Ladies and gentlemen, thank you for standing by and welcome to the Pediatrix Medical Group First Quarter Earnings Call. At this time, all lines are in a listen-only mode. Later, we’ll conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, today's conference is being recorded. I would now like to turn the conference over to our first speaker, Mr. Bob Kneeley. Please go ahead.

Thanks Ryan and good morning everyone. Thanks for joining the call this morning. I want to read our forward-looking disclosure before turning the call over to Dr. Roger Medel and Karl Wagner, our senior management team. Certain statements and information during this conference call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to objectives, plans, and strategies, and all statements other than statements of historical facts that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. These statements are based on assumptions and assessments made by Pediatrix's management in light of their experience and their perception of historical trends, current conditions, expected future developments, and other factors that they believe to be appropriate. Any forward-looking statements made during this call or made as of today and Pediatrix undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Important factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements are described in Pediatrix's most recent Annual Report on Form 10-K, including the section entitled "Risk Factors.” With that let me turn the call over to our Chief Executive Officer, Roger Medel.

Thank you, Bob. Good morning and welcome to our review of the 2008 first quarter. I am happy to report results that include solid top line and bottom line growth. Revenue and earnings per share both increased by 16% for the 2008 first quarter. Revenue growth was generated from a balance of acquisitions and same-unit revenue growth. We also completed our previously announced $100 million share repurchase during this period. Earnings per share, including income from discontinued operations, were at the low end of our guided range for the first quarter, only as a result of lower than expected same-unit neonatal intensive care unit patient volume. Overall, same-unit growth was 7.8% and included improved reimbursement from commercial payers, as well as the Texas Medicaid increase. We also had strong volume growth from our office-based practices. This was in line with expectations and contributed positively to overall same-unit patient volume growth of 3.2%. Same-unit neonatal intensive care unit volume grew by 1.9%, but when you adjust for the leap year our 2008 first quarter NICU patient volume growth was seven-tenth of 1%. Historically, we talk about NICU patient volume growing in a range of about 3% to 5%, that's our annual experience over many years of operations. In fact, since 2002 our full-year NICU volume numbers have been between 3.6% and 5.5%, but there is a lot of variability quarter-to-quarter within that range. For example, the year we saw 5.5% same-unit NICU patient volume growth, we had one reporting quarter with growth of one-half of 1%. At this time, we have no reason to believe that what we are seeing this quarter is anything other than normal variability. After the specifics of the first quarter, average daily census at our neonatal intensive care units was tracking to expectations for January. In…

Thank you, Roger. Good morning, and thank you for participating in this discussion of our 2008 first quarter results. Before we take your questions, I want to present an overview of our financial results for this quarter and for purposes of comparison to last year, I am going to present some of the results on a non-GAAP basis. This presentation excludes a gain on the sale of our metabolic screening lab during the 2008 first quarter and for the 2007 first quarter, I’m excluding expenses related to the stock option review and a benefit from a change in our reserves for uncertain tax positions. Our press release this morning contains a detailed GAAP reconciliation table. It's available on our website at www.pediatrix.com. For the three months ended March 31st, our net patient service revenue increased by 16%, operating income increased by 14%, and earnings per share grew by 16% over the 2007 first quarter. As Roger said, our results were impacted by lower than expected same-unit NICU volume growth, which led to our earnings per share come in at $0.67. This includes $0.01 from discontinued operations related to the metabolic screening laboratory, which was included in our guidance for the quarter. For the quarter, we reported revenue of $245.6 million, up 16% from $210.9 million for the same period in 2007. We continue to grow our business through consistent improvement in contracting from third-party commercial payers. Our same-unit revenue growth of 7.8% consists of overall volume growth of 3.2% and contributions from reimbursement-related factors of 4.6% or a little bit higher than our annual guidance. We continue to see the flow through from the increase in the Texas Medicaid fee schedule that was effective in September of last year, as well as improvements from commercial payers. Same-unit volume growth of…

Thank you, Karl. At this point, let's just open up the call for questions. Question and Answer

[Operator Instructions]. Our first question is going to come from the line of Bill Bonello with Wachovia. Please go ahead.

