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Operator
Ladies and gentlemen, thank you for standing by and welcome to the MEDNAX 2016 third quarter earnings conference call. During today's call, all phone lines will be in a listen-only mode. We will have an opportunity for a question/answer session later on. (Operator Instructions). As reminder today's conference call is being recorded. At this time, I would like to turn the call over to our host, Charles Lynch. Please go ahead.
Charles Lynch - VP, IR
Thank you, operator. Good morning everyone. I'm going to read our forward-looking statements and I will turn the call over to Roger.
Certain statements and information during this conference call may be deemed to be forward-looking statements within the meaning of the Private Securities and 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 entertainment 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 and its quarterly reports on Form 10-Q 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 Report on Form 10-Q, or in the Investors section of our website located at mednax.com. With that I would like to turn the call over to our CEO, Dr. Roger Medel.
Roger Medel - CEO
Thank you, Charlie. Good morning and thanks for joining our call to discuss our results for the third quarter of this year. 2016 continues to be one of our busiest years ever for acquisitions. During the third quarter we acquired five practices for a total of 12 practice acquisitions for the year-to-date. We added three anesthesia practices expanding our footprint in the West to Nevada. After the quarter we acquired our eighth anesthesia practice this year and to date we have expanded our physician population in anesthesiology by more than 20%. Our pipeline remains strong and I am confident that we can close additional anesthesia practice acquisitions this year.
We also acquired a pediatric ophthalmology practice in Texas and an MFN group here in Florida. In the areas of women and children's care we continue to see opportunities to work strategically with our hospital partners in expanding the service line capabilities they can offer. MEDNAX is uniquely positioned to do this on a national scale and there are an increasing number of market where we're partnering with health systems to build out a continuum of services from conception through childhood care. I see this is as solid opportunity for growth both on an organic and acquired basis.
As I discussed, last quarter we closed our acquisition of Cardon Outreach this summer. This acquisition provides MedData with a unique set of services for our hospital partners that focus on patient experiences, establishing eligibility for Medicaid or insurance coverage for a patient while they are in the hospital making it easier for physicians and patients to communicate, and helping patients navigate the bill they will receive after their discharge. As we have been integrating Cardon's sales and marketing efforts with MedData's, we have seen good receptivity from our hospital partners, and I think there are significant opportunities for growth through cross-selling.
At vRad, operating results were in line with our expectations as we discussed last quarter and we continue to take positive steps in addressing the growing need of our customers. Our first priority has been physician recruiting. For the year-to-date we have now recruited more than a 150 radiologists which puts us on track to exceed 500 radiologists by year-end, and we're continuing to recruit new physicians. Many of our newly recruited physicians are still going through the onboarding process but out of that total as of today we have nearly 400 radiologists actively reading for vRad. This compares to about 375 who were on line when we reported our reports at the end of July and it's a number that we expect will increase steadily throughout the winter.
From a timing standpoint the onboarding process is still a challenge as it takes months to complete the state licensing and hospital credentialing needed for teleradiology services. As a result, we're still in the process of building vRad's network of reading physicians to the size we think we will need. I expect that will continue to be the case through the remainder of this year and into 2017, and our guidance for the fourth quarter of this year includes our outlook that we will continue to be working above our physician capacity. But overall we have made good progress so far in working through the challenges that we face at vRad.
At the same time, I still believe that telemedicine will play a significant role in the practice of radiology in the future, and that vRad will be a valuable asset to us after we move down the path of building a broader radiology business at MEDNAX. As I have said before, we do expect to acquire our first on-site radiology practice before the end of this year. In my view MEDNAX brings a unique value proposition to these groups in that we can provide not only practice support but also fellow radiology capability through vRad that can enhance their efficiency, provide subspecialty access, and help them grow and remain competitive.
Now looking at 2016 as a whole we have clearly had some challenges. And we have made strategic investment in newer areas, where we have had to learn a lot about these businesses and make adjustments that have impacted our growth this year. But I believe we have made good early progress to position vRad for additional growth in the future.
At the same time, I fully believe that all of the investments that we have made over the past several years put us in a strong strategic position as a true solutions partner for our hospitals and health systems and provide significant opportunities for long-term growth. Across all of the areas where we provide services for women and children's care -- anesthesiology, radiology, management services -- we have developed the capabilities to improve the care of patients, to do so with greater efficiency, and to enhance the patient experience in the healthcare system. Particularly within management services, we created expanded opportunities for cross-selling our services which I am optimistic can add to our growth in the future.
And we have been able to do all of this while maintaining a very strong financial position with ample access to capital through our own cash flow and modest debt level. This is particularly important given the strength of our practice acquisition pipeline as we look forward. We have significant opportunities to put this capital to work in practice acquisitions, and I expect that we will continue to be very busy on that front as we wrap up this year and look into 2017.
As a result, I believe that we maintain the ability to generate attractive revenue and EBITDA growth beyond 2016, and that our expected growth in the second half of this year is not reflective of our longer-term expectations.
With that, let me turn the call over to our CFO. Vivian?
Vivian Lopez Blanco - EVP, CFO
Good morning, and thanks for joining our call. I want to give an overview of our operating results for the third quarter and provide additional details in a couple of areas. For the third quarter, our net revenue increased by 15% to $828 million. 90% of this growth came from recent acquisitions. Our practice acquisitions contributed roughly two-thirds of that growth and our acquisitions of Cardon Outreach and Alegis contributed the remainder.
Looking at our same-unit metric, same-unit revenue increased by 1.4%. On the volume side, same-unit volumes increased by 1.1%. Anesthesia, neonatology, other pediatric services, and radiology contributed to that growth partially offset by slight declines in maternal-fetal medicine and cardiology volumes. Our same-unit NICU days were up 1.3%. On the net reimbursement side, we saw slight improvement in managing care contracting that was somewhat offset by the changes in mix of radiology services provided at vRad.
