came in around $230 million. I know there's some natural inflation inside that number offset by whatever you took out. So I'm trying to kind of circle a number like what the permanent G&A savings that you found in 2022. Is there another savings number that you're targeting this year? Thanks. Hey, Whit, it's Marc Richards. Yes, you are right, we made significant progress in reducing overhead throughout all of 2022. We think and as we indicated, in our guidance for 2023, we think that a lot of that progress has been made and that as a result, we're probably looking at a similar G&A load in 2023 to that in 2022. In the 11.5%-12% range of total revenue. Okay. There are no additional initiatives to further reduce that G&A this year? I feel like there was a number that I had in my head, maybe like a $13 million number that you had previously communicated. We had savings over the course of 2022, which are permanent savings of over $25 million. You know, an offset to that is obviously we pay fees to our RCM vendor and other things that hit the overhead line item. But the savings that we achieved over the course of the last year are permanent savings. They're concentrated at the executive level and on the people side. Got it. $25 million is kind of the number that you took out of the organization that should be recurring going forward. That's helpful. I'm a little confused on the malpractice comments. I've been looking at your 10-K. The end period malpractice costs were actually lower year-over-year. It was like $53 million versus $56 million last year, and there was another $4 million favorable prior year development. I don't know, Marc, can you maybe flesh that out just a little bit more? Maybe there was just something elevated in the fourth quarter but not necessarily in the full year. That's correct. It was one event, and we don't see that going forward. There's no pattern, and we haven't seen that in the past, and we don't anticipate that, but you never know in terms of malpractice. That was just one event in the fourth quarter. Okay. One last one here. Sorry. I'm still a little confused on this. It's just the AR write down in the fourth quarter. I presume there was one. Did R1 absorb that for you? They made you whole? What are you assuming in terms of perhaps a headwind in 2023? In terms of a headwind, we've said that we expect a headwind in 2023 to be approximately, you know, $15+ million in an adjusted EBITDA related to, you know, continued rate erosion. Looking at the fourth quarter of 2022, our net patient service revenue, of course, reflects all the ins and outs related to write-downs in the associated billings in the quarter. That's all contemplated both in the rate discussion and in what we saw in total revenue for the quarter. I'm not sure there's no real direct write-off related to that. It's just our revenue recognition relative to our aging policies. In the fourth quarter, R1 backstopped. Our vendor backstopped a portion of our receivables, and that was a one-time event which directly supported our numbers because they realized that they had been very deficient, coming into the fourth quarter. Okay. Sorry, one last follow-up. I'll get off. Sorry. It's just. With any of the AR that you've already previously written off, are you making any progress to collect any of that, or all of the initiatives focused on the bills going out the door today? A couple of things on that. Certainly, there's a lot of initiatives on the bills going out today. As I mentioned earlier, you know, with respect to the revenue that we recognized in 22, we believe any difference in bad debt expenses is appropriately recognized and therefore reflected in our P&L. Okay. Thanks, guys. Next we can go to Kevin Fischbeck with Bank of America. Please go ahead. Great. Thanks. yeah, I guess it's still not 100% clear to me, how this R1 payment is working. Is it flowing through your revenue number? Where does it show up, I guess, in the P&L? It's in revenue. Your pricing includes the R1 impact. I'm just trying to think about like what do you think ex cares, ex R1, but with normal performance on collections, what do you think pricing would have looked like in the quarter? Down about 200 basis points. Down about 200 basis points. Ex those factors. Ex those factors, even though commercial was up in the quarter. Like what else, I guess, on a mixed basis? What else was causing a down 200 basis points? Yeah, Kevin Fischbeck, it's Charles Lynch. For the fourth quarter, that's predominantly the comparison of CARES Act dollars as they flowed through, which was, you know, pretty significant in the fourth quarter of 2021. Digging through all of those variable pieces, whether it is, you know, the impact of the rev cycle process, the CARES Act dollars and the like, we're still looking at an underlying price trend in the range of, you know, call it 1% to between 1% and 2%. That's a function of, you know, normal pricing trends, across, you know, managed care and governmental payors as well as I think you know, we account for our admin fee revenue, our contract and admin fee revenue within pricing. That usually has some increase to it. In the fourth quarter, it was fairly modest. Okay. you think underlying pricing at 1%-2% is kind of a go forward way of thinking about it once this is all stabilized? Yeah. We don't see any reason for it to be different from that. Just to understand, I just maybe go back to the other question that was