- Physician staffing firm Mednax has outlined a new strategic direction with plans to focus solely on women's and children's medical services. The company will continue to sell off other business units to achieve that end and will change the company name to Pediatrix Medical Group to reflect its new direction.
- Fort Lauderdale-based Mednax now plans to shed its radiology unit, a month after it sold its anesthesiology group, American Anesthesiology. Late last year the staffing firm also divested its revenue cycle management firm, MedData.
- Mednax has been particularly hard hit by the novel coronavirus as elective surgeries have been delayed, putting the squeeze on both its anesthesiology and radiology groups with volumes down between 60% and 70% and between 50% and 60%, respectively, compared to April of last year.
The novel coronavirus is only exacerbating the challenges facing Mednax, which include contract disputes with the nation's largest insurer in some states. Amid the upheaval, the firm is paring down its business to weather the disruption and payer challenges.
However, as analysts with Jefferies pointed out in a recent note, that means "unwinding 13 years of strategic moves." The company originally started out as Pediatrix Medical Group then pivoted to Mednax in 2007 as it began buying up firms outside its core focus in order to stoke growth.
Still, focusing on newborns and moms is not without risk, analysts with Jefferies noted, pointing to a low birth rate in the U.S. and potential antitrust hurdles if Mednax attempts to acquire more firms given its large market share in certain locales.
At the end of last year, the firm operated a network of more than 4,300 physicians, the majority of which cared for newborns in hospital NICUs and administered anesthesia for surgeries.
Before the pandemic became a crisis in the U.S., Mednax was cut from the network of the nation's largest insurer in four states earlier this year. UnitedHealthcare said it was seeking "fair market prices" from Mednax and alleged it was charging more than 60% higher than other providers for similar services.
Mednax did disclose earlier this year that UnitedHealthcare accounted for 2%, or $70 million, of its 2019 consolidated revenue of $3.5 billion.
Mednax was not alone. In a bid to extract lower prices from providers, UnitedHealth has been terminating contracts with what it views as high-priced physician staffing firms and analysts have said the squeeze from the payer is likely to continue.
However, UnitedHealth told Healthcare Dive it has extended the Mednax contracts through August 1 so that patients needing neonatology, pediatric and obstetrics services retain uninterrupted access. Meanwhile, the two continue to negotiate, UnitedHealth said.
Many of these contracts were set to expire throughout the coming months, potentially exposing patients to surprise bills.
The onset of the novel coronavirus and the challenges it poised to the business forced Mednax to consider its options, according to a recent regulatory filing detailing the sale of the anesthesia group.
"American Anesthesiology experienced multiple business challenges, including inflation in unit labor costs and other expenses, constraints to revenue growth based on adverse changes in payor mix, and a difficult reimbursement environment where unit revenues grew at levels meaningfully below unit costs," according to the filing.
The moves the company has made will help ensure the support of its physicians, Mednax said in a recent statement.
"The steps we have taken, and will continue to take, demonstrate our commitment to retain a strong balance sheet with moderate leverage and meaningful liquidity. Moreover, we believe these steps will help ensure that Mednax continues to meet its commitments to its patients, its affiliated physicians, and its hospital partners long into the future," CFO Stephen D. Farber said in a statement.