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Coronavirus Pandemic ("COVID-19") | 3 Months Ended
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Mar. 31, 2020
Extraordinary Items [Abstract] |
Coronavirus Pandemic ("COVID-19") |
2. | Coronavirus Pandemic (“COVID-19”):
COVID-19 and related “stay at home” and social distancing measures implemented across the country has significantly impacted demand for medical services provided by the Company’s affiliated clinicians. Beginning in mid-March 2020, the Company experienced a significant decline in the number of elective surgeries at the facilities where the Company’s affiliated clinicians provided anesthesia services. See Note 12 - Subsequent Events for information regarding the divestment of the Company’s anesthesia medical group on May 6, 2020. Much of this decline has been due to the closure of operating suites or facilities following federal advisories to cancel non-urgent procedures and the prohibition of such procedures by several states. Within the Company’s radiology service line, orders for radiological studies have declined by a meaningful amount from historically normal levels, with much of this reduction focused in non-urgent studies. The Company’s affiliated office-based practices, which specialize in maternal-fetal medicine, pediatric cardiology, and numerous pediatric subspecialties, have seen a significant elevation of appointment cancellations compared to historical normal levels. At this time, the Company has not experienced, nor does it currently anticipate, any significant impact to neonatal intensive care unit (NICU) patient volumes as a result of COVID-19. The Company has implemented a number of actions to preserve financial flexibility and partially mitigate the significant anticipated impact of COVID-19. These steps included a suspension of most activities related to the Company’s transformational and restructuring programs, limiting these expenditures to those that provide essential support for the Company’s response to COVID-19. In addition, (i) the Company temporarily reduced executive and key management base salaries, including 50% reductions in salaries for its named executive officers through at least June 30, 2020; (ii) the Board of Directors agreed to forego their annual cash retainer and cash meeting payments, until further notice; (iii) the Company enacted a combination of salary reductions and furloughs for non-clinical employees; and (iv) the Company enacted significant operational and practice-specific expense reduction plans across its clinical operations. In response to the anticipated impact of COVID-19 on the Company’s results of operations, on March 25, 2020, the Company amended and restated its Credit Agreement to, among other things, (i) establish a deemed Consolidated EBITDA of $139.2 million for the second and third quarters of 2020, reflecting average Adjusted EBITDA from continuing operations for the prior eight quarters (calculated for purposes of the Credit Agreement), which will be used in the calculation of rolling four consecutive quarter Consolidated EBITDA under the Credit Agreement, (ii) temporarily increase the maximum consolidated net leverage ratio required to be maintained by the Company from 4.50:1:00 to 5.00:1:00 for the second and third quarters of 2020 and 4.75:1:00 for the fourth quarter of 2020, before returning to 4.50:1:00 for the first quarter of 2021 and beyond, (iii) require that the Company maintains minimum availability under the Credit Agreement of $300.0 million through the third quarter of 2021, (iv) provide for a weekly repayment of borrowings under the Credit Agreement through the second quarter of 2021 using unrestricted cash on hand in excess of $300.0 million, plus a reserve for certain payables, and (v) temporarily restrict the Company’s ability to make restricted payments under the Credit Agreement for the remainder of 2020, subject to certain exceptions. At March 31, 2020, the Company believes it was in compliance, in all material respects, with the financial covenants and other restrictions applicable to the Company under its Credit Agreement, its 5.25% senior unsecured notes due 2023 and its 6.25% senior unsecured notes due 2027. The Company believes it will be in compliance with these covenants for the next twelve months. CARES Act On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act is a relief package intended to assist many aspects of the American economy, including providing up to $100 billion in aid to the healthcare industry to reimburse healthcare providers for lost revenue and expenses attributable to COVID-19. The Department of Health and Human Services (“HHS”) is administering this program and began disbursing funds from the initial $30 billion in early April 2020, of which the Company’s affiliated physician practices received an aggregate of $12.2 million based on their respective share of Medicare fee for service reimbursements in 2019. The remaining $70 billion in aid is intended to focus on providers in areas particularly impacted by COVID-19, rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population, and providers requesting reimbursement for the treatment of uninsured Americans. It is unknown what, if any, portion of the remaining healthcare industry funding on the CARES Act the Company and its affiliated physician practices will qualify for and receive. In addition, the CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. The Company intends to utilize this deferral option throughout 2020. The Company currently expects that the COVID-19 situation will materially impact its financial results, but due to the rapidly evolving environment and continued uncertainties surrounding the timeline of and impacts from COVID-19, the Company is unable to predict the ultimate impact on its business, financial condition, results of operations and cash flows. The Company, however, believes it will be able to generate sufficient liquidity to satisfy its obligations for the next twelve months.

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