asked before this, because when we think about companies that go through these types of disruptions, I guess there's two potential implications going forward. One is that you get back to the right run rate. Then the second one is that you collect on things that you didn't collect, so there's actually a period of outperformance, I guess, as you start collecting on old receivables. Is that the right way to think about it, or is the fact that R1's backstop things kind of taken away some of that, you know, catch up opportunity? I mean, is there? How should we be thinking about what this looks like when it's, we get to the other side of it? I think our forecast is that we're gonna get back to the right level over the coming quarters. There may be some bump from additional collections. In our forecast and the numbers that we're forecasting, we are working hard, as Jim detailed, to get back to a proper functioning process and get back to the levels that where we should be. Okay. Just to try and round out this, R1, payment dynamic, you guys mentioned that you're putting extra costs in to improve collection, some of which you're taking, some of which they're taking, and the $15 million includes those costs that you're undertaking, and that may or may not be permanent? No, that is solely related to our expectation of the flow through of revenue impact of the AR process as we've talked about, you know, the last few quarters. The any kind of incremental costs that we're incurring or believe we might incur on additional staffing is embedded within our outlook for G&A for this year. That, you know, that sub 12% G&A that Marc referenced. We're still in discussions with our vendor if there are additional labor costs that are needed on how we share those costs because they stepped up properly and helped cover a lot of the costs that we incurred from additional labor in Q4, and we have talked to them about the need to continue that bolstering by them for costs that we need to get back on track. Okay. Then just last clarification on a question, the question that was earlier. I think you said you're not seeing any change of behavior from payors that are in-network. Just wanna make sure I understand two things. One is rate updates from payors in-network are consistent, is what you're saying, that they're not trying to squeeze more out of you to stay in-network. Two, you say you're overwhelmingly in-network. Has that percentage changed at all during the last couple of years? You could still be overwhelmingly, but have it go from 4% to 6%, you know, so just wanna make sure we're not missing anything there. Yes. Go ahead, Jim. No, it hasn't changed. You know, again, we've had a few of the payors where we've been out-of-network, and as I said, we've been very successful in the IDR process. We have not seen a trend of payors coming to us to look to move us out-of-network. It's been very stable. I'd say that there was a fear in the market over the last, you know, say 18 months that payors would use this as a weapon, and we haven't seen that. What we've seen is the normal proper discussions with payors about being in-network and in many cases renewing in rates in line with what we've had in the past. If you're asking relative to a big concern that everybody had, we say we have not seen that materialize. As Jim said in his remarks, we don't have a crystal ball about the future, but we continue to have constructive relationships. We have not had a change in more out-of-network situations. In fact, in some areas, where we've been out-of-network, even though there are few, we're having very constructive dialogue. What's clear is that payors want us in-network. We are the premier provider of these necessary services for mothers and babies. I think people know that if you wanna have subscribers, you wanna have Pediatrix physicians and clinicians providing care. Okay, great. Thank you. Next, we go to Rishi Parekh with JP Morgan. Please go ahead. How are you doing? Thanks for taking my questions. One, going back on the NSA, I think you said that you're winning 80% of your cases. I believe, or I assume you're winning at a rate that is above the QPA. A couple of things. One, can you confirm that you are winning above the rate of above the QPA rate and what that multiple looks like? Two, can you just give us an idea as to how many claims you're running through arbitration and what the DSOs are on these claims? Yes, Jim. listen, we're actually winning those well above the QPA, and we see that as a barometer in terms of our ability to contract back in-network at relatively good rates. And, you know, the process, as everybody's heard, the process has been a bit disjointed. We, however, feel that we've had a, you know, a great team, and our RCM vendor has been one of those people on that team. The process of submitting the claims into the IDR has gone very smoothly for us. On, on that, has the R1 situation in any way affected your ability to collect on those claims? No, not at all. Actually, that's been a bright spot in the relationship. The TMA summary judgment with regards to the QPA, just curious as to how you guys think it will affect you? I think the, you know, we all can look at the effect that they're shutting down, you know, the claims going in after February 6th. We look for resolution to that issue, and hopeful that, you know, there'll be a more judicious view of what should be considered in the IDR process and not just