Thanks. Good morning, guys. Just a couple of questions, I know you said you can't say much more about the volume growth, but I am going to try one any way, which is just simply in prior years when you had a quarter where the NICU volume growth was low, did you do a similar check with the hospitals and if so, did you find a similar correspondence that they had seen kind of a lower than normal birth rate or number of births in that quarter?

Birth as a statistics that we gather, as you can expect, we have to get addresses from the hospital on a routine basis and what we have seen of lower rates is typically will be correlated with births, but not always. So there is no specific direct correlation on that. We have seen it before, we’ve seen periods where the births might have been low, but we still had strong admissions and strong growth rate for the NICU. So there is not any direct correlation, but we have, there have been times when it has occurred.

Okay, so just as though you say, you had quarters, which you were well aware of where the volume growth has been light and then it’s recovered, you’ve also seen quarters, where the hospitals appeared to have lower births and it’s recovered there as well?

That's correct.

Okay, that's helpful. And then just if I’m doing the math right, the acquisition revenue growth was over 8% and that's about 300 basis points higher than it was even last quarter and so I guess, I am just trying to figure out if you acquired something pretty big in Q4 or Q1.

Bill, in Q1 we did acquire the Atlanta Maternal-Fetal Medicine and obstetrical practice, which was a fairly sizable practice up there so that clearly had an impact on our growth during the quarter.

Okay, so that pretty meaningful in terms of total revenue, is that right?

Yes, it was a sizable from a revenue standpoint acquisition.

Okay.

The fourth quarter and the first quarter, as you know, were impacted… both impacted by the anesthesia acquisition.

Obviously, but I am just thinking of the rate Q4 relative to what it was in Q1. Okay and then just the last question, and I will get back in the queue, just do you... you talked about the various things driving reimbursement rates. One, I guess, as a two-part question on that and two things you didn't address. One, do you have any rates that are directly paid to the Medicare physician fee schedule, I mean, obviously you don't have Medicare patients, but I didn't know if any of your rates are pegged to that? And two, any evidence of continued mix shift and from or that continued, but accelerated mix shift from commercial to Medicaid?

As far as your first question goes, we do have contracts of managed care payers tied to Medicare for the most part we tie them to a specific year Medicare. So a change in the Medicare rates will not impact that contract. So it basically becomes the fixed fee schedule. We do have some that are based upon current year Medicare, it’s not a lot of our contracts, but there are a few that it could be impacted by that. On your second question, during the first quarter, we saw a slight increase in the government, but it was slight nothing that we were concerned about. We have slight quarter-to-quarter variations, but it wasn't anything of significance that we were concerned about.

All right. Thank you.

It is something we watch monthly, but there was no concern about it.

Thank you very much.

And our next question comes from the line of Dawn Brock with JP Morgan. Please go ahead.

Good morning. I just wanted to dig a little bit more into the integration of FAA and where you are right now as far as merging your interfaces on the billing and collecting side on contract negotiations, and probably even more importantly and I am not expecting any specific numbers on this, Karl, but directionally are you seeing the kind of margin improvement both through rationalization and growth that your internal projections have told you, you would say?

I'll start with the infrastructure side in the systems. We've made some good progress so for this year in evaluating systems and really narrowing it down. On the system question as far as what we’ll do going forward in working with FAA on what their expectations are on that and how it may impact acquisitions we are looking at in the future. So, I think in the not too distant future we’ll have a system that will start the implementation project on. So, we are moving forward on that. As far as the results of FAA at this point, we are very pleased with what's going on, we have done a contract, a managed care contract. I would say that the negotiation went well, we got a good increase. It’s one of those things that managed care payers will get less than you want, I think we’ve got more than they wanted to give us. So, we weren't I guess shocked by where we end up on that. It's kind of in line... I wouldn't say exactly like a neonatal one, but there weren't any major surprises through that process.

