Ladies and gentlemen, thank you for standing by. Welcome tothe Pediatrix Medical Group Investor Conference Call. At this time all participants on a listen only mode. Laterwe will conduct a question-and-answer session. Instructions will be given atthat time. (Operator Instructions) I would like to turn the conference over to your host, Mr.Bob Kneeley. Please go ahead.

Thank you, Pam. Good morning everyone. Well to PediatrixThird Quarter Investor Conference Call. Before we open the call to Roger Medelour CEO and Karl Wagner our CFO. I do want to read a forward-looking statement. So, certainstatements and information during this conference call maybe deemed to beforward-looking statements within the meaning of the Federal Private SecuritiesLitigation Reform Act of 1995. Forward-looking statements may include but are not limitedto statements relate to objectives, plans and strategies and all statementsother than statements of historical facts that address activities, events ordevelopments that we intend, expect, project, believe or anticipate will or mayoccur in the future are forward-looking statements. These statements are often characterized by terminology suchas believe, hope, may, anticipate, should, intend, plan, will, expect,estimate, project, position, strategy, and similar expressions and are based onassumptions and assessments made by Pediatrix management in light of theirexperience and their perception of historical trends, current conditions,expected future developments, and other factors they believe to be appropriate. Any forward-looking statements made during this call aremade as of the date hereof, and Pediatrix undertakes no duty to update orrevise any such statements whether as a result of new information, futureevents or otherwise. Forward-looking statements are not guarantees of futureperformance and are subject to risks uncertainties. Important factors that could cause results, developments andbusiness decisions to differ materially from forward-looking statements aredescribed in Pediatrix most recent annual report on form 10-K included in thesection entitled risk factors. Thank you. And with that, I would like to turn the call overto Roger Medel.

Good morning, Bob good morning and thanks for joining ourcall today. This morning we reported another period of solid growth in ourbusiness with the continuation of the margin expansion that has become thehallmark of our results over the past few years. We’re growing our business completing acquisitions withinour base business and taking the initial steps in moving into the much largeranesthesia specialty during the 2007 third quarter. Our cash generating capabilities have allowed us tosimultaneously pursue these growth opportunities and repurchase our shares onthe open market. Over a period of less than two months, we’ve now completed our$100 million authorized share repurchase program buying back $1.56 millionshares in the open market. And with the guidance that we issued this morning we’reexpecting continuation of the growth trend into 2008. I am going to discusssome of our recent growth and operating trends, before turning the call over toour CFO, Karl Wagner for a detailed review of our most recent financial resultsas well as our discussion of the earnings guidance we issued in this morning'spress release. Obviously, the biggest operating event for our group was theacquisition of Fairfax Anesthesiology Associates in the beginning of September.This is our first anesthesia group practice acquisition and we’re on track inworking through our integration plans. We've successfully completed some basic integration includingcompliance training and working with some human recourses related issues. Asexpected, we're just beginning to integrate billing and collections with ourfocus on anesthesia services for office-base practices. As I mentioned in September, we're continuing to work withFAA outside billing company for the group's hospital and surgery centerbilling. Since then, we've also identified several opportunities for improvedmanage care contracting and we've started that process. It's early in the process and while I understand yourappetite for information I am sharing with you what we know at this time.…

Thanks, Roger. Good morning, everyone. Our results for 2007third quarter continue to reflect, the company that are expanding, operatingmore efficiently and one with a strong balance sheet and cash flow to continueto execute on a clearly defined growth strategy. I'm going to spend a few minutes on our financial resultsfor the period and then discuss the 2008 guidance that was issued in thismorning press release. Revenue for the three months ending September 30, 2007increased by 10% to 236.9 million from 215.8 million for comparable 2006period. Our revenue growth was relatively balanced with same-unitgrowth, which was 6.1% for 2007 third quarter and acquisitions completed duringthe past 12 month contributing another 3.9% of growth for the current periodversus the prior year. Volume of other services including maternal fetal medicinephysician service, pediatric cardiology and our metabolic and hearing screenprograms contributed about one and three quarter percentage point of same unitgrowth during the 2007 third quarter when compared to 2006 period. The 9/10 of 1% growth contributed to reimbursement includesa slight increase in the percentage of patient care reimbursed by Governmentpayors during the third quarter when compared with 2006 period. We usually see a Government payor mix increase during thisperiod. But this year was slightly higher than in the past few years. It is nota big number nothing that suggest there's any kind of shift from recentpatterns at this time. But obviously we will watch this very closely. In addition, throughout 2006 as Roger said there was a newneonatal code that raised reimbursement to our physician services. We did notfully recognize that code in the first half of last year until we started tosee collections from that new code. During last year's third quarter, we had a slight benefitfrom increased realization of that new code for the period, which affectscomparisons to the 2007 third…

Thanks Karl. At this time, let's just open the call forquestions. Operator.