During the 2016 third quarter our [payer rate] was unchanged compared to the 2015 third quarter but increased approximately 130 basis points on a sequential basis. Our EBITDA increased by 7.7% to $181 million. Our EBITDA margin was 21-point -- 21.9% compared to 23.3% last year. When we provided our guidance for the third quarter EBITDA growth, we anticipated that operating trends at vRad would negatively impact that growth by three to four percentage point and vRad's actual operating results for the quarter were in line with that expectation.
Looking at some of the components of our EBITDA -- first our profit after practice expense for the third quarter was $275 million, up 10.6% year-over-year. Profit after practice expense margin declined by 120 basis points primarily related to vRad and the mix of businesses we have acquired in the past year.
Second, our G&A expenses were 11.3% of revenue in Q3, an increase of 19 basis points over last year. Our interest expense was $17.2 million, up from $6.2 million last year. This increase is related to the incremental interest for the notes we issued in December of 2015 and higher average borrowing. The difference in interest cost between our senior notes at 5.25% and our revolver at roughly 2% impacted our EPS in the quarter by roughly $0.04.
Our third quarter net income was $96.5 million, compared to $90.8 million last year and we reported diluted EPS of $1.04 versus $0.97 in 2015. Included in our net income and GAAP EPS is $10.6 million or $0.11 per share related to the settlement of a certain tax matter. After excluding this income tax benefit, our effective tax rate for the third quarter was 39%.
On a non-GAAP basis, adjusted EPS was $1.09 compared to $1.10 last year.
For the quarter, weighted average diluted shares were 93.1 million, down from 93.6 million shares from the same period in the prior year, due primarily to the repurchase activity we undertook during the first quarter of 2016. At the end of the quarter accounts receivable were $487 million, an increase of approximately $42 million as compared to December 31. Days sales outstanding were 54 at the end of the quarter, in line with the end of the second quarter.
For the third quarter, we generated $196 million in operating cash flow, up from $172 million in last year's third quarter. Our total net outstanding debt was $1.8 billion at September 30, up from $1.3 billion at the end of 2015. This increase was primarily related to the acquisitions completed thus far in 2016. At the end of September our available borrowings under our credit facility were approximately $836 million.
Moving on to our outlook for the 2016 fourth quarter as we announced in this morning's press release, we expect that our earnings-per-share for the three months ending December 31, 2016 will be in a range of $0.88 to $0.92 and that our adjusted EPS will be in a range of $1.04 to $1.08. The range for our fourth quarter outlook assumes anticipated same-unit revenue growth will be 1% to 3% year-over-year.
For the fourth quarter of 2016 we expect that our EBITDA will increase by 3% to 7% compared to the fourth quarter of 2015. In general, the timing of completion and contribution from acquisitions will always have an impact on our EBITDA growth rates across periods. In addition, we expect that the unfavorable impact to our fourth quarter EBITDA growth from vRad will be similar to what we saw in the third quarter of 2016.
Our fourth quarter 2016 results will also be affected by the impact of our senior notes offerings in December 2015. The difference in the interest costs associated with this offering of 5.25% compared to the cost of our concrete facility borrowings at roughly 2% will impact our fourth quarter by roughly $0.04 per share.
Finally, our fourth quarter outlook assumes an effective take rate of 39% which includes the expected increase from a change in our annual earnings [indiscernible] between states. The 2015 fourth quarter rate was 35.8% and included a favorable impact from certain discrete items that did not recur in 2016. Based on our expected pre-tax income in the fourth quarter, this increase in our tax rate will impact our earnings per share by roughly $0.05.
With that I'll turn the call back over to Roger.
Roger Medel - CEO
Thank you, Vivian. With that, operator, let's open up the call for questions, please.
Operator
Thank you. (Operator Instructions). Our first question today comes from the line of Kevin Fischbeck with Bank of America Merrill Lynch. Please go ahead.
Kevin Fischbeck - Analyst
Great thanks. It sounds like you guys are making some progress on the vRad labor side but you indicated that is probably going to drag into 2017. Do you have any more color about that? Is this like a Q1 issue, a first half issue, or do you think it will continue to be some pressure throughout 2017?
Roger Medel - CEO
Well, we think it's -- it's a progress that we're making, so it's an evolution. We definitely will see more physicians coming on line to read during the fourth quarter, but we think it will drag into the first quarter.
Kevin Fischbeck - Analyst
Okay. But hopefully keep -- it shouldn't be a big issue after Q1?
Roger Medel - CEO
We expect that by the end of Q1 that we should be more or less complete with that.
Vivian Lopez Blanco - EVP, CFO
Yes. And I think Kevin -- this is Vivian -- you're going to see gradual improvement in that so it's not just one quarter. It's just gradual because as the physicians come on line you will see those improvements throughout the year.
Kevin Fischbeck - Analyst
Okay. And then I guess I mean the whole problem started because you were seeing really strong demand. Has the inability to staff kind of impacted people's willingness to kind of -- to contract with you or are you still seeing that same demand out there and they're perfectly okay waiting for your capacity to catch-up?
Roger Medel - CEO
Yes. Just to remind you volumes were up 23% year-over-year in February and for the first half of 2016 they were up by 16%. Some customers that we weren't able to service -- have tried to insource I will say their overnight read, but we think we can bring that business back as we add more capacity. The competitive environment remains fairly thin so we see fewer competitors than we have seen in past years.
We're hopeful -- one of the first things we did obviously when we realized the problem that we had at hands is we just stopped selling. There wasn't any point in trying to sell more business when we weren't able to service the business. And so we are slowly starting that sales process back again and so we believe when we have enough capacity to service those clients that we will continue to see growth in our -- in our vRad.
Kevin Fischbeck - Analyst
Okay. This last question. I guess we talk about the pricing. You mentioned that there was a slight improvement in managed-care rate. Is there something pressuring managed-care? I guess why aren't we seeing something low single digits at least versus kind of like the modest number that it sounds like you're seeing?