Okay. Go ahead.

As far as the operating results, I think we are happy with the way the operating results are going based upon what we had projected when we completed the acquisition.

Okay. And then I just want to make sure that I understand, I mean as far as the billing and collecting side, you guys do not have that under... like under your interface right now, that's something that you are still working on?

Right. We have... as we had begun... when we started, we were using an outside billing company, we continue to use them. With significant oversight from our patient accounting group here being involved with them, I mean significant weekly calls, visits, reports have been generated the way we want them report it. We have a report card that we look at constantly on how they are doing from a collection standpoint. The cash doesn't go to them, it goes to us, so we know exactly what the cash coming in is and reconcile it to their cash. So, there is a lot that we do here from an oversight standpoint on that. But we still have to finalize the decision on the system and we are in negotiations right now to get that done.

Okay, excellent. Thank you.

And our next question comes from the line of John Ransom with Raymond James & Associates. Please go ahead. John Ransom - Raymond James & Associates, Inc.: Hi, good morning. Just looking at the data in '01 and '02 when last recession, it did look like birth rates were down those two years. Are you saying that you don't think that will be the case this time or are you still trying to figure that up?

I would say that we don't know what's going to happen. And I think if you look at that, you do see that birth rates were down in '01. I think they started back up in '02 and we're coming up in '02. But there are other periods where they were down and there is no direct correlation of that over the last 20 years or so. John Ransom - Raymond James & Associates, Inc.: Sure.

So, it’s hard to say that there is a direct correlation on that. So, in some periods they were down, in line with the economy sometimes. John Ransom - Raymond James & Associates, Inc.: Right. Can we add a down… I think down... basically down 20 bps in '01 and up 1% in '02. But then running about 2% in '04. So, it looks like there is a little maybe a 200 basis point kind of broad annual correlation to the economy. My other question is, do you see anything going on with infertility? That's a fairly expensive treatment. Do you think there is any correlation to maybe scaling back on those expensive shots, as times get tougher? Have you seen any evidence for that?

Yes, I don't really know, I would assume that if we were to see an impact from the economy, that would be a place where we would see it. However, admissions to the NICU as a percentage of births has remained stable. So, I don't think we are seeing that, I think what we are seeing is just fewer births and so... John Ransom - Raymond James & Associates, Inc.: Do you think it's an... one of these actuarial blips that happens from time-to-time?

That's what it looks to us like right now. We’ll have to wait a few months to see whether that's true or not true, but… John Ransom - Raymond James & Associates, Inc.: Sure.

Right now that's what it looks like. John Ransom - Raymond James & Associates, Inc.: Okay and my other… I just want to make sure I understand what you said, you are… are you now suggesting looking at what's going on with the kind of state negotiations, you are looking for flat Medicaid rates in '09 versus '08. Is that your expectation?

Based upon what we’ve seen in the legislative sessions, a lot of which were already done. Based upon what we saw, we expect not to see any changes in our Medicaid reimbursement that we have now. John Ransom - Raymond James & Associates, Inc.: Right.

That's a net, that would say if California came down 10%, there are a few states we are getting slight increases and all that will net out. John Ransom - Raymond James & Associates, Inc.: And can you... thanks, that's very helpful. And can you remind me counting Texas, what's kind of your net Medicaid trend this year, so we can kind of understand the effect on same-store?

I guess trend by... John Ransom - Raymond James & Associates, Inc.: Well, if you look at your blended Medicaid pricing trend this year compared to... let's say, it's running flat next year, if Medicaid is around 27% of your revenues, is it up a couple of percent this year or a few way in Texas, they increase in Texas?

I don't know the increase in Texas, but not big an impact on our overall... John Ransom - Raymond James & Associates, Inc.: I understand, but just looking at your blended Medicaid pricing trend, do you have an… if it's flat next year, do you have an idea of where are those running this year? And I know it's getting some help from Texas?