(Operators Instruction) Our first question comes from BillBonello from Wachovia. Your line is open.

Hey. Thanks. Good morning, guys. Just a couple of questionsif I can. Thank you for all the color on the changing reimbursement. I am justwondering if it is possible to give us some sense of the magnitude of theimpact either specifically of the various components where in aggregate atleast so we have some sense of how much they're driving your growth in '08?

Well. I mean, I will talk about some of them in general, alittle more specific about Texas because I think that's the big one a lot ofpeople are interested in. So when you look at the different reimbursementfactors, clearly the cardiology factor has no impact on next year. We are really glad to hear that came out yesterday. We werehopeful but we weren't hearing any feedback as we were waiting for an answer onthat. So that's very positive for us. We are happy to see that and we willcontinue to work with AMA and other organizations in pediatric cardiology towork through what the coding and changes are going to be needed, if a changegoes forward in 2009 and beyond. So there's no impact from that. As far as the new CPT codeis coming out as Roger said it is very minimal for us. It is a piece of ouradmit codes in neonatology so it is not a lot of money. We are happy to see it,I think we clearly think it recognizes the services the neonatology hasprovided as being different from the physicians not in house, coming inrounding patients and leaving. And a team could have care that provides thoseservices. I think that's important and there's an increase in the use relatetoday that. But it is not a huge code for us, it is not going to have avery large impact next year. The bigger item relates to Texas, and we expectTexas will probably add in the range for next year of about $0.05 and I thinkthat's lower than people think. That's because next year we will get eightmonths of impact. We think the overall impact of Texas change afterconsidering the physicians compensation part of that which is 50%. It isprobably in the $0.08, little bit more than $0.08 range on annual basis. We did get a little bit of impact this quarter. In thefourth quarter, we will get that and it will be positive in our fourth quarterwhich you know, we have haven't changed our range on that but because of Texaswe might be at the high end of that range.

Okay. And just, did your guidance, it would seem that yourguidance couldn't have contemplated the fact CMS reinstated the Doppler code orwas that within the range of your guidance?

Our guidance didn't have any impact of what was happening?

You just assumed it would, that you weren't going to lose itthen.

We assumed we weren't going to lose it.

Well, okay.

Only because we didn't have an answer and we, until we hadan answer, we didn't want to start putting out guesses of that number.

Sure. Okay. And then, the second question that I had and Iwill get off, can you just give us some slots on your other uses of cash. If Ilook at it, you should probably generate $150 million of free cash flow overthe next five quarters. You are going to spend about 80, 85, you have no moreshare repurchase authorized, no debt to repay. I mean, are you just going tobuild up sort of a big war chest because '09 could be a big year foranesthesiology or something or how are you thinking about that?

You know, we are constantly looking at your cash balancesand we don want to maintain significant cash balances for a long period oftime. You know, clearly anesthesia is something that we want to be sure that weare well set up to complete acquisitions on. As I said, we will expectsomething will occur next year. We don't know when, one to two deals is kind of what we arethinking. We don't know timing part of that it depend upon or we continues tosee in Fairfax. But if things continue as they are going I think we'll expectto see some deals next year, which is in addition to the $80 million to $85million dollar that I spoke about.

Okay.

So when you add all of that, you know I think we have usesof the cash but we will continue to evaluate that as we go forward.

Okay. Then just what I think about, if you did do deals inaddition to the $80 million to $85 million, that would also be in theory notcontemplated in the current guidance either.

That is correct.

Okay. Thank you very much.

Thanks.

Our next question comes from Dawn Brock from JP Morgan. Yourline is open.

Good morning guys, I don’t want to stay with guidance aswell, I just want to clarify that in the guidance you put out this morning itonly includes the $0.02 for the originally guided to for Fairfax. So it’s stillexcluding any improvement, any synergy, any growth for Fairfax.

