MEDNAX, inc (MD) Q2 2021 Earnings Call Transcript

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MEDNAX, inc (MD -2.49%)
Q2 2021 Earnings Call
Aug 6, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the second quarter 2021 earnings conference call. [Operator Instructions]

I'd now like to turn the conference over to our host, Mr. Charles Lynch. Please go ahead, sir.

Charles Lynch -- Vice President, Strategy and Investor Relations

Thanks, operator, and good morning, everybody. Welcome to our second quarter earnings call. I'll quickly read forward-looking statements and then turn the call over to Mark. 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 MEDNAX's management in light of their experience and assessment of 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 MEDNAX 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 purple GAAP measures can be found in this morning's earnings press release, our quarterly reports on Form 10-Q, our annual report on Form 10-K and on our website at www.mednax.com.

With that, I'll turn the call over to Mark Ordan.

Mark S. Ordan -- Chief Executive Officer

Thanks, Charlie, and good morning, everyone. Also joining me on today's call are Mark Richards, our CFO; and Dr. Mack Hinson, who leads our Pediatrix and Obstetrix medical groups. You'll see in this morning's filings that the recovery in patient volumes we reported in the first quarter has continued. In fact, in the second quarter, patient volumes across our total span of services has now exceeded pre-pandemic levels. On a same-unit basis, total volume was up 1.3% versus the second quarter of 2019 with hospital-based services up by 10 basis points and office-based services up by 5.2%. I'll add that other key metrics that were particularly volatile through last winter continued to show stable improving trends coming into the summer. Payer mix remained favorable on a year-over-year basis for the second consecutive quarter and the rate of admission into our NICU did so as well. As a result, our revenue for the quarter of $473 million was above our internal expectations, as was our adjusted EBITDA of $66 million.

Based on our results as well as the actions we've taken in our operations that we'll also discuss this morning, we now expect that our 2021 adjusted EBITDA will be above $240 million, up from our prior expectation of it being at least consistent with the prior year of continuing operations or $220 million. There are, of course, the risks that we face, most importantly, the recent rise in COVID-19 cases driven by the Delta variant. But that said, our updated view for the full year includes our experience to date. Looking forward beyond 2021 and count for the same risks, there are a number of factors that give me increased confidence that we'll see additional growth in adjusted EBITDA in 2022 that will get us pass the $270 million run rate we achieved pre-COVID. I'll expand on these in three areas. First, we're building momentum in our core. While demand has recovered faster than we had anticipated earlier in the year, we are also helping to drive additional growth across our practices.

I talked earlier this year about the investments we've made in improving patient access, better scheduling and a drive for increased pace and efficiency. Q2 is the first quarter where we can estimate the impact of these initiatives, and we think we've just begun by adding roughly $2 million to the top line in the quarter. I'm very confident that this is just the beginning of a long-term payoff. And please remember that we call this initiative patient access because it's really just that. We want to make sure that patients that need our care receive our care as soon as possible. Our reengineered and focused sales efforts are accelerating our pipeline of organic growth. We have such a superb focused and organized team that make this a reality. Halfway through this year, our new business bookings and by that, I mean new contract sales have already approached our total bookings for 2020. Our win rate has increased.

Our time to close has decreased, and our pipeline remains robust and diversified across multiple specialties. Our M&A pipeline also continues to build with several acquisitions of important specialty groups completed for the year-to-date. As an example, last week, Child Neurology Consultants of Austin joined the MEDNAX family. This group of 12 physicians and three nurse practitioners are among the premium groups of neurologists in the country. The lack of local neurology coverage is a major reason in time to transfer the way from the birth hospital. This is the most recent example of investing to further support our hospital-based practices with subspecialty consultation to allow infants to stay near their homes. But we believe this is also a plan for growth, both geographically and via telehealth. Second, we're still in the early stages of building our presence in children's primary and urgent care. Following our acquisition of NightLight, we're now in the planning stages for new clinic openings outside of NightLight's hometown of Houston. We're also working on additional investments and initiatives for primary urgent care that we believe will meaningfully accelerate this expansion. We also believe that our breadth and depth in women's and children's health will enable us to actually change nationally many aspects in pediatric care.

I look forward to doing the calls to cataloging our progress. Third, we're making significant progress on improving the efficiency of our practice support infrastructure. Mark Richards will detail some of this progress, but I'll highlight our previously announced agreement with R1 to transfer our RCM operations to them, which not only gives us immediate G&A savings, but also enables improved bottom line results that I'm certain would not have been possible had we continued on our own. To put these things together, I think you should view our expectations for 2021 as far from the finished products. Beyond this year, we believe the full benefit of our efficiency improvements will be paired with our ongoing and compounding growth initiatives that today are only just beginning to bear incremental fruit. These factors together support our confidence that in 2022 we can achieve adjusted EBITDA above the $270 million that I just referenced. Of course, none of this is possible without the strength in our core and a singular unwavering focus on our top priority, taking great care of the patients. It's so timely to me to reiterate this to you today.