Yes, I don't have that specific number. I would expect that that would be less than 1%. John Ransom - Raymond James & Associates, Inc.: Your blended… okay, less than 1. All right. And on the managed care side, are you seeing any impact there from the troubled demand, are you still seeing pretty consistent increases on the managed care side?

Yes, we really haven't seen any changes. As we have talked about in the past, the pushbacks kind of moved region to region or state to state in negotiation, but there is really no change in the characterization of any of those discussions or in the nature that we have been having. John Ransom - Raymond James & Associates, Inc.: Right and my last question, as you… I mean you obviously paid a big price for Fairfax and I think that's… deservedly sells a great practice, that was your first foray. As you negotiate future anesthesiology deals, can you give us a sense of kind of where the price stock is on an EBITDA standpoint, because I would think it might be maybe somewhere between what you paid for Fairfax and maybe a little higher than what you’ve historically been able to pay on the neonate side? Thanks.

Yes, just to follow-up on that. I mean we don't.., we are not going to give a specific range of what we are paying on the practices at this point. It's going to vary based upon a lot of with the dynamics of the specific practice in what they come with. From an infrastructure standpoint or from an opportunity standpoint for future growth, that will vary and where we are in our development. Now, remember what we talked about with Fairfax and we are starting to see some improvements from the things we are doing. And it will be slower on anesthesia than a neonatology. When we say we pay four times or so on neonatology, that's based upon the improvements that we are pretty comfortable that we are going to get based upon our historical improvements in neonatal practices. When we are looking at anesthesia practices, we are not building in things like the increases we got from the payer we just completed with Fairfax or growth that we expect in the practice. So, the multiple would be higher on that basis and I would expect it will take us longer to bring those multiples down at this point as we are learning and getting through some of the infrastructure build in that specialty. John Ransom - Raymond James & Associates, Inc.: Sure. Thank you very much.

And our next question comes from the line of Rob Mains with Morgan Keegan. Please go ahead. Rob Mains - Morgan Keegan & Co., Inc.: Good morning. Can I try asking couple of John's questions in a slightly different way? The Medicaid pricing you are getting for this year, Karl, are you saying that that is in line with what you would have gotten… what you’ve gotten in other years that served like 0% as sort of the norm?

Exclude Texas. Rob Mains - Morgan Keegan & Co., Inc.: Right. Okay.

I would say we might have been up slight positive in the last few years, but it was slight... it varied state to state, we really in a several years hadn't seen reductions in Medicaid pricing and we had some states that had improvement. So, I would say we have seen a slight improvement over the years. I think what we see going forward is basically, it's going to be flat if Texas… I mean if California were not to get cut based upon the activities going on, we might see a slight positive out of that. Rob Mains - Morgan Keegan & Co., Inc.: Okay. Slight positive, less than 1%?

Yes. Rob Mains - Morgan Keegan & Co., Inc.: Okay. And on a similar vein, managed care pricing, you said you are getting some reasonably good price increases, what neighborhood are those in? Karl Wagner - Chief Financial Officer, Treasurer Typically when we renegotiate manage care contracts we said in the past, high single-digit, low double-digit increases with a multi-year with some level of mid-to-low single-digit increases year-over-year in the out years. That's typically what we see. Rob Mains - Morgan Keegan & Co., Inc.: Okay. So, unlike there is, well, okay so you are saying that you get a big increase in, say, this year and then that's the rate you are going to have for the next couple or three or whatever?

We might get a big increase, 9%, 10% in year one and then we might get 4%, 5% year 2, 3. Rob Mains - Morgan Keegan & Co., Inc.: Okay.

It really depends and each contract depends on where we are, how long expenses have contracts when we negotiated, where we are in that marketplace, where this payer is related to other payers in the marketplace. So, there are a lot of dynamics, so it's not consistent, but it averages something like that. Rob Mains - Morgan Keegan & Co., Inc.: Okay. So, on a blended basis sort of mid-single digits type?