Vivian Lopez Blanco - EVP, CFO
Well, when we talk about pricing, Kevin, it's all-in. So it's the P mix effect, it's managed care pricing, it's contract revenue, it's modalities. So it's everything. So what I have said before is that you do see some variability in the contracting throughout the year and so we did see some of that in the third quarter but we're still -- we're still negotiating contracts and getting rate increases. But at the end of the day there will be some variability with that. We're on our work plan for the year.
Kevin Fischbeck - Analyst
All right. So you're getting consistent rate increases it's more of a mix issue?
Vivian Lopez Blanco - EVP, CFO
Well, it's variability in that and the timing of negotiating contracts. So it's not -- it's not something that's steady throughout the four quarters of the year and yes, we are getting favorability on pricing on our contracts, yes. And some of them we re-negotiate and have escalators in them, and they come in at different times as well.
Kevin Fischbeck - Analyst
Okay. Great. Thanks.
Roger Medel - CEO
Thanks.
Operator
Our next question will come from the line of Ann Hynes with Mizuho securities.
Ann Hynes - Analyst
Thanks. I just want to ask about Q4 guidance because I guess the EBITDA growth rate guidance is 3% to 7% and I think you said the vRad impact will remain the same at 3% to 4%. So is there anything else in there that you want to call out that causes the deceleration like for example is the hurricane impacting volume for October in Florida?
Vivian Lopez Blanco - EVP, CFO
So good morning Ann. This is Vivian. So yes there's some variability not so much I mean the hurricane would have had some slight impact, but it's also what I said in my prepared comments some of the contributions from our acquisitions do vary from quarter to quarter and just some of the seasonality of our business from the third quarter to the fourth quarter. So that's -- that would be impacting the overall growth rate.
Ann Hynes - Analyst
Okay. And I get a question a lot about your same-store EBITDA growth because I think there's some perception that maybe it's not growing, but if you back out -- I mean the math I do if you back out maybe with the vRad impact is that it is growing at least low single digits. Can you confirm that?
Vivian Lopez Blanco - EVP, CFO
So we don't get into the specifics regarding that and so I typically don't break that out, but what I have said on the margin perspective because we do see pressure from margins when you have the same-unit growth not north of 3% but obviously there's -- there's contribution from -- from same-unit.
Ann Hynes - Analyst
All right. And then I guess my last question is you do have a strong balance sheet so I guess two quarters in a row there's been some disappointment with guidance. Would you consider a share repurchase at these levels? Thanks.
Roger Medel - CEO
Yes. Thanks for that question. Actually we do think that given our full pipeline that we would rather put our money to work by acquiring practices, and we're particularly encouraged by the reception that we are getting as we fly around the country and meet with some radiology practices and their ability to see what we see which is the strategy of putting these on the ground practices together with our radiology practice and the benefit and the value that that brings to the existing practices.
So having said all of that the answer is right now given the fact that when we acquire practices we're not only acquiring the -- the profitability that comes from those practices, but also these practices come with a tremendous amount of cash flow and for us right now the focus is going to be on completing as many of these acquisitions as we can from our pipeline.
Operator
Next we'll take questions from the line of Ryan Daniels with William Blair.
Ryan Daniels - Analyst
Yes. Thanks for taking the questions. Roger, a bit of a tactical question for you as a follow-up to your comments there. I'm curious how you think about the acquisition pool in radiology and balancing that against the challenges at vRad. It seems like if you do do as many of those deals as appear in the pipeline that it could actually exacerbate some of the pressures you're seeing as you try to service some of those internally-owned accounts. How do you balance that growth potential with the growth potential of kind of pure outsourcing at vRad?
Roger Medel - CEO
We don't see a lot of conflict. On the contrary what we see is complementary provision of services to these practices, whether it's by providing weekend coverages for them or nighttime coverages for them or by adding subspecialty coverage that they don't currently are able to provide for their hospitals on a consistent basis. Retirement, as physicians retire, covering vacations. I mean, I think there are a number of opportunities that we see by bringing both of the models together.
In addition, one question that we get asked is hey, we have 40 radiologists practicing at XYZ hospitals on their days off can the younger crowd work for vRad and provide that backup that you might need. So for us it's a very complementary business and we don't really see much of a we're not about going into a hospital and displacing existing groups and kicking them out. That's never been our model from neonatology to anything else that we do. So no, we're pretty encouraged by the reception that we're getting.
Ryan Daniels - Analyst
No. I appreciate that. Maybe I didn't ask the question well, but I'm thinking if you acquire a number of the radiology practices and then do start providing that overnight, weekend subspecialty coverage, that's only going to increase the volume burden on vRad at the compact same time where you're kind of struggling to staff vRad up and postponing new sales. I'm curious doesn't it just exacerbate that problem a little bit.
Roger Medel - CEO
I say. No I'm sorry. I see your question. Well, no. Obviously we're going to model that out in a way that makes sense to make sure that we can service our customers, our existing customers, before we add any more from the practices. But like I said, I think that part of the opportunity that we see is that some of the younger physicians practicing in these on the ground radiology practices have asked if there would be an opportunity for them to actually read for vRad during their time off. We'll have to be careful and thoughtful about how we add that, but no, we see that as -- as an opportunity.
Ryan Daniels - Analyst
Okay. And then final question on vRad and I will hop off. Just how long is the typical kind of sales pipeline there? Meaning that when you really do start to ramp up sales again, how long will it take for that to reflect in net new customer acquisition? Thanks.
Roger Medel - CEO
I'm going to say four to six months. I don't really have that figure in front of me, but a safe guess would be in the six month period.
Vivian Lopez Blanco - EVP, CFO
I mean Ryan are you asking to get back to where they were before or to basically just because they are right now we're adding new customer just not at the rate that we had been. So I think that you will see that progression throughout the year depending on what happens with volumes at the hospitals and things like that as well. So there's -- there's different aspects to that.