That's correct. The only thing in have in our guidance atthis point is what we had expected from Fairfax when we closed the transaction,still it will be too early to say that there are any significant changes thatwill going to happen. As Roger mentioned there are things we are working on it,share contracts and the like but it's too early to make changes to thoseassumption.

Excellent. Thank you for giving us the Texas Medicaidimpact.

You're welcome.

On the acquisitions the $80 million to $85 million, can yougive us an idea of how the pipeline looks right now. I think that its obviouslyvery encouraging to know that the core business is so strong that you guys aremaintaining the high level that you have been investing, over the last coupleof years. Obviously 2007 was a bit of it and normally with that stockoption review but, it's nice to see that number so high. Can you give us anidea of where the pipeline is right now and whether it’s queued toward neonatalor the neonatal sub specialties.

Good morning, Dawn. Our pipeline is actually pretty full.When you look at our neonatal deal that are in the pipeline, there are a numberof deals that we are excited about, the timing of this year has been an issuefor us and the other thing that happened was with the cardiology uncertaintythat came up during the summer we just stopped doing cardiology deals. There are couple of the small cardiology deal that is, youknow, we have put on hold that we are trying to do [substrate] as we speak. Sowe've got some fair amount comments and will be able to get one or two of thosedeals done hopefully even before the end of year. There are couple anesthesiology of deal we are excited aboutin our pipeline. So, you know, I would say that even though the timing thisyear, has not been what we would have hoped for it to be, we continue to bevery optimistic that we will continue to do deals across all specialties,neonatology maternal-fetal medicine and pediatric cardiology well into nextyear.

Okay. That's great. Thank you very much.

Thanks. Dawn.

Our next question comes from Pradeep Singh from DeutscheBank. Your line is open.

Hi. Good morning, guys.

Good morning.

Good morning

Good morning. I guess just based on what you guys did forthe first nine months, relative to your second half guidance of 158 to 162. Isthat imply for the fourth quarter on EPS of a range of $0.77 to $0.81 and Ithink Karl mentions you may be end of that range, but that range also excludesFairfax and the Texas rate increase. So, is it possible that you could even beabove that range when you include Texas?

Texas is leading me to say that it will be at the high endof that range. I am not at this point to change if range we have out there. Idon't know that our intention was to look, to expect the fourth quarter we dropas low as $0.77, but when you look at the fourth quarter as well. Typically the fourth quarter is a lower quarter than what wehave seen. The third quarter historically, depending on deals but from a truevolume quarter-to-quarter on the cent unit basis, volume in the fourth quarteris lower than volume in the third quarter. So that will impact the fourth quarter from that standpoint.We will make some of that up with the deals in Texas Medicaid. As far as the anesthesia deal that we did, yes we have someof that but as I said $0.22 on a year. So it only add about, quarter of a centto our guidance for the quarter so it’s not a big impact.

Maybe if you could just talk a little bit about as youfurther integrate Fairfax, what kind of G&A costs or what kind of ramp upto do you expect to see there or do you feel that a lot of the infrastructurehas already been built out?

We are continuing to add to the infrastructure. We have somepeople here in house and we are doing a lot of work but I don't think you aregoing to see anything which going to see anything which going cause a sizablechange and you know our G&A clearly we wouldn't expect our G&A to growas a percent of our revenue. The reduction percentage might show down a little bit as iton when we deals happen in a way as we build that infrastructure but, at thispoint, I don't see a big change in what's going on with G&A because ofanesthesia. We have been doing investments over the year of a more thana year actually in that specialty. So I don't see major changes.

Great. Thanks very much.

Welcome.

Next question comes from Arthur Henderson Jefferies andCompany. Your line is open.

Good morning. Karl, could you tell us what your CapEx wasthis quarter and could you give us some sense of what we should expect for '08.

Our CapEx for this quarter was $1.5 million actually we havebeen running pretty low on capital expenditure this year, but I don't expectthat we will get outside the range we have been historically. Which is somemoreover in the $10 million, $7.5 million to $10 million a year going into '08.That I am seeing the major capital expenditure going to happen in next yearthat would change that.

That's helpful. You don't have any share repurchases in yourguidance for next year, do you.

Nothing beyond what we have completed.