Yes, it stays about right. Rob Mains - Morgan Keegan & Co., Inc.: Okay. And then just want to make sure I heard this right, that the percentage of births at your hospitals that you are getting has changed?

That's right. The percentage of admissions to the NICU has not changed. Rob Mains - Morgan Keegan & Co., Inc.: Okay. It's just the underlying... the whole underlying birth rate that’s been the driver?

That's right. Rob Mains - Morgan Keegan & Co., Inc.: Okay. And then you said that you’ve had two months in a row in which the same-unit volumes are down year-over-year, is this… when you look back at some of the other kind of lean quarters you’ve had like that second quarter in '02, is that something that has happened before?

But as we said, I mean year-over-year we were negative in March. And April, while was below prior year, was better than March. So, I just want to be sure that's clear and compact. Rob Mains - Morgan Keegan & Co., Inc.: Yes.

In the past, I guess, we have seen some months that were negative and probably we haven't seen consecutive negative months, but basically zero growth one month and negative another we’ve seen. Rob Mains - Morgan Keegan & Co., Inc.: Okay. And obviously in all those cases, things will come back?

Yes. Rob Mains - Morgan Keegan & Co., Inc.: Okay, that's all I have. Thank you.

Great.

And our next question comes from the line of Art Henderson with Jefferies & Company. Please go ahead. Arthur Henderson - Jefferies & Company, Inc.: Hi, good morning. Assuming that the... say, the volumes stay weak as we go into May and June, are there things that you can do ongoing with cost savings either on the SG&A line or in one of the other cost categories that you could work with to cushion it some more than what maybe you’ve done this quarter?

Well, on the G&A line, I mean clearly we watch that very closely and that's something that we look at. As we move forward, we will continue to look at that fairly very closely, probably even more closely considering where we we’re at, if volume were to remain weak. We don't have any anticipation to do anything at a practice level from reducing doctors, the number of physicians at a practice or anything like that. When we go forward and looking at a practice and discussion about new physicians, I mean clearly we’ll want to be comfortable with the volume on that specific rotation and what's been going on. And what the future looks like on that volume, but there is no discussion about our staffing levels or anything along that line, that we would expect to see any change. Now, this is impacting the physicians from a bonus standpoint, as we look year-over-year growth not being as strong as it was in the past, so there is some impact on it from that standpoint. Arthur Henderson - Jefferies & Company, Inc.: Okay, and then the SG&A that you worked with this quarter to control, what areas are you… are there certain areas that you are focused on there? I know it’s across the board, but where there certain areas that stood out this quarter?

Predominantly on the G&A side, it’s staffing, it's employees, and we try not to do it in the areas like patient accounts that had been into another collector, because the volume of the accounts is there they get another collector, so the acquisitions are coming and we need to add. But in other areas where there is more discretion work we are not adding people without a clear and absolute need, we have been pretty strict on that to past, but even more so now with where we are from that volume stand point. Arthur Henderson - Jefferies & Company, Inc.: I just want to make sure understood something you answered to Rob. You said that in the past you have seen...never seen a two sequential or two consecutive declines year-over-year in volumes did I hear that correctly?

I said, we have never seen two months in a row that were below the prior year, we have seen periods where we had essentially no growth one month in negative the next. Arthur Henderson - Jefferies & Company, Inc.: Okay, okay understood. And then Roger, I know you talked about that we should to expect to see an anesthesiology and another anesthesiology acquisition, I think you said some time in the near future, are talking about within sometime this year, is that what you are saying?

Probably earlier in that we have said that earlier on and thanks for giving me the easy question and Karl for the hardest question. As that...earlier on that we thought we would finish, we would complete a second acquisition sometime during the first half, sometimes towards the later part of the first half of the year and I think we are still on track to do that so, sometime while the next couple of months. Arthur Henderson - Jefferies & Company, Inc.: Okay and then two little quick once back for Karl. If the Medicare physician fee cut, where to go into effect in the back half of the year. I know that you talked some contracts tied to it, I know the anesthesiology business Fairfax might have some impact, have you calculated what the potential impact could be if that were to happen?