But the fact is that in talking to our clinicians and clinical leadership, it's becoming clear that as the country continues to evolve through this pandemic period, the need for many, many of the highly specialized services our doctors provide is only increasing, which makes it that much more important that these doctors are able to operate as part of a highly integrated collaborative network in order to ensure that patients have access to the services they need exactly at the time they need them. That's why I'll ask Mack, who is a longtime neonatologist and pediatrician, to talk about the why behind the resurgence in volumes we've seen across many specialties as well as the why behind the importance of having access to the full continuum of care for expecting parents, newborns and children.

So I will now turn the call over to a person who firsthand understand this importance. Dr. Hinson?

Roger M. Hinson -- President of Pediatrix and Obstetrix Medical Groups

Thanks, Mark, and good morning, everyone. I'll start with what we're seeing across the country today. And then for the benefit of all of our stakeholders, give some thoughts about what we truly are as a national medical group, and how MEDNAX is uniquely positioned to address this current and future environment. I would describe the market trends we see today as twofold. First, as isolation measures became less restrictive, our pediatric specialists are seeing a surge in respiratory illnesses during the summer, illnesses that we typically see during the winter months. We've also seen a significant number of behavioral health issues that have resulted in both pediatric intensive care and pediatric hospital service admissions. In addition to that, the American Academy of Pediatrics now recommends that any child with COVID has a cardiac evaluation prior to returning to sports. Our pediatric cardiologists, hospitalists, critical care physicians, surgeons, urgent care physicians and other pediatric specialists are all seeing the near- and long-term consequence of COVID-19.

Regardless of the immediate rate of infection in our communities, we believe the consequence of isolation and delayed healthcare will continue to require access to the entire spectrum of our pediatric specialty services. These services are scarce national resources and access to them is filed for the health of the children and our communities. Second, alongside the significant increases in total births and NICU admissions we reported this quarter, our maternal fetal medicine volumes have now far surpassed pre-pandemic levels. Here, too, for at least the near term, it's clear that trends in pregnancies and deliveries have turned upward. And across the country, access to highly trained obstetrical specialists is vital for the health of expecting parents facing a high-risk pregnancy. And in fact, a number of states have highlighted the risk of higher child-work complications that can result from insufficient access to proper care. And all the payers we work with, both commercial and governmental, stress the importance of access to high-quality maternal care.

To put some statistics behind these two phenomena, I'll point out that compared to the second quarter of 2019 on a same-unit basis, volumes in our pediatric intensive care units were up 11.5% and pediatric hospitalist volumes were up 4%. On the office space side, pediatric surgery volumes were up 8% and maternal-fetal medicine was up 9%. Pediatric cardiology volume is still down slightly by 2%, but we anticipate that, that could increase as we move into the fall. All of these statistics went to the breadth of specialty services provided across our organization and across the country, and the demand for these services has been increasing in this rapidly evolving environment. But beyond these numbers, I'll speak to you now as a physician who's been fortunate to have been a leader of MEDNAX for many years. There's a broad spectrum of care that is absolutely essential for prenatal, newborn and pediatric populations. And that is exactly what our pediatrics at Stafford's medical groups provides every day of every year.

We are far more than a collection of practices and clinicians to ensure our clinicians trust for lives of thousands of women and children every year. But more than that, we are a highly integrated group of affiliated maternal pediatric practices that work together to deliver care across the whole spectrum of pregnancy, childhood and in some cases, even adulthood. This includes maternal-fetal medicine doctors, or the hospitalists and neonatologists, all working closely to provide diagnostic care to mothers who are at risk of the complicated pregnancy and to provide routine and emergency triage evaluation and care to pregnant patients presenting to the hospitals as well as to provide a complete inpatient spectrum of maternal in the neonatal care. It includes pediatric hospitalist to cover smaller community pediatric services to large tertiary referral services, emergency medicine physicians who see patients in dedicated pediatric emergency departments, and pediatric critical care physicians who care for severely ill children and adolescence with a large range of medical and surgical problems, including patients requiring cardiac surgery. With the addition of NightLight Urgent Care, it now includes pediatric urgent care clinicians who see pediatric patients at a time and place convenient for parents in an environment that's the right place for their child.

As Mark spoke to earlier, we see an enormous opportunity at MEDNAX to change the way pediatric primary and urgent care is practiced in our country, and this is totally complementary to our core business. It includes developmental medicine specialists who evaluate and treat disorders of development and you see many of our former NICU patients. It includes pediatric cardiologists who evaluate and treat the entire spectrum of childhood cardiac disease as well as adult congenital heart disease patients, and additionally support both neonatology and hospitalized pediatric patient population, including intensive caring cardiac intensive care patients. We continue to add multiple other pediatrics specialties, include neurology, endocrinology, gastroenterology, hematology and infectious disease to better serve our patients and their families. And this includes rapidly growing pediatric surgical services across general surgery, urology, ophthalmology, orthopedics, E&T and plastic surgery.