Okay. And then, back get a question on easology and sort ofthe pipeline for that, I know that when you guys announced Fairfax, you talkedabout that the length of time that it had taken you to do Fairfax you hadgotten comfortable and familiar with, what was out there in terms ofbusinesses. And that you had been pretty close or at least somewhatclose with a couple of other acquisitions and you had indicated, I think thepossibility that we might see more done in a shorter period of time. And I am just wondering, is there, it sounds to me like fromyour comment that is maybe we should think more in terms of that being newacquisitions coming on it a little bit slower on the anesthesiologist side. AmI reading that correctly or am I not.

It is Roger. It remains true that we are very excited aboutanesthesia and I think what I said was, we had originally talked about maybewaiting a year from our first acquisitions before we would see our second one,and that I felt that maybe that was a little conservative and that it probablywouldn't be a year before we would see our second one. And you know, and I am still subscribed to that. I believewe will see our second one sometime during the first half of next year. So, weeverything that we see in anesthesia up-to-date continues to make us feel likethis is the right place for us to be at.

Okay. That's helpful. One last question I will jump back inthe queue. Has there been anything with Fairfax that surprised you in terms ofbusiness, maybe anything that you didn't expect or something that you foundthat was encouraging?

Yes. I wouldn't say surprises, you never know, you are goingto run into it like until you get into and do it. So, we there have beensurprises but we will not surprised by them because we knew there were going tobe surprises both on the good side and the bad side so I would say, we areexactly what we expected we would be by this point in time. We are surprised perhaps a little by just the interest thatwe see from other anesthesiologist groups calling us and asking us, to take alook at them on the positive side. You know and on the negative side, you know,it is surprising just how different the billing and the whole reimbursementatmosphere for anesthesiology is for neonatology. So but, I mean, we expectsome of that and we knew there would be those kind of issues but nothing that Iwould say, oh my god, this thing is, there's something really bad or somethingreally good here.

Okay. Great. That's helpful. Thanks very much, Roger.

You are welcome. But I just wanted to add to that is, one ofthe thing that, we are not disappointed in this practice to hear aboutphysicians and how they're working with us. They're, you know, providing greatcare but working well with us and try to look at the opportunities and understandingsome of the issues that are inevitable to come up when you take on atransaction of this size integrated and do that. So that's not, we are nothearing issues on the physician side at this point because they're not thinkingthey shouldn't have done this, I think, we are all in sink moving forward andworking together.

Now, if anything I have to tell you I am thrilled with thisgroup of guys. They're absolutely, you know, excellent. Operator Our next question comes from Rob Mains from Morgan Keegan.Your line is open.

Thanks. Good morning.

Good morning. Rob

Good morning, Rob

Karl, the share repurchase if I am doing the math right withthe fully diluted share count likely decline in Q4?

I am sorry. Would the fully diluted share account climb?

No. Decline.

Yes.

Okay. And do you have the equity base compensation numberfor the quarter?

You know, I don't have that at any fingertips. That will bein the Q we will file next week.

Okay. And then, if I look at NICU volumes you've hadto-date, they're kind of in line with some of other years but there are gooddeals stronger than what you had last year. You know, not like percentagepoints but enough I think it is kind of noticeable. Is there anything going onin your markets that you would attribute that to or just sort of normalvariation?

Normal variation and we see this run up and down we haveactually seen quarters in past we have exceeded that 5% volume, when you lookin history and then we had quarters that we have been actually some of them wehave been negative from the same unit standpoint for less than 1%. So it doesfluctuate but that 3% to 5% range has been very constant on an annual basis.

Fair enough everything else I had has been answered. Thanks.

Thanks.

Our next question comes from Kevin Ellich from RBC CapitalMarkets. Your line is open.

Good morning, guys.

Good morning, Kevin.

Good morning.

Just a handful of questions as last been discussed. Justwondering if you could breakout the revenue contribution from Fairfax in thefor third quarter revenues?

Yeah. At this point we have decided we are not going splitout anesthesia from our revenues at this point in time. We will continue toevaluate that but, it’s only one month it is not a huge number but it is notsomething we want to breakout. You know, as you expect we are seeing morecompetition in this area than we see neonatal side, we want too be real carefulon what we put out there.

Sure. Understand. Okay. Next question would be of the --just wanted to clarify. Of the $89 million of acquisitions spent in thequarter, that does not include the 7 million?

That is correct. It does not. The $89 million is just thecash that we paid out during the quarter.

Okay.