We have not impact on our core business would not be significant. We do have some contracts, whether it's a very small piece of the business that is based on current year Medicare. We have a lot of Medicare base, but it's basically on a fixed Medicare year. Arthur Henderson - Jefferies & Company, Inc.: Okay.

And then, there would be some impact on Fairfax going into it on a year-over-year basis for Fairfax when we stared last year. They have a net large increase doing this year would be as large more as hopefully ended up being with this work for not inactive. Arthur Henderson - Jefferies & Company, Inc.: Okay. Okay. And then lastly can you remind us how much of your revenue comes out of Texas?

I think it's 28%... 26% of our revenue is Texas. Arthur Henderson - Jefferies & Company, Inc.: Okay. Okay, great. Thanks very much.

And our next question comes from the line of Gary Taylor with Citigroup. Please go ahead.

Hi, good morning. I missed the first couple of minutes of the call. So I didn't know if you had addressed whether any of the volume weakness at any particular geographic characteristic to it?

No. It's Roger. We're seeing it across the country, some regions are actually up and others are down. So there isn't any specific region that we can point in.

And is there any correlation to what WellPoint was saying about California, if I'm not mistaken, I think they had commented that part of their higher medical cost turned in the first quarter was higher [inaudible] days and I know that's a significant state for you. Is that logical that that would have been one of the areas that was trending better perhaps than the rest of the country... company?

No. I would say that western region was not one that was trending up.

Okay. And can you just comment on what you're seeing just in terms of uninsured volumes over the last couple of quarters, any material change in mix there?

We're not seeing any change, we look at our self paid uninsured and government payors because in our case a lot of these... most of these patients qualify for some type of government program and we're not really seeing any change. As I said earlier, we saw a slight change in our government mix in the first quarter, it was very slight, nothing that we were concerned about. And so there is nothing going on that we see that unusual in that mix.

And when you said slight... I mean do you just basically mean that the Medicaid mix was up a little, is that... ?

We had a touch more Medicaid mix than some of the commercial insurance, but it was just a little bit.

Got it. Okay. Thank you.

And our next question comes from the line of Kevin Ellich with RBC Capital Markets. Please go ahead.

Good morning guys.

Good morning.

Good morning.

Could we get your thought on pricing going forward, especially with the economy as we see higher unemployment, do you think it's possible we could see higher Medicaid percentage?

Well, that is something that we have been concerned about and have watched pretty closely and have said in the past that it is a concern for us. But as Karl has said, we are not seeing it.

Okay. And then Karl, you mentioned office-based practices, and you saw some strong growth from that. Could you give us a detail as to how much that contributed to the same-store growth?

That's... we had total volume growth of 3.2%. The office-based practices... well, it’s not just office-based practice, non-NICU services were 1.8% of the growth.

Okay.

The growth in those areas were much higher, over 5% in those areas, which is what our expectation and we saw strong growth in those areas last year. So those are areas that we're expanding the businesses in those practices. Chain units, probably not the right parameter seeing practice growth, they were seeing on those practices and so it’s an area that we clearly want to encourage the expansion adding offices and adding physicians in both those specialties.

And then on the pricing side of the equation, did you say how much the Texas Medicaid increase contributed?

Did not break out specifically, Texas Medicaid.

Are you willing to break that out?

Not at this point.

Okay. And then just on the acquisitions and deal flow, are you guys seeing any changes and willingness by physicians to sell now before the election due to potential changes in capital gain stands?

I would update now, I don't think that there is a fracture right now.

Okay.

I haven't heard that from our business development team as something that people are talking about.

Okay, thanks. And then just a couple of last follow up questions here. Karl, you mentioned that salaries was up 125 basis points mostly due to anesthesia, is that a good way to think about how the added expense going forward?