the QPA. We remain vigilant, and we remain, you know, very positive that there'll be an outcome there. None of us can know, you know, HHS and CMS what they're gonna do with that, so we're waiting to hear following that court case. You know, right now claims can go into the IDR process, but they can't come out, so it's gonna increase the backlog, which is very unfortunate. Fortunately for us, because we're overwhelmingly in-network, it doesn't affect us the way it does many other people. We certainly hope that the government clarifies the rules so the IDR process can restart. This is the second time that the courts have said that the rulings have been inappropriate and don't mirror the bipartisan legislation. Now there's this stall, which is unfortunate. Again, fortunately for Pediatrix, we are overwhelmingly in-network, and we have won overwhelmingly in the cases that have gone to arbitration. I think it is, again, a signal that if you look at all the factors that were in the bipartisan legislation, it favors a group like ours. Just a last question on the NSA. As it relates to the% that is out-of-network, can you just remind me of as to what that% is? Then I think you had stated earlier that you think that there's a high probability that you could move some of that in to an in-network agreement. I was hoping that maybe you could quantify of that amount that is out-of-network, where do you think there's a high probability? Or what is the amount that could actually move in-network over the course of 2023? Yeah, I think roughly we have about 5% where we're out-of-network, and that's kind of held traditionally along those lines over the last number of years. You know, obviously anybody had the concern that with the, you know, NSA that and payor behavior, that could get worse. To Mark's point, you know, where we are out-of-network, we feel very, very good about what we're able to do with that. Again, we may be, you know, in a good position to be, back in-network. Just the last question, though, for 2023, can you just walk us through your capital allocation policies? Thank you. Sorry for that. This is Jim. You know, listen, I think what again, as I referenced on the call, is that we are gonna be very careful about our strategic, you know, acquisitions and deployment of capital in that regard. I think we are with the balance sheet where it is. We have plenty of cash flow in order for us to do transactions. You know, at this time, we're coming off the heels of having the stock buyback. We thought that was, you know, an original allocation that we took in 2022. Right now, I think we, you know, we again have the balance sheet to look at some acquisitions in our core areas, that may be attractive. I will say that one of the behaviors we've seen change with groups is instead of us having to do prospecting and call the groups, we have people who have been reaching out to us about interest in being a part of Pediatrix. Excuse me. Next, we go to Tao Qiu with Stifel. Tao, please go ahead. Thank you. Good morning. Could you talk about the expectation in terms of potential impact on either payor mix shift or patient volume from Medicaid redetermination that's expected to start in the second quarter, and how much of that is baked into your guidance? Hey, Tao. It's Charlie. We haven't given that a huge priority in our outlook. You know, we tend in all the changes that have occurred, whether it was additional support during the pandemic, and even going back a long time ago to some of the rules within the original Affordable Care Act. The nature of the services our affiliated physicians provide for expecting mothers and newborns, virtually, I think, completely across the country, has a higher eligibility threshold as a% of poverty for Medicaid eligibility. That has tended not to create any movement in our Medicaid mix as a part of our payor mix based on those changes. Indeed, we did not see that in any material fashion through the course of the pandemic. Got you. Then, you called out the $15 million expected revenue headwind from R1. What was the level in fourth quarter? Could you kind of give us the cadence of the expectation through the next four quarters on that $15 million? I think Marc referenced that in the fourth quarter. You know, the impact, embedded within our results, although it's difficult to see, in the fourth quarter, was comparable to what we experienced in the third quarter of last year. If you're asking about 2023, as Marc said, we think that the $15 million drag in 2023 will be largely in the first half of the year and ramp up as we approach the end of the second quarter into the third and fourth quarter. Okay, gotcha. Mostly in the first half. When we think about the DSO, you know, where do you think that might stabilize at during in 2023, or once the R1 transition is, you know, complete? Thank you. We don't know. We saw positive movement in the DSO from the third to the fourth quarter. It is a slow recovery to normal. We would expect that once again, probably weighted towards the latter half of 2023 when we see our DSO come back in line. we'll continue to report on that in the coming quarters. Yeah. When you talk about normal, right, are we talking about kind of pre-pandemic level, DSO, or do you expect to be a little bit elevated? Correct. Pre-pandemic levels. Okay, thank you. Next, we have a follow-up from Pito Chickering with Deutsche Bank. Please go ahead. Hey, guys. Thanks for