Ryan Daniels - Analyst
Okay. Sure. No. That's helpful color. Thank you.
Operator
Next we'll take questions from the line of Ralph Giacobbe with Citi.
Ralph Giacobbe - Analyst
Thanks. Good morning. On the -- just going back to the pricing side again you cited the mix shift I guess radiology serving as a pressure point. Is there any way portfolio parse that often and give us a sense if you exclude that what it was in terms of the contribution to the drag to same-unit pricing until you [indiscernible] on the volume side as well? Because I would think the vRad side had a positive impact there.
Vivian Lopez Blanco - EVP, CFO
Yes. I mean so -- so net-net it's not that big of a number to the same-unit but I hate to give out specifics, but it would be in a range of less than 50 basis points all-in for the pricing impact. But again that number varies because there's -- there's other things going indifferent ways, P mix being one of them. But yes, radiology would be roughly that.
Ralph Giacobbe - Analyst
Okay. That's helpful. And then just considering the guidance for next quarter mid-point implies your EPS down year-over-year and you certainly mentioned some of the pressures and the continuation of the pressures. And Roger you mentioned in your prepared remarks that you don't think it's sort of reflective of go forward and opportunities you have.
So I guess the question is when do you think you can sort of slip an start growing EPS? At this point, and maybe more importantly, could you give us a sense in terms of how you think about a longer term sustainable EPS growth target for the company at this point?
Roger Medel - CEO
Well, we -- we have said in the past and we are sticking with that thought that we believe we can grow EPS in -- in north of that 10% number. And so we still believe that. We think in the double-digits would make sense and we expect that as early as in the first half of next year we will be able to continue down that path.
Vivian Lopez Blanco - EVP, CFO
Yes. With that said of course I have to put on my CFO hat and say that obviously you have to adjust for things that, like tax rates that really is not a reflection of what's happening in the operations of the business and interest which we're going to -- a lot of it this year, but nonetheless you have to look at that because we have had as I mentioned to you guys because I wanted to set the expectations correct that we have, our tax rate has gone up.
Ralph Giacobbe - Analyst
Okay. All right. That's helpful. One last one. Just a point of clarity on the vRad side, or maybe I missed this and just want to be clear. So I understand the positive side of all the volume in the incremental scans coming to you. Is it you're getting all of those scans or sort of the offset that you're getting the lower acuity scans?
Vivian Lopez Blanco - EVP, CFO
So yes we're getting some -- I think we talked about that in the last quarter. The mix of the business is changing as it relates to CT scans moving to x-rays of -- we're -- we still have CT scans but there's more volume on the x-ray side an on the final side of the x-ray which is kind of where you wanted to get to.
Ralph Giacobbe - Analyst
Right.
Vivian Lopez Blanco - EVP, CFO
With that said it's not a straight math calculation because obviously it takes less time to read the x-ray than it does the CT scan. So there's -- it's different factors impacting the overall pricing aspect. It's not just math. Straight math.
Ralph Giacobbe - Analyst
Got it. Helpful. Thank you.
Operator
Next we'll take questions from line of Brian Tanquilut with Jeffries.
Brian Tanquilut - Analyst
Hey. Good morning, guys. Roger, Vivian, question for you on pricing again. Sorry to drill down this again. But as we think about the pressure that we're seeing in some -- in some states on out of network rates, are you seeing any pressure at least initial discussions on in-network as you kind of like lose that leverage or at least the leverage to use the out of network strategy is a way to negotiate in-network rates? Is that an issue that's coming up right now?
Vivian Lopez Blanco - EVP, CFO
So no. Honestly we have heard about that and so we actually have been talking to our folks here in preparation for the call because I think I want to just make sure that there wasn't anything out there that I hadn't heard of. But we have always said to you guys, and it still stands, that we don't really have a lot of out of network business. We don't think it's good for the patients, hospitals and all that. So -- so we are specifically not -- not seeing that.
Roger Medel - CEO
Yes. We have never built the business by being out of network. We don't think that makes any sense. It's not good for the patient. It's not good for our hospital partners and it's not good for us. So we do have some out of network business that's a small nonmaterial amount and so we're not -- like Vivian said, we're not seeing that.
Brian Tanquilut - Analyst
Okay. Got it. And then Viv, as we think about guidance and obviously this quarter for Q4 your guidance is below Street. What do you think the sell-sider in the Street is missing in terms of modeling your numbers? Because it seems like we have always been over shooting the -- the numbers that go into your guidance. So as you look at 2017 without looking at you giving guidance I mean what do you think we immediate to be cognizant of as we think about modeling?
Vivian Lopez Blanco - EVP, CFO
Yes. So and I know that we have had some discussions with that -- with you guys about it, so thanks for bringing it up. I think some of it is related to some seasonality in our business. If you go back throughout the years, Q4 is usually lower than Q3. Some of it depends on how the calendar days land. It's not always the same number. It's not always the same variance and but that's certainly a piece of it related to that. So I think you got to keep that in mind all else being equal that that has something that does impact us from three to four. And then now -- now in our fourth quarter like I said there's some variability with contributions from acquisitions et cetera but that's more of our own positioning. But the seasonality does impact the sequential ramp-up or ramp down of the third and the fourth quarter.
Brian Tanquilut - Analyst
Got it. Last question for me, Roger, you talked about capital deployment, right? And in the past I think Vivian has mentioned that necessarily there's -- or at least there's a goal to spend roughly $1 billion dollars a year towards acquisitions and buybacks. So as we think about the remainder of the year and 2017 and you look at the pipeline I mean number one do you still think that's a good number to be thinking of and then second what do you see in terms of the acquisition for deals in radiology, especially since he we just saw [indiscernible] radiology a deal get done with private equity recently. So what's the backdrop there, both of the on-site and the telerad side?
Roger Medel - CEO
Yes. Well, I'm going to answer the second question first and let Vivian answer the first.