Each of these represents a scarce and highly specialized surgical specialty that's very important to our pediatric communities in their own right, but are also supportive to our inpatient services. I hope all of this can help you appreciate how interconnected our organization is. It is this network of care from pregnancy to delivery to childhood and sometimes even beyond that makes what we do special and, in fact, essential. And of course, we do this in a very close partnership with our hospitals. When they choose us, the vast majority of the time they stay with us because of our shared commitment to our patients, because of our work to maintain strategic alignment with them, and because they rightly expect and demand the robust resources we at MEDNAX provide to our affiliated clinicians everyday.

Mark?

Mark S. Ordan -- Chief Executive Officer

Thank you, Mack. I will now turn it over to Mark Richards.

C. Marc Richards -- Executive Vice President and Chief Financial Officer

Thanks, Mark. Thanks, Mack. Good morning, everyone. Rather than going through each line of our P&L, I'm going to focus today on our G&A restructuring and stabilization efforts during the quarter and our expectations as we move through the second half of this year. And then, I'll touch on our financial position as it stands today. We had a lot of activity during the quarter that I'll globally describe as the culmination of efforts to refine our support services and create efficiency going forward, all while keeping a priority on service to our practices. First, as previously disclosed, in May, we finalized an agreement with R1 to transition our RCM functions to them. This agreement followed a thorough decision-making process, from which we concluded that R1's scale, technology investments and dedicated focus on revenue cycle can give our affiliated clinicians capabilities we would never match.

Under the terms of our agreement, we realized near-term G&A savings. And we also expect to benefit over time from future improvements in RCM performance, yield and revenue enhancements. In terms of the impact of this transition on our P&L for the second quarter, it was a net savings to our G&A. But as with any major transformational project, we did record certain onetime expenses within our transformational and restructuring line item, primarily related to expected terminations of other existing third-party RCM contracts. In addition to this agreement, we passed two other important milestones related to information technology and infrastructure modernization. We completed a significant data center consolidation, and we went live on our Oracle ERP solution that represents a far more advanced financial platform. The planning and implementation of both of these have been in the works for some time. But we did incur a surge of IT-related spend in the second quarter to bring all of this over the finish line, which all sized, is roughly $3 million to $4 million over the year-over-year increase in our total G&A when compared to last year.

Third, we have substantially completed the support services related to the PSA arrangement attached to last year's sale of our anesthesia organization and plan to wind down any remaining services through Q3. As I noted in the past couple of quarters, there will still be some period of time when we're still incurring some of those expenses, but not being reimbursed for them. Finally, we sold a secondary corporate office building in Florida during the quarter. We received $25 million in cash proceeds and recorded a $7 million gain on the sale. And on a go-forward basis, we'll realize approximately $2 million to $3 million in annual G&A savings from the building sale. With all of these actions moving toward in our rearview mirror, we expect our dollar G&A spend for the second half of this year to be below $137 million we incurred during the first half. I'll finish with a comment on our financial position. We generated a strong $70 million in operating cash flow for the second quarter.

We ended up the quarter with $338 million in cash, up from $270 million at the end of the first quarter, and net debt of $662 million, implying leverage of less than three times. In addition, you'll see on our balance sheet that we also have a $29 million income tax receivable primarily related to the tax elections made with respect to the sale of our Anesthesiology Medical group last year, and we anticipate receiving that cash sometime in late '21 or early '22. Based on our expectations of second half adjusted EBITDA and cash flow, this tax receivable and normal uses of cash for capex and M&A, we would expect to end this year with leverage below 2.5 times.

With that, now I'll turn the call back over to Mark.

Mark S. Ordan -- Chief Executive Officer

Thanks, Mark and Mack. We are ready to respond to any questions.

Questions and Answers:

Operator

[Operator Instructions] And we'll first go to the line of A.J. Rice with Credit Suisse. Please go ahead.

A.J. Rice -- Credit Suisse -- Analyst

Hi, thanks, everybody. Good to see the rebound in the volume trends, but it's interesting that the bursts were up 2.9%, but the NICU days were up 4.4%. I guess they usually march a little more in tandem. Any -- as you drill down, anything to say about what drove the stronger -- even stronger performance on the NICU side than just in the birth number?

Charles Lynch -- Vice President, Strategy and Investor Relations

Yes, it's Charlie. If you recall, through a good part of 2020, our rate of admission into the NICU was somewhat below trend. And as we came into this year, beginning in the first quarter and continuing here in Q2, it has reverted to trend. So that's the differential essentially between birth and days for this quarter.

A.J. Rice -- Credit Suisse -- Analyst

Okay. So is that something you'd say this is more normal going forward than maybe what we saw in 2020?