taking this follow-up. Just a quick one here. Excluding contract labor, what's your practice dollars and benefits, increase in fourth quarter? It was right in the right in the mid-single digits, Pito. You know, Jim referenced and we've given similar comments, you know, in the second and third quarters that, you know, that the underlying trend was a little bit elevated from what we expected. Certainly not to the level of volatility you've seen elsewhere, but somewhat elevated, primarily related to, you know, the stand-up of new practices on behalf of our hospital partners and some of the difficulties in those expansions in new recruiting and the like, and the need for locums and others as we get staffing right. Yeah. It's not unusual in that time period because of the holidays that we have to have, you know, additional staffing opportunities or challenges of people, you know, taking time off. That, that's probably baked in there as well. Okay. actually let me ask it differently. Excluding sort of that, the higher contract labor kind of in general, what was your core labor inflating in the fourth quarter? We still have the same kind of directional comment there, Pito, right? Kind of in that mid-single-digit range. You know, within our outlook for 2023 versus the historical norm, you know, we're looking at somewhat elevated, but not in a great fashion. Okay. you know, like if I were, you know. By mid-single digit. By mid-single digit, like 4%-5%. Yeah. Yeah. Okay. You know, to Kevin's question, you know, units from normalized pricing, sort of 1%-2%, labor inflating either low single digits or mid-single digits. You know, what makes sort of this margin start increasing into 2024 and beyond? Is it the pricing gets better than 1%-2%? Is it the labor comes down to like 1%-2%, or is it the amount of general leverage you can get off of, you know, the business in order to help negate that negative yield spread? There is a volume component in there as well, which carries operating leverage when it's positive. That's just one thing to keep in mind in that equation. Jim, I don't know if you wanna add further. No. All right, great. Thanks so much. Next we can go to, excuse me, Brian Kinstlinger with Jefferies. Please go ahead. Good morning, guys. Jim, just, you know, trying to put on your former biz dev hat on, you know, as I think about, you know, obviously there's a lot of focus here on rev cycle near term, but once you get past that, how are you thinking about, you know, where your focus is from a growth perspective and, you know, what do you think will be kinda like a good normalized growth rate to be thinking about maybe once we get to 2024? I think, you know, what we focused on in the last number of years, and you know that we reported on this, is really around the build-out of our organic growth team, which really paid off in dividends in terms of, you know, sourcing opportunities with our hospital partners and also sourcing opportunities internal to us that were all around ambulatory services. What we've seen, you know, going forward now is that, and I mentioned on the call, you know, really these relationships with the hospitals where we have had, you know, hospitals reach out to us, and instead of it being a, you know, one program they're looking for, there's a suite of programs that they want us to build out around women and children. You know, we always talk about the fact that we're not a staffing company, we're a program building company, and those programs are in women and children's. We've seen a, you know, a significant uptick in that activity. When you look at, you know, the core areas, I think there's a confluence of issues, you know, coming down the pike. I think there are succession issues in some of these practices on, like, you know, in some of the hospitals, where the hospitals are concerned about do they have the, you know, the right people, you know, as the population ages and the physician population. I think we stand ready both on an organic side, but I would also say on the acquisitive side, there's opportunity for us in multiple specialties and in the core. You have to remember, you know, I think the core is gonna be a big part of this when you talk about NICU, when you talk about MFM, and we're focused on that because, you know, that is really obviously key to what we do on the growth side. I think it's gonna be pretty measured. We'll keep our powder dry if we need to in terms of, you know, a big acquisition. There's something out there that is material to what we're doing, we're gonna go after it. Got it. I guess, Marc, as I think about just seasonality, and I know Q1's always one of the issues here, but maybe if you can quantify for us how we should be thinking about payroll tax, just for sequential modeling purposes. I mean, I would look at the first quarter of last year. We'd expect a similar load in the first quarter of 2023, which will tail off as those limits are met typically, you know, towards the end of the first quarter into the second quarter. Okay, got it. All right, thank you. Yep. Currently, we have no further questions in queue. Thank you very much, operator. Thank you all for joining the call. Thank you very much. Ladies and gentlemen, this conference will be available for replay after 11:15 A.M. Eastern today and running through March 3rd at midnight. You can access the AT&T replay system at any time by dialing 1-866-207-1041 and entering the access code