Vivian Lopez Blanco - EVP, CFO
I'm happy to do it.
Roger Medel - CEO
She's over there protesting.
Vivian Lopez Blanco - EVP, CFO
No.
Roger Medel - CEO
I think the radiology -- I think the advantage that we have with radiology is that we own vRad and I see that as a significant competitive advantage because there's only one vRad. There's only one company that practices in all 50 states. There's only one company that has 75% to 80% of their physicians that are sub-boarded in all of the sub Boards in radiology, whether it's pediatric or musculoskeletal or breast [indiscernible] or whatever. And so we think that -- and one of the reasons we bought vRad when we did is that we saw the uniqueness of that -- of that practice and our ability to create value by bringing the local practice together with -- with vRad.
As I travel around the country and talk to different radiology practices, I'm encouraged by the -- the confirming, I'll say, of that opinion that we had that these -- a number of these practices that we meet with are seeing the same kind of benefit and the opportunity to bring practices together.
So I mean we'll always have competition. We have seen in the past when we have decided to enter radiology and other practices areas that specialties that others have decided to do it as well, but I think that we're in a pretty unique position given the assets that we have which is unique and non-reproducible.
Vivian Lopez Blanco - EVP, CFO
So on the close $1 billion deployment, we have been doing that and we have -- as Roger mentioned in his comments had a great year on acquisition spend and we don't think that that will end in the fourth quarter. We will have some continued spend as we're pretty encouraged on the deal flow here and so I don't think that that will be an issue to get to close to that number, Brian.
Brian Tanquilut - Analyst
All right. Got it. Thanks, guys.
Roger Medel - CEO
Thanks.
Operator
Next we'll go to the line of Gary Taylor with JPMorgan.
Gary Taylor - Analyst
Hey. Good morning.
Vivian Lopez Blanco - EVP, CFO
Good morning, Gary.
Gary Taylor - Analyst
Just a couple of questions a lot has been covered. I just want to make sure I understand going back to a couple issues. The guidance for the 4Q, I do understand tax rate headwind year-over-year and the financing expense headwinds year-over-year. This is the first time in some time I think you have guided the 4Q down sequentially and so I am just wanting to understand that a little better and I guess we had presumed that potentially was some additional vRad recruiting on boarding cost et cetera, but I want to make sure that that's correct or if there's anything else you would call out in the sequential guidance.
Vivian Lopez Blanco - EVP, CFO
Yes. And so I don't know that I agree with that. I do think we have had, like I said fourth quarter typically is -- is from a seasonality perspective when we look at some of our drivers like average daily census and some of the days -- typically it is somewhat lower, and so there is seasonality in our business from the third to the fourth quarter. Now again, given what we've done sometimes with acquisitions that could potentially then offset that like last year we had a really large contribution, right because we had done -- we had done vRad.
Gary Taylor - Analyst
Okay. So in the last five years I think earnings have been up, but maybe I'm not thinking about the sequential acquisition build. So nothing else, though, outside of seasonality that you would call out? You're --
Vivian Lopez Blanco - EVP, CFO
No. It's usually the -- the days like I said and for whatever reason we do see some seasonality in the census et cetera, but yes. You can go through that with Charlie because I do think that there, that that has impacted the growth rates.
Gary Taylor - Analyst
Can I clarify one comment? I want to make sure I heard it right. I think you said that as vRad came into same-store that put a 50 basis points pressure on reported pricing/mix factors. Did I understand that correctly?
Vivian Lopez Blanco - EVP, CFO
You did and that's why you see -- I hate to give out because I said it was a range. I said it was not more than 50 basis points. That's on the pricing side. Obviously on the volume side it did have a positive -- positive impact because as I said in my comments they did have positive volume.
Gary Taylor - Analyst
Okay. You said 50 bps.
Vivian Lopez Blanco - EVP, CFO
I said no -- (Multiple Speakers). Yes. Exactly.
Gary Taylor - Analyst
Two other -- two other quick ones. Can we I mean given that obviously vRad has been an issue, and the mix has been issue, can you give us a sense of what you're seeing? I'm really interested in both for vRad and the revenue cycle business what kind of -- of volume growth in vRad and maybe this makes more sense to talk about what kind of revenue growth in the revenue cycle business. Are you willing to provide any more detail on those two segments?
Vivian Lopez Blanco - EVP, CFO
So well, I mean on the revenue cycle business we are -- we are excited about the growth position as -- as Roger said. They have been coming in in the higher single digit and we do believe -- and we do believe that there's going to be as he mentioned cross-selling opportunities and they're -- that will take a little while for that to though up on the P&L because there's ramp-up time with these implementations and all that. But we're pretty excited about that opportunity and -- and they have -- they have had good organic growth. Again, given their size hard to move the same-unit needle from all of MEDNAX but that sector is really a pretty exciting one.
Gary Taylor - Analyst
And then last one if we -- if we think about what vRad looks with these newly recruited positions onboarded and we start getting into the second half of next year and moving into 2018, conceptually what do we think vRad looks like in terms of volume and revenue growth?
Vivian Lopez Blanco - EVP, CFO
Well I mean it's hard to predict that at this time but again we had said that we were looking at some mid-single-digit for them all-in. So we're hoping we can get back to that but again it's too premature to tell so we're not going to put that in at this point.
But we're making good progress with them. They did have a great quarter on recruiting physicians. It does take time for them to be really as productive as we would like and with their shift of services for moving to x-rays, you got to get them productive on reading those which -- which you want those to be read at a faster rate given the reimbursement from both of those, CTs versus x-rays. So there's a lot of moving parts but everything is -- is moving in the right direction at the moment.
Gary Taylor - Analyst
Okay. Thank you.
Roger Medel - CEO
Thanks.
Operator
Our next question is from John Ransom with Raymond James.
John Ransom - Analyst
Hi. Good morning.