Charles Lynch -- Vice President, Strategy and Investor Relations

Yes. Yes. We look on trend on the admin rate side and not sure how things will continue through the third and fourth quarter. But if they do continue on trend, that's probably somewhat additive to our NICU days versus for the rest of the year.

A.J. Rice -- Credit Suisse -- Analyst

Okay. I just wondered on the vaccine with some of the managed care companies have talked about, obviously, the potential. We've got the 12- to 17-year olds, I guess, but the under 12 population. If there is an approval for that, there's some discussion that a lot of that would happen in the pediatrician office. I'm wondering if you've looked at that, if you're prepared for it and how much of tailwind that might be if that happens.

Roger M. Hinson -- President of Pediatrix and Obstetrix Medical Groups

This is Mack. I think, the primary care pediatricians to some degree, are doing the vaccine. That's not widespread necessarily across all pediatric practices. So I think there's still going to be a lot of these patients that are going to be vaccinated in sort of similar size to what we've seen in the adult population. So I'm not sure that the vaccines in and of itself in the entire population, it's going to provide much of a tailwind for anybody, us included.

A.J. Rice -- Credit Suisse -- Analyst

Okay. And then I just want to ask on the acquisition that you mentioned the neurology deal. And then I think also, as you've talked about different specialties that can support women's and children's health, it was a little wider catchment area than I would have thought. I guess, we've been focused more on traditional women -- things like women's health. Is that an evolution in your thinking that now you branch out some of these other areas? And would you strictly in neurology or any of the other specialty, as you mentioned, would that strictly be practices that are focused on pediatrics or women -- or have a unique women's practice, or are you thinking more broadly that you might branch into some of those going forward?

Mark S. Ordan -- Chief Executive Officer

Well, the answer is -- it's Mark, A.J. The answer is the latter. We think that there is a very important necessary and big opportunity for us to be a broad provider of women's and children's health services. And that's why we look at the subspecialties in these areas and look at holes in the market and say, how can we fill those holes and how can we strengthen the network that Mack so carefully described. Hospitals depend on us for a suite of services and our specialist work, as Mack described, are very inter-connectedly, to support each other. So I think you I think that is the way of things to come. So while our core is around our NICUs, our other subspecialties are extremely important, not just to the absolute size that they present. But the opportunity to present to really provide the right level of care for our patients. And yes, I think that, that strengthens our relationships with our hospitals. It strengthens the ability of our doctors to provide care. It's far more than if it was just a collection of practices out there.

A.J. Rice -- Credit Suisse -- Analyst

Okay. All right. Thanks so much.

Operator

And our next question here will come from Brian Tanquilut with Jefferies. Please go ahead.

Brian Tanquilut -- Jefferies -- Analyst

Hey good morning guys. Congrats on the quarter. I guess, my first question, Mark, you've had some success, and thank you for highlighting the R1 G&A opportunity. But yes, you've been here a few quarters now. How are you looking at incremental G&A or even just efficiency opportunities to drive kind of like incremental margin growth?

Mark S. Ordan -- Chief Executive Officer

Well, there are two Marks. I'll start, but -- and thank you for the -- your kind words about the quarter. We think that focus and efficiency come hand-in-hand. And both Marks have worked together for a lot of years to do that. So we think over time by focusing on how to make our core better, you become more efficient. So we think that, that will equate to lower percentages of G&A as we grow. I think, by not being as far afield as the company used to be, by having a very singular focus, these things pay off. And then we talked about the patient initiative act. That -- those are areas where we can grow without adding any incremental overhead because you're just making your operations that much more efficient. But that requires that the core that we have today is looking at everything we do and saying, how can we do a little bit better. And if you're not too broad, we think we can do that. So we think that's a big opportunity for us going forward.

Brian Tanquilut -- Jefferies -- Analyst

Got you. And then just to the point on the recruitment and specialists and the different specialties that you're looking at. -- You've seen some of the job postings online for like pediatric surgeons and things like that. So how are you thinking about the engine strategy there? Is it going to be acquired, or is this going to be more organic as you try to expand beyond the current service lines?

Mark S. Ordan -- Chief Executive Officer

Well, look, it's all of the above. And you know I think probably embedded in your question is an easy recruiting market. So you have to be the employer of choice. You have to build an organization that people are really proud to be part of. And our job is leaders of the organization is to make sure that that's what we're doing. So a lot of the work we do will be organic growth. We're getting -- we have a great pipeline and new contracts that we're growing in that way. And then we're also attracting new physicians. We're advertising. We're out there trying to make sure that people understand who we really are and the support that we provide. Again, we want everybody to know whether you're a clinician, a practice or a hospital, a payer anybody. We want people to understand that this is not a collection of practices that when you park this organization, you get a tremendous amount of support.