Well the increase in practice salaries and benefits is a combination as a percent of revenue. Anesthesia was a big piece of that, a piece of that was, we have the same number of physicians with lower patient day volume. So, as a percent of the revenue that would have gone up some during that period. So, that had an impact on it. And in the first quarter as we paid higher bonuses this year than last year our taxes and 401 came action contribution accruals, for payroll tax matching that we had to pay. In the first quarter, it was higher, which request had a touch. A little of things combined caused the margin with that percent of revenue with the largest piece been anesthesia salaries and benefits as a percent of revenue.

Would you say, it made up over half than increase?

I realize it specifically into anesthesia as we've talked in the past that with the anesthesia competition that's out there another people in that we don't want to get really specific on the anesthesia numbers.

Okay. And last maybe I missed that or just didn’t see it, could you combine the actual operation cash flow and maintenance CapEx numbers?

Cash flow from operations was one was a use of $27.8 million; I think it was $27.3 million during the quarter. And CapEx, we spent $4.9 million this quarter, which is a little higher than our typical quarter that mostly was for ultrasound machines that are maternal-fetal medicine practices and our pediatric cardiology practices and some of that is a function that we had low capital expenditures last year as we spend a little more this year, just the timing of those purchases and pushed up something.

And then do you think that to come back to normalized levels?

Yeah, I think it will come back down, I think for the year will be somewhere in that 10 million range, I think last year we were only 7... we are allowed to make million last year, I think for the whole year in capital expenditures. So, I think it will be in 10 to 12 range at the high, will be my expectation at this point.

Okay. Thanks guys.

Thanks.

And our next question comes from the line Sudeep Singh with Deutsche Bank. Please go ahead.

Hi, thanks for taking my call, guys. Just a quick question on some of the things that I have been hearing from some of the insurers and reinsures and just kind of reconcile their comment and why does... what you guys are seeing on the volume front, it sounds like on the reinsurance side they are seeing actually it spike up in [inaudible] just give me a little bit more detail as to how I should reconcile the difference?

I don't know specifically what period they are looking at as far as that spike. If you see in the first quarter, that is not really following, what we saw in the first quarter. We are not seeing anything saying that we have a much longer length of stay in the first quarter, which might be an indication of acuity. So, we are not seeing anything that would say that there should be any spike. We did talk to you some units, we are not in just from a volume standpoint and it wasn't in consistency with what base they were seeing from volume from what we've seen. So, that when we got everybody show. I don't know where that's coming from. I don't know if it relates to rates that they are obtained in hospital, clearly the hospital fees is a much bigger fees of the claim, so I don't know how that works through that. But I don't know that we have any other comment specifically what the insurers are seeing.

And then may be question for Roger. If you could just give me a sense for what you are hearing or seeing about the 17-alpha hydroxyprogesterone drug, there has been some recent studies on that and what discussion around how that drug could help with reducing kind of preterm births. Any sort of color on that or kind of what you are ... can you assume that [inaudible]? That will be great.

We, I’ve read some of the same studies. If fact, we are funding a study on that drug ourselves with our Maternal-Fetal Medicine group and I expect we will have those results in the not too distant future. What I hear from the our obstetricians, who are the guys who use the drug and really know what the story is, is that, this is something that's been tried in the past and, it's an old drug obviously, and they have used it in the past and the studies that I've seen are really in conclusive, but I am not an obstetrician. I can get you a better read on that. I know that again we are funding a study ourselves with our Maternal-Fetal Medicine specialists, and we'll have results on that in the near future.

Okay. And then Karl, just one last question. Can you guys give me a sense for at least in terms of revenue mix, how I should be thinking about neonatal versus non-neonatal traditionally about what more like a 70 or 80 to 20 and I was just wondering if it is now kind of 70-30 or how should I be thinking about the mix?