Roger Medel - CEO
Hi John.
John Ransom - Analyst
Let me just go back to an issue on anesthesia. So first of all have you guys -- and I don't recall but have you guys ever disclosed your total network mix across all your businesses?
Vivian Lopez Blanco - EVP, CFO
I don't believe we have ever -- we have ever disclosed it, but I can tell you it's just very, very, very small.
John Ransom - Analyst
Okay. And, again, the concern that I hear from investors, and this is a bit arcane, is that some of these hard caps on out of network rates, particularly for anesthesia as a multiple of Medicare are giving payers license to unilaterally reduce in network rates. And I think we understand commercial rates are 4x to 5x Medicare rates in general. So what's the mechanism to prevent -- or how does this work inside baseball to prevent some payer of network rates are now limited to 175% of Medicare, so now here's your shiny new 125% of network rate for in-network. That's the concern I hear and it's a new issue at least for me personally to try to figure out and I just would be interested in your perspective on it.
Vivian Lopez Blanco - EVP, CFO
Yes. So like I said I had heard that so we talked to some of our folks that are out there dealing with these negotiations day to day. And they just haven't seen that pressure in our, in the book of business that we have for anesthesia. So I don't know what else to tell you on that other than we just haven't seen it in our geographic with our geographic concentration. I don't know if other folks are saying that but what we just -- we just haven't seen it, John.
John Ransom - Analyst
And you don't have enough exposure in say California to worry about that particular state?
Vivian Lopez Blanco - EVP, CFO
Right.
Roger Medel - CEO
We -- I don't think we have any -- any exposure in California for anesthesia.
John Ransom - Analyst
Okay. And then -- and then my second question would just be on your anesthesia group do you have a number that would kind of break out in your mind and inpatient surgeries versus outpatient surgeries and in particular freestanding outpatient surgeries? Are you -- as part of what's going on with anesthesia, as the surgeries migrate from to freestanding, is that something that you feel like you're up against it a little bit in terms of that trend or is it something I'm worried too much about?
Vivian Lopez Blanco - EVP, CFO
Well, I mean we have -- I don't remember the actual numbers, but we have -- we do have a mix of all that and we have had in hospitals where we're at we have the pre -- where they have ASCs, we have that business too and we have outpatient business. So I mean it's --
Charles Lynch - VP, IR
I can look that number up.
Vivian Lopez Blanco - EVP, CFO
We have a variety of that. We can look it up and share it with you guys. We haven't really -- we don't really focus on to --
John Ransom - Analyst
I mean we're just in a cycle will hospitals are reporting basically flat outpatient surgeries and these freestanding ASCs have been reporting high single-digit, low double-digit rates. Now we haven't seen a lot of press this quarter, so we'll see what if that trends normalizes. But it just seems like ever since high co-pay plans hit a threshold, we have seen this acceleration into all national lower cost settings. So I didn't know if that's something that was on your radar to worry about.
Vivian Lopez Blanco - EVP, CFO
No.
Roger Medel - CEO
Let me just add to that every one of these practices that we typically have both in hospital and out -- have outpatient facilities that they cover.
John Ransom - Analyst
Sure.
Roger Medel - CEO
So -- but I can -- I can -- Charlie can look up that number and give you a more intelligent answer.
Vivian Lopez Blanco - EVP, CFO
Yes, but it does vary from quarter to quarter just so you know.
John Ransom. Sure.
Vivian Lopez Blanco - EVP, CFO
Because I do think we have talked about that, so -- but like Roger says we can, we can get it because we know we have it.
John Ransom - Analyst
Yes. All right. And then just last couple for me. Again, sorry so beat the seasonality horse but what we see is surgeries are massively -- I mean every year fourth quarter is a bigger, bigger, bigger number for surgeries because of co-pay people get their co-pays through their co-pays. I'm not aware of any particular seasonality with babies so other than just timing of M&A and one fewer weekday and is there something else that's changed with seasonality in your business or is this just a funky year with M&A timing and maybe vRad is playing a bigger role than it will going forward.
Vivian Lopez Blanco - EVP, CFO
I think you're right. I mean it's what you said there's nothing more to it than that.
John Ransom - Analyst
Okay. And as you guys have deployed a ton of capital I think the thing -- the last thing I hear on your socket that's hard to parse is you have deployed a ton of capital. It's hard to break out organic growth versus return on capital, but just generally speaking when you deployed this $1 billion what kind of returns were you looking for? How do you measure that? How are these deals tracking against your returns expectations? And I'm talking anesthesia, your two IT acquisitions, vRad -- the big jump up in capital deployment. How is it tracking versus your expected hurdles?
Roger Medel - CEO
Okay. So as you know, I would say this to you guys from time to time. We do look at three deals retrospectively and figure out really on a deal to deal basis and so overall the deals are performing well. Now, that doesn't mean every single one will be hitting the pro forma estimate that we have for them, but overall they do okay. Again obviously impacted when you look at our return on invested capital right that's been impacted by some of the multiples that have been paid, not only because we have done a lot more anesthesia deals but in some of the pricing on that but again --
John Ransom - Analyst
Right.
Vivian Lopez Blanco - EVP, CFO
Over -- overall, John, we do have a pretty good discipline here of looking at the performance of the deals and of course overall they're doing well. There's some that are not doing what we planned but overall the -- the return is what we expect.
John Ransom - Analyst
And I think people are still a little confused on vRad and just say you get over the hurdle with your staffing and it gets back to steady state like you think approximately what percentage of the EBITDA is in the third quarter versus the rest of the year? I mean it wasn't clear to me that the third quarter was such an important quarter for you until the issues last time. But as we think about that business on a steady state business and I think it was $50 million or so in EBITDA when you bought it, how do we think about allocating that on a seasonal basis?
Vivian Lopez Blanco - EVP, CFO
So it did, it did have some ramp-up. But I think what we have said is it impacted the third quarter close to 4% and we do think it's going to be on the -- on the EBITDA growth rate and -- and similar percentage in the fourth quarter.