So if you're a clinician and you want to take care of patients, we're going to make that job as easy as we possibly can and provide as much support as we can. We have a clinical services group led by Dr. Curtis Pickert that works tirelessly to do so many things for our physicians to help them do their jobs. And then, led by our E&P resource department, Mack and others, we're very choosy about the clinicians that join us. So we think we're able to find the best doctors and clinicians out there because they know that they're in an organization that is 1,000% dedicated to taking care of patients, providing research support, IT support, everything we can to make a doctor's life a better so that our patients get better care.

Brian Tanquilut -- Jefferies -- Analyst

Okay.

Operator

And our next question here comes from Pito Chickering with Deutsche Bank. Please go ahead.

Pito Chickering -- Deutsche Bank -- Analyst

Hey, good morning, guys. A really nice quarter here. The first one is, there has been some noise coming out of Texas as it relates to managed care pushing out some doctor practices to go out of network in order to reduce their reimbursements, obviously, your quarter was exceptionally strong. So I'm wondering if you've seeing this or you believe this won't have any impact on you at all?

Mark S. Ordan -- Chief Executive Officer

Well, yes, and thanks, Pito. Yes, in Texas and California, we have a network right now with CVS, Aetna. Look, unfortunately, throwing a group out of network is a tactic that's used from time to time. I think it's unfortunate because it's very destabilizing for patients, number one. Number one, two and three probably. And -- but look, we're optimistic we'll be back to network because I can't imagine how anybody that care about women's and children's health wouldn't want an organization like MEDNAX and our doctors to be taken care of their members. We play a vital role in some of the communities where we are that I just -- I think that I look at CVS's and they say the role about care. So it makes me optimistic that if we are rational, they'll be rational and will be back in network. And then you look, we'll fight very hard to be back. Overall, we have a great relationship with our payers. Our doctors work the rear ends off to take care of patients, and we provide a lot of support. So we just make that point. But I'm not -- we're not unaccustomed to negotiating again, I think that a tactic like talking to somebody on the network is unfortunate, but I learned it's part of life. So I think we'll moved past that.

Pito Chickering -- Deutsche Bank -- Analyst

Okay. Fair enough. And then a second question for you on payer mix. What is the typical payment for other third parties and private pay patients versus standard managed care payer? Is it a lot higher? And I ask because other third-party and private pay grew 100 basis points versus 2020. And contracted managed care, it's also up 100 basis points versus 2020. So when you put it all together, government reimbursement was down 300 basis points versus last year. I'm curious, sort of what impact it is on EBITDA? And how do you think about that sustainability going forward? Is this a new run rate for 2021, 2022?

Charles Lynch -- Vice President, Strategy and Investor Relations

Pito, it's Charlie. We look at -- when we're looking at payer mix, and as you know, we'll always look year-over-year on a similar basis and look at it by volume to see how it's trended. As you saw in the release, our nongovernment volume was up about 35 basis points as a percent of the total for the quarter. So that's how we view it, and that's somewhat additive to our net pricing when mix moves away from government. So that's how I would classify it in terms of where that's impacting and how it impacted the quarter. It's really in the aggregate, having somewhat lower government reimbursement in the mix.

Mark S. Ordan -- Chief Executive Officer

Pito, it's -- just to correlate to this, I think you noticed, but we do absolutely nothing, and we will do absolutely nothing to manage that number. We've taken patients throughout our practices, whether it's in the hospital or ambulatory, without any regard to how they're paying. So the payer mix is the payer mix from the day that Dr. Medel started this company. There's only one mantra here. And we're continuing it, and that's to take care of the patient. And our doctors are blind to how the patients are going to pay, and it's something that we're definitely very proud of and is unwavering.

Charles Lynch -- Vice President, Strategy and Investor Relations

The only other thing I would add, just to throw briefly is, I would be a little bit cautious about -- and this is just a general commentary, a little bit cautious about looking at year-over-year comparisons to 2020, particularly given the distortions and disruptions across our organization through a good part of last year.

Mark S. Ordan -- Chief Executive Officer

That's a good point.

Pito Chickering -- Deutsche Bank -- Analyst

Yes. No. So actually, let me actually rephrase this differently. Government revenues, as a percent of revenues is 24% in 2Q. That was 27% in 2020. It was 26% in 2019 and 2018. Is this 24% of total revenue from government? Is this the new run rate, or does this over back to mean over time back into the 26% range?

Mark S. Ordan -- Chief Executive Officer

That's a tough one, to say, as we come into this year, we have seen our mix start to move back to what we had seen in historical trends prior to 2020. But I don't think we're in a position to say that we're at a completely different level of mix just based on our overall business right now.

Pito Chickering -- Deutsche Bank -- Analyst

Okay. That's fair enough. Nice quarter guys.

Mark S. Ordan -- Chief Executive Officer

Thank you.

Operator

And next, we'll go to the line of Tao Qiu with Stifel. Please go ahead.

Seth Canetto -- Stifel -- Analyst

Hey, good morning. This is Seth Canetto on for Tao. I just want to ask about the EBITDA margins in the quarter. There was a nice revenue beat this quarter. But I just would have thought that given the stronger revenue, there would be more EBITDA expansion. So can you just give us a sense and remind us of what the costs are variable and fixed? And how should we think about margin expansion as you grow revenues going forward?