That's not something that we broken out on a routine so, I don't want to give that, it is clearly based on our acquisitions, we are expanding strongly in the Maternal-Fetal Medicine and in the pediatric cardiology area and some will continue to grow, so I will expect it will see more of the office-based practice being a bigger part, but those are new are not going to still do a lot of neonatal acquisitions as you saw our large acquisition in Maryland earlier I guess at the end of last month, which is a great addition. So we expect to continue to see growth there, but we are seeing expansion in those areas.

Thanks very much.

[Operator Instructions] Our next question comes from the line of John Randy with WCM [ph]. Please go ahead.

Good morning, gentlemen. Couple of questions for you, if I may. First of all, I know it was mentioned earlier a couple of times about the last major volume decline back in 2002, when your size was about half of what it is today, does that change at all your thoughts either way about volatility in the quarterly tracking of patient volumes?

That was something that we used to talk about all the time and we used to see wild swings in volumes that as we got bigger that would normalize and the swings will get flatter. That didn't happen, as we got bigger the swings have continued and now we are just seeing bigger swings than we saw in the past. So no, we look at this... at the swings and they are really is not that different from what they used to be in the past.

And we are talking about the 2002 that was the largest year from a same-unit growth standpoint for the whole year and had a weak quarter. But it wasn't the only time we've seen that happen in the past. We've had months in the last I guess... back in '05 that were negative, we've had quarters if you look back to our quarterly growth in the end of '05, we had 1.7% growth in the fourth quarter of 2005. So this doesn't go that... it’s not just back from 2002 period that occurred.

Okay. And you mentioned I believe, Roger or Karl, that it was primarily in March, in the month of March where you saw this steep drop off, is that correct?

Yeah February... January was on track with expectations. February was slightly lower, but pretty much okay and then March was the big drop.

And how would you characterize April at this point?

Well, like we said, April was still below, but it was better than March.

Okay. And I guess last question, you touched on this a little bit, but I am... and may be this is unanswerable on this call, but the correlation of economic strength versus... or weakness versus birth rates, is there a study we can pinpoint to or is that something that's very nefarious?

We looked at GDP versus birth rates and it was hard for us to find any correlation. We looked all the way back to 1970 and there were some periods of time you could point to where you could see a correlation and I am looking at the chart. In 1972, GDP was up almost 5%, births were down almost 8%. And yet, other times exactly the opposite happened, other times they do seem to go hand-in-hand. So it's hard to find any correlation.

Okay. And last question Roger, if I may, and this may be de minimis, but is there a way of characterizing whether you lost, whether your hospitals lost births to other regional hospitals?

We looked at that and of course we don't have birth data from other hospitals. But we did call around some of our buddies that are not part of Pediatrix who work in other units and they were seeing similar effects to what we were seeing. So they... those that we did get an opportunity to talk to confirmed that they too were low on volume.

Okay, thanks very much.

And we do have a follow-up question from the line of Art Henderson with Jefferies & Company. Please go ahead. Arthur Henderson - Jefferies & Company, Inc.: Karl, how much... could you tell us how much... how many shares you repurchased during the quarter and sort of the average price?

We repurchased just under 1.5 million shares and the price was about 66, 68, I think was the average price somewhere in that range? Arthur Henderson - Jefferies & Company, Inc.: So, it's basically the four… close to the 400 million. It was the 400 million, okay. And then you had given back and I guess it's early February quarterly expectations I assume those expectations for the second quarter $0.85 to $0.87 haven't changed at the moment?

As we said in our guidance we are not changing our guidance. Arthur Henderson - Jefferies & Company, Inc.: Okay.

It’s clearly a key piece of that is and ICU volumes. Arthur Henderson - Jefferies & Company, Inc.: Okay, all right. Thank you.

And the next question is also a follow from the line of Bill Bonello with Wachovia. Please go ahead.

Just beat this volumes thing a little bit more, if I go back to 2002 and 2003 and look at the correlation where everybody is worried about this economic impact, those were actually the two highest same-store volume growth years that you ever had and so, I am just trying to record recollect, is there anything unusual in those years that would have made same-store volume growth especially high so that we can’t look at that as sort of evidence that how