John Ransom - Analyst
But does it do 30%, 40% of its EBITDA in third quarter normally? I mean is it that big seasonal effect because of doctor vacations?
Vivian Lopez Blanco - EVP, CFO
No.
John Ransom - Analyst
Just as an example it's not that high.
Vivian Lopez Blanco - EVP, CFO
No. I don't think -- I would have to go back to that, John, but I don't really think that there's that big have big of a seasonality. I mean obviously in the summer there's some, but I wouldn't say it's that -- it's to that magnitude.
John Ransom - Analyst
Okay. All right. Thanks so much.
Operator
Now to the line of Chris Rigg with Susquehanna. Please go ahead.
Chris Rigg - Analyst
Morning. I just wanted to come back quickly to the mix in the radiology business. I mean, when we think about the shift from CT to x-ray, I mean if I guess to use sort of a baseball analogy -- what inning do you think we're in terms of when this is sort of baselined into or sort of in the run-rate when we're not going to see this pressure on a quarterly basis?
Vivian Lopez Blanco - EVP, CFO
Well, I mean, the mix -- the mix is hard, it's hard to project. I mean, I think they have seen business moving in that direction, but like I said before, I think that they'll obviously improve that with the productivity, right, because it just depends on the number of x-ray reads you can do per hour versus what you do for a CT scan and then how the physician is getting reimbursed and so it's just a lot of those moving parts. I do think the business is moving towards finals and specifically than on the x-ray side. But I don't -- I don't know like I said I just think that that's going to have volatility from quarter to quarter.
Chris Rigg - Analyst
Okay. So just it's not really a trends it's just going to move around quarter -- you're just saying it's a quarterly thing. It's not going from where we are today to -- it's not going to persist for some period of time?
Vivian Lopez Blanco - EVP, CFO
Well, I mean there's some -- well, the results aren't going to persist because right now they're in an evolution of trying to get these docs to be more productive ever. Once you get some of that settling then you will find that having that final x-ray business they will be able to make more -- more profitable because -- because of the efficiency of the reading process and so there's several moving parts to it. But yes, I do think there's been a trend towards more final business that will be typically more x-ray, but it's just not -- it's just not one thing is what I'm trying to say, Chris. There's a lot of different business dynamics that go with it and again the efficiency of the read from the physician perspective would definitely impact that a lot.
Chris Rigg - Analyst
Understood. On the NICU side a couple of the hospitals have sort of said they have seen some weakness in terms -- in terms of lower Medicaid volumes generally. Is that consistent with what you guys have been seeing?
Vivian Lopez Blanco - EVP, CFO
Not -- I mean, not really, no. No.
Roger Medel - CEO
Lower Medicaid volume? I don't think.
Chris Rigg - Analyst
Well, fewer -- fewer Medicaid deliveries and I'm wondering if that has translated into anything on your side.
Vivian Lopez Blanco - EVP, CFO
No. We haven't -- we haven't really seen -- seen that, no.
Chris Rigg - Analyst
Okay. Okay. And then just getting back to this out of network dynamic. Obviously this is the question that a lot of us get all the time and I know you said it's not a very small percentage of revenue, but does that mean it's sort of like 2% or 10% or just some parameters would probably be very helpful for all of us on the call.
Vivian Lopez Blanco - EVP, CFO
Well, it's -- I can tell you it's a lot less than 10% but again it's not -- it's not something that we -- that we basically want to do. We don't -- we don't keep it up because it's just -- it's not a part of our business. It's very small.
Chris Rigg - Analyst
Right and then just one follow-up on that because these are questions that I get all the time. Even though the out of network is small in its totality is it heavily skewed towards the anesthesia business or is it about the same level across all the businesses?
Vivian Lopez Blanco - EVP, CFO
Oh, I would have to look at that. I think -- I would say it's about -- I mean it's -- again, because we -- we use that only when we can't really negotiate with -- with a payer in that market I would -- if I went back I would tell you that it probably varies. But it's just a very small percentage for us. I don't know how -- how much more to tell you guys other than we have been saying this for years. We don't believe that it's good practice to have out of network business and it hasn't been an issue for us and it's -- it's a very small percentage.
Chris Rigg - Analyst
Understood. I appreciate your color. Thank you.
Operator
Now to the line ever Gary Lieberman with Wells Fargo.
Gary Lieberman - Analyst
Good morning. Thanks for taking the question. I guess maybe to stay on the NICU business, can you talk about general trends that you're seeing there and maybe comment on any -- any increase or decrease of what you're seeing with Zika if anything?
Roger Medel - CEO
No. Nothing to report as far as the Zika virus is concerned. Our admit rates are within the -- the usual ranges and our length of stay which are the other the two variable we look at are also within our historical ranges so methodology to report on admissions, admit rate or length of stay.
Gary Lieberman - Analyst
Okay. And then make just coming be back to the -- to vRad. I think you talked about it, but are you continuing to see the trend towards -- towards final read? You cited that last quarter as being one of the -- one of the issues that you hadn't expected and was putting pressure on -- on labor. Is that continuing to be the case or do you now expect that you're for the most part going to be doing the final reads?
Vivian Lopez Blanco - EVP, CFO
Yes. So I don't know if you have been on the line but yes, we just talked about that. It's a trend that's continuing and I think again as these physicians get on board and -- and they're trained, I think the productivity there will improve and so will the profitability of the finals x-ray business.
Gary Lieberman - Analyst
Okay. Right. Thanks a lot.
Roger Medel - CEO
Okay.
Operator
Thank you. Next we'll go to the line ever Chad Vanacore with Stifel.
Chad Vanacore - Analyst
Hey good morning, all.
Vivian Lopez Blanco - EVP, CFO
Morning, Chad.