C. Marc Richards -- Executive Vice President and Chief Financial Officer

Yes. It's Mark. Just a couple of things on that topic with respect to EBITDA margins. as I mentioned earlier, we did have a surge of activity in the third quarter to bring a lot of our technology and infrastructure enhancements online. So you've got a little bit of margin compression related to the surge of not only data center but a new ERP technology that we went live on April 1. So that's a piece of it. But I would say with respect to where this is going in the revenue push, the big component from a variable standpoint is our incentive sharing program with our physicians. And to the extent we've got a lot of top line movement that will drive our variable cost component up. So that's probably the biggest piece of movement relative to our top line increase over the quarter, a relative share of that in our bonus pools.

Mark S. Ordan -- Chief Executive Officer

We also -- it's not important. We happily announced the end of the long-running lawsuit that we had with CVS-Aetna and there was considerable spending including through the quarter, which has happily how we come to an end. So there are -- so I would say that if you look at the spending that we've been doing to bolster our core, to rev up our sales effort, to really strengthen just about everything we're doing, I think that's -- you see some of that in the quarter, and I think it's going to bear fruit going forward. And like every other company, there's increased spending in technology to keep the company safe from unwanted intruder. So we have that, too.

C. Marc Richards -- Executive Vice President and Chief Financial Officer

And just one last thing. If you're looking at the margin comparison on cost comparison versus 2020, I'll repeat what I said before. There were a number of distortions anyway you look at our comps to last year, particularly for the second quarter. We had enacted temporary compensation reductions not only across our G&A infrastructure, but across the clinical practices as well to the second quarter last year that reverted to normal post the end of the quarter. So that distorts a little bit of your comparisons to Q2 year-over-year.

Seth Canetto -- Stifel -- Analyst

No. That's very helpful. And then I just want to ask on the R1 G&A opportunity versus the patient access and patient initiatives. Can you quantify sort of the runway there? I mean it sounds like you guys are confident in 2022, you'll get past the $270 million pre-COVID EBITDA, but what's the runway opportunity for these programs in place?

Mark S. Ordan -- Chief Executive Officer

We're not right now breaking out what we're doing -- what we're going to get from R1 because we think it's going to be very meaningful. I think we'll detail that. So -- but it's not something that we're prepared to call it as a single line item. We do know that managing for a company our size is such a vast function is very difficult, and it requires an enormous amount of technology that we could never afford and it requires the right people and the team to handle that technology. So we think that it's going to have very significant savings, and we'll detail that as we experience it. On patient access, we, again, we think we're just scratching the surface by adding $2 million to top line in the quarter.

But there's a kind of a new way of operating here. And I think it's -- I think that's very important. There are weekly calls with our practice starting from snacks to the presidents of our regions, to the practice leaders, and we have a very strong operations team that is drilling on so many of the key metrics on scheduling. And it may seem mundane, but by doing that, we are already seeing changes in how scheduling is being done and we'll work even more on our appointment to be being kept. It's all saying that we're in a competitive world, and we want to do everything we can to get people in as quickly as we can and whether that's physical year for telehealth. So we think that's really going to pay off.

Seth Canetto -- Stifel -- Analyst

Great. And then my last question is just in regards to the White House plan that could possibly curtail non-compete agreements. It seems that this executive order would have a large impact on your business model. And I know it's been early since that announcement, but can you guys give us any color on how you're potentially thinking about the impact to your business and the industry?

Mark S. Ordan -- Chief Executive Officer

Sure. Well, first, we operate in states where non-compete don't even affect what we do and we operate very effectively there. So we believe that the best way to operate for any company is to be the employer of choice, as I said before, and we think that people really love working with MEDNAX, and we want to do everything we can to strengthen that. and it works both ways with -- in the absence of not compete. It could enable us to recruit in ways that we think we can today. So I don't see it as a net negative. It's just another reminder that we should operate. And in my past, I've always operated the same.

We want our team to stay here because they love it here not because they're shackled here. So that's how we'll operate. So It's just another reminder to all of us that we have to be the best we possibly can be and be as open in an organization. And I hope you don't think I'm stretching too far by saying it's another reason that focus pays off because all we talk about. There's a reason that Mack spoke for quite a while today because all we talk about is how we take care of women and children and how we take care of our clinicians and how we build a better network, and we think people will want to come here or more.

Seth Canetto -- Stifel -- Analyst

Great. Thanks for taking my questions.

Mark S. Ordan -- Chief Executive Officer

Sure.

Operator

[Operator Instructions] We'll go next to Ralph Giacobbe with Citi. Please go ahead.

Ralph Giacobbe -- Citi -- Analyst

Thanks. Good morning. I guess, on the pricing side, you continue to note the contract admin fees, which I'm assuming is largely hospital subsidies. Does that get comped in at some point, or how do I think about how much subsidies should grow each year?