Two deals on the last day of the quarter the cash didn't getfunded until the 1st October.

Right. So then if we go back and look at, yes, I believe itis stated in your last Q, the San Antonio pediatric cardiology practice was about$3 million, that would leave $86 million to be spread out over Fairfax and oneother deal you did during the quarter?

Yes. I think that's roughly right, yes.

Okay. And then on the Texas Medicaid, how much of the 2% to4% same unit pricing growth in ‘08 is attributed to Texas Medicaid?

You know, I don't have that number on off the top of myhands, as far as, a percent.

Okay. Then last question do you have any update on the SECor US attorney investigation?

No. There's no update, you know, there's nothing really newto report.

Okay. That's it. Thanks.

Thanks, Kevin.

(Operator Instructions) Our next question comes fromNicholas [Johnson] from Raymond James. Your line is open.

Hi, guys. Good morning. A quick question on the manage careside. We have heard some manage care companies say specifically that on theNICU side they are seeing some going after that in terms of trying to ratingthe cost on there. So if you can give me a color on that it would be great?Thanks.

I guess we have heard that from Manage Medicaid programs inthe past, which I don't know what their expectations are from how to rain thatin, we are just providing service to the patient in the unit. Our compensationis usually medicaid maybe touch above medicaid, 505% of medicaid depending uponthe market. So, you know, I don't know what, what that impact would comefrom. We have not seen any impact in the changes from manage medicaid. If youare hearing that from somewhere else I would like to know we have not seenanyone else doing it, we just thought we are working with.

We just heard it from on the WellPoint call. They weretalking about NICU specifically. But that helps.

Okay.

Thanks.

Our next question comes from Dawn Brock from JP Morgan. Yourline is open.

Hi there. I just have two quick follow-ups and they'rebasically maintenance. The first is, can you give us the number of [docs]anesthesiology in the quarter?

I don't have that number on my fingertips. We will get thatto you number of docs in anesthesia.

Okay. That's great. And then Karl, just a number that youare using for shares outstanding for 2008?

I think we are estimating that number to be about 50 millionshares outstanding next year.

Okay. Excellent. Thank you very much.

Our next question comes from [Brooke O'Neill] from Daughertyand Company. Your line is open.

Yes, Roger. I thought your comment regarding the things youhave been finding about differences between the billing and reimbursementatmosphere in anesthesia were interesting. Would you be willing to amplify on that in any way, I mean,what are some of those differences you are seeing and how do you think they'regoing to affect your approach to the business going forward?

Well, you know, that's what I get for trying to answer thequestion. Somebody earlier shaking their finger at me. You know, it is just adifferent, you know, it is just a completely different system. You know, we got in to look at the billing companies thatthey use and we are intrigued by some of the software that they have in placeetcetera. So, it is just that kind of stuff, I mean, their billing as we knowis based on time and how they go about, breaking down those time period and thecomplications related to who's covering where, where there's back up needed. You know, who is going outside of the hospital to provide carein a physician’s office. Whether that is being reimbursed on a cash basis orwhether they're billing, the insurance. And that's typically, some -- it's justthat it is very complicated and it's just been surprising how much work thereis to be done there for us.

Wag, you means that all of that -- ultimately will play toyour strength as a company because you guys have demonstrated over a longperiod of time an ability to get into those details and bring a whole lot ofdiscipline and rigor to that process. Is that what you are thinking.

Yes. We believe that, we think that's exactly right, themore and again it isn't anything we are not going to be able to handle.

Right.

It's going to take time to look at and to comprehend and towork through.

I mean, Roger hit on lot of point to me in thosecomplexities are added -- there's not necessarily a standard with every payerusers. So some payers are around time to the minutes, some around it to thecloser 15 minutes. You know, so there are a lot of complexities and as we'rebuilding the infrastructure for the building system it's just very complicatedand intricate. I think, as you hit appropriately looks to me once we were inthis it's going to be -- very strong for us. We have very set and strict processes we are putting inplace as we do this to make sure we understand it appropriately and can applythat as we go forward. So you know, it is just working through all of theseintricacies that has us a little behind, I guess, on that piece of it.

Sure. It will just take time but in the end the reward willbe worth it. Thanks a lot.

Okay.

(Operator Instructions) One moment for questions.

Okay. If there are no further questions, then we thank youfor listening this morning. Thank you operator.

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