Chad Vanacore - Analyst
I want to retread some well-trodden territory here. So just thinking about vRad services, have you seen any changes in demand from hospitals and is it the demand there but just not able to fill it yet or is vRad just lacking the economies of scale including staff help?
Roger Medel - CEO
No, no, no. The demand is there. Again, we -- as I told you before, we saw during the first half of 2016 a 16% rate increase in volume and we stopped the sales process once we realized that we were going to have a problem fulfilling our obligation. We have since then, at a much lower rate restarted our sales process with some extended times when we can begin the coverage. So we're selling -- we're saying now we can help you but you have to wait until February of 2017, that kind of stuff. And we're seeing continued interest and continued ability to sell into, into the next -- next year. So no I think that the interest is still very much there.
Chad Vanacore - Analyst
Okay. Then just as a follow-up what percentage of increase in staff are we talking about to get vRad to the optimal level to backfill this demand?
Roger Medel - CEO
Well, we -- we saw a 20% increase during the first quarter of the first -- in the months of February we saw a 20% increase in volume so if that continued we would need to increase our population by 20%, right? We were at 400 -- or under 400 physicians. We think we will be at 500 by sometime by the end of the first quarter or something like that. For the current volume and the volume that we project that we would have by the end of the first quarter that probably is the right number. Now --
Chad Vanacore - Analyst
Correct.
Roger Medel - CEO
Now as we continue to sell and -- and continue to grow, obviously we will continue to recruit at the same time.
Chad Vanacore - Analyst
All right. Thanks, Roger. That's good color. Then just thinking about the revenue cycle management business, especially Cardon that you just added that was the bulk of the addition is to this quarter, what kind of margins for these physician practice acquisitions should we be thinking about, or should we be thinking about this more as an internal bolt-on?
Vivian Lopez Blanco - EVP, CFO
So, again, we are not going to talk about any specific margins on these businesses, but -- but and it's not -- it's still a much lower percentage of the total MEDNAX business, but we're -- we're excited about the topline growth of it because we do think that, that there's a lot of opportunities there. And I do think there's opportunities there as well for improvement of margins as we proceed with some of these cross-selling opportunities and some synergies that we're doing just with integrating some of these businesses.
Chad Vanacore - Analyst
All right. I think that's it for me. Thanks.
Roger Medel - CEO
Thank you.
Operator
Go now to the line of Dana Hambly with Stephens.
Dana Hambly - Analyst
Thanks for getting me in. Roger, just on the conception to child care strategy, just wondering if it there's a market where you're providing the full continuum or what kind of type of -- type of penetration do you have within the existing footprint where you are providing that full continuum? I'm just trying to better understand the market opportunity.
Roger Medel - CEO
Yes. We see that as a real opportunity for us. Our hospital partners continue to ask us to help them with either -- whatever their needs are it could be pediatric emergency room, it could be pediatric neurology, it could be OB hospitalist services, it could be maternal-fetal medicine. So it depends on the specific need of the hospital, but they are currently turning to us more and more and asking us for help with whatever specific services they -- they might need. And we see that as a significant avenue of continued growth for us in the future.
Dana Hambly - Analyst
Okay. And then Vivian, on the fourth quarter the -- the contribution from acquisitions to the fourth quarter revenue is that -- I know you talked about the timing of acquisitions. Should we think of that as comparable to what was in the third quarter or -- or more or less?
Vivian Lopez Blanco - EVP, CFO
Yes. I mean more or less. Like I said our same unit guidance is one to three and then the remainder is coming from -- from the acquisitions so yes. More or less it will be similar.
Dana Hambly - Analyst
Similar. Okay. Thanks very much.
Operator
And we'll go to the line of Whit Mayo with Robert W. Baird.
Whit Mayo - Analyst
Hey. Thanks. Just a couple quick ones. Back on vRad, when you acquired that business I think it was earning margin in the low 20s and presumably it's lower than that now. Just was wondering if you would be willing to share where it's tracking currently.
Vivian Lopez Blanco - EVP, CFO
Well, you're on the right track, but I'm not going to give specific numbers but given that it's impacting our EBITDA growth yes, obviously it's lower than what we expected when we -- when we acquired it. And so we're hoping again as all of the discussion throughout the call, that it's moving in the right direction to get back on track where it was. But yes, it has been impacted obviously with these challenges in the business related to additional cost on the -- physicians on the recruiting side as well as on the productivity pay side.
Roger Medel - CEO
Let me just remind you what we talked about last quarter -- which was number one, an increase in compensation to our physicians to get them to work overtime in providing these reads. And so if they're scheduled to work whatever eight shifts every two weeks, now we're asking them to work ten or 12 shifts an we're paying extra for them to work those shifts. And then we also by contract have some turnaround time that we are specified to with our -- with our clients and if we're not able to provide the turnaround time within those parameters then there are some penalties built into that. And so all of that we hope will go away by the end of the year.
Whit Mayo - Analyst
Got it. And maybe just two quick ones. Just malpractice, Vivian can you just remind us how that's trending now?
Vivian Lopez Blanco - EVP, CFO
So we have had really good experience with malpractice throughout the years. It's really not any given quarter phenomena. Throughout the years, we have had a very good experience because we believe we have a very good process to manage those claims with our claims committee that is comprised of the different physicians in the specialties. So I wouldn't say that that's changed. It's been a good favorable trend throughout the years.
Whit Mayo - Analyst
Okay. And just one last one. Parity revenues from the prior year I have $1.5 million. Is that number still accurate?
Vivian Lopez Blanco - EVP, CFO
That number is absolutely accurate.
Whit Mayo - Analyst
Perfect. Thank you.
Operator
There are to further questions in queue at this time.
Roger Medel - CEO
Okay. If there are no further questions, then let me thank everyone for participating this quarter and I'll look forward to speaking with you next quarter. Thank you, operator.
Operator
Okay. That does conclude our conference today. We thank you for your participation for using AT&T Executive Teleconferencing. You may now disconnect.