Charles Lynch -- Vice President, Strategy and Investor Relations

Rob, it's Charlie. Yes. I mean this comes up pretty frequently. And I'll answer it in a similar fashion. When you look at that book of revenue that we lose the term contract admin fees, it contains literally hundreds of contracts across the country, many of which are structured for different specialties spending on their needs. Some of them might be service level driven. It could include stipend and the life for medical directorship, etc, participation in the hospital's clinical leadership and some might be outright subsidization depending on the nature of the specialty. And we often bring up the example that for an OB hospitalists practice to be set up inside a hospital to assist and be on call for labor and delivery is typically heavily funded host hospital to make the P&L work and provide ability to staff those stations. That has been a growing -- a demand-driven growing subspecialty across the country for us. And that's a good example of where you see that revenue book continue to grow. So it's not necessarily escalators or increased subsidization of existing practices. It's also driven by business growth.

Ralph Giacobbe -- Citi -- Analyst

Okay, fair enough. And then, I guess, you did $65.5 million in EBITDA in the quarter. Your commentary around the $240 million for this year would suggest about $65 million a quarter for the back half. Just annualizing that on that sort of $260 million, I know you talked about next year greater than $270 million, I guess, just looking at those numbers, it sort of implies kind of a mid-single-digit EBITDA growth. I know, again, your comment was at least $270 million, so it depends on where you want to put that number. But anything you can frame for us in terms of how you think even about longer-term EBITDA growth at this point?

C. Marc Richards -- Executive Vice President and Chief Financial Officer

Well, look, I think you can tell that our tone is optimistic. We think that we're marketing in the right direction, and we think that, that will bear fruit. We think that there are a lot of opportunities for us, and we're excited about it. We think that our organization is running more and more efficiently and really just focus on all the little things that make up a great organization even greater. So I'm sure, we think that -- we think we'll be north of $240 million. We think we have unless COVID or something else comes up and rerated and hurt us, we should be north of $270 million, and our intention is to grow well beyond that. we're not prepared to throw out a number there, but we don't think -- we don't expect to plateau at $270 million, and I hope you tell the combination of the comments that we made. And you mean most specialty, if you think about all the areas where we're focused, primary in urgent care, the opportunity for us to grow without leaving ever contemplating leaving the space of women's and children's health is a big, big, big playing field out there for us.

Ralph Giacobbe -- Citi -- Analyst

Okay. That's helpful. If I could just squeeze in one more. In your prepared remarks, you talked about new business bookings and higher win rates. Just hoping you could flesh that out. Is that just all related to more hospital contracts coming on, what the opportunity there is, or if that was more on sort of the office space side? Just any more details around that new business booking run rate.

Mark S. Ordan -- Chief Executive Officer

Yes, it's actually all of the above. It's -- And I really must sound like a broken record and I apologize, but it's that focus. I mean, we have leaders in the organization that when we're talking about a practice joining us, it's all hands on deck to work on that, when it's approaching a hospital or often very flattering, not for me personally, but that hospitals approach us and say they have a need. And can you help us with this need? This is an area that we've been struggling with. We have hospitals where we've had no formal relationships that have come to us and say, we see what you've done in other places. Can you help us? And then I think we -- in addition to outreach and the inbound, we have a team that's also very skilled at taking a concept and turning into reality, which is very important in any process.

It's not just that a group wants to join you or a hospital wants you to do. I mean, how do you get to the start of that -- getting that program really in place. And we have -- so it's a combination in our sales group of sales leaders but also key operations leaders. And we moved a key executive from operations -- strictly operations to sales to make sure that we're actually getting these practices in. And when we have a costal contract, it's enacted on time. And if we're getting the bottom line that we expect that we're recruiting the right people and they're being credentialed at the right time.

So that's -- I think that's exactly why the win rate is better. And obviously, versus the past, we're not distracted by anything else. All of us are involved in the effort that I just described. To think about how we expand and how we make sure that we do it in a way that's clearly additive to the organization and to do it on a timely basis. So I think that's why -- glad you asked. That's why we're proud of our win rate.

Ralph Giacobbe -- Citi -- Analyst

Got it. Okay. All right. Thanks for the comment.

Mark S. Ordan -- Chief Executive Officer

Thanks.

Operator

Next, over to the line of Kevin Fischbeck with Bank of America. Please go ahead.

Kevin Fischbeck -- Bank of America -- Analyst

Thanks. Great. Maybe, go -- actually go back to an answer you kind of gave. You mentioned, hey, you can see that our tone is optimistic. I guess, I would contrast that with last quarter, you sounded like that there was a lot of uncertainty in the underlying business and fluctuations and payer mix and things like that. So I guess, your tone definitely does sound a lot more strong and optimistic. I guess, what have you seen and learned in the last few months that makes you more confident?

Mark S. Ordan -- Chief Executive Officer

Well, let me -- that's a great question to ask a psychologist, maybe. But I would say that I was really trying to be, I hope I always do, in last quarter and this quarter, trying to be analytical about where we are. So in the last quarter, we had just come from a period of real fluctuation following massive fluctuation in 2020. So it wasn't that I was pessimistic. I don't like to call a trend if I don't see a trend. And sometimes it's a little bit too early. So I don't like to have a good day to annualize that I'd like to make sure that we see things click. Also in the -- I got here a year ago, and a lot of work that's been underway both before I got here to now is really starting to bear fruit. So it's one thing to say, gee, if things settle in, we should be at a good trend. It's another thing to say, "Wow, things seem to be settling in, and we are on a good trend." And that's a big difference between the first and second quarter.

And I don't think, looking back, I was wrong in the first quarter to be mindful that in the fourth quarter of 2020, things were awfully erratic. And so one quarter to me doesn't make a trend. If you look at Q1, Q2, things like R1 falling into place well, the patient access initiatives, falling into place as well, the team gel-in, a few of us are new, you get -- you start to get a sense that things are clicking. And that's why I try to be as accurate as I can be. So I don't try to be ahead of myself or conservative, just try to see where it is. So we could do better than $240 million, we could do better than $270 million, I try to also be careful and say, hey, we're not sure. there are a lot of variables in our business. And we don't want to take anybody.

Kevin Fischbeck -- Bank of America -- Analyst

That's definitely helpful. And I guess, when we think about the $240 million, $270 million. I know that Ralph just brings it from kind of a run rate basis. But I guess just from a year-over-year basis, it's about double-digit growth any late just kind of roughly size that? I'm sure it's a mix of revenue growth and margin expansion, but just kind of roughly bucket, is it equally split between revenue growth and margins? Is it more margin? How should we think about that bridge from this year's guidance to next years?

Mark S. Ordan -- Chief Executive Officer

Well, it's a bunch of factors to go into to $240 million and the $270 million and looking at a lot of the spending that we have. So I can't break it out in more detail on the call, I think we'll report to you on the parts of our earnings as we experience it. But we look at trends in various areas like in any company would from spending on small things to big things. It's looking at where we think we're going to grow in sales in particular regions. The pace that we think we can grow in acquisitions. So it's all of that. And it's not saying that we think that there's a secular growth in margins in one area and a secular decline in expenses in another area, it's a compilation of things. So I think we just have to stay with that to give you our broad thinking and then obviously report you on a GAAP basis every quarter.

Kevin Fischbeck -- Bank of America -- Analyst

Okay. And then last question, I guess, surprise billing, we got the first piece of it. I'm not -- I feel like maybe the next one or the next piece is going to be more informative, but any updated thoughts on surprise billing and overall, and in particular, is there anything you learned from the first part of the proposal that makes you feel better or worse about that?

Mark S. Ordan -- Chief Executive Officer

Nothing makes me feel better worth. I'd say that -- I think I commented in the past that we believe that a patient shouldn't get a surprise bill. So we agree that, that's the right thing. So we're not all against surprise billing legislation. And we enjoy a very good relationship with our payers who know that we're a vital we're vital to their members and to their networks. So we think that while there are times where we have negotiations, that's never going to come to an end and are at times like the CVS and we might be out of network for some period of time. we think that if you do your job well, you'll be a necessary part of networks, and there will be no reason to generate a surprise bill.

So there's nothing in the legislation so far. Now some of the implementations of the time points of the legislation, we don't know yet. So there are lots of things that we're still going to learn. But yes, I would say, overall, we favor doing everything that's good for the patient and getting the whopper of a surprise is not, and we haven't been a surprise billing organization. So overall, we're fine with it. And I think we will manage our company and our relationships to make sure that it's a positive for our patients and for us.

Kevin Fischbeck -- Bank of America -- Analyst

All right. Great. Thank you.

Operator

[Operator Instructions] And given a moment here, I have no further questions in queue at this time.

Mark S. Ordan -- Chief Executive Officer

All right. Well, if there are no other questions, what I should have done some point in this call is since I'm bragging about all the things that we've done and feeling good about it is to thank everybody in our organization because it wasn't me, it's them. And I appreciate everybody's support for what we're doing and where we're going.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Charles Lynch -- Vice President, Strategy and Investor Relations

Mark S. Ordan -- Chief Executive Officer

Roger M. Hinson -- President of Pediatrix and Obstetrix Medical Groups

C. Marc Richards -- Executive Vice President and Chief Financial Officer

A.J. Rice -- Credit Suisse -- Analyst

Brian Tanquilut -- Jefferies -- Analyst

Pito Chickering -- Deutsche Bank -- Analyst

Seth Canetto -- Stifel -- Analyst

Ralph Giacobbe -- Citi -- Analyst

Kevin Fischbeck -- Bank of America -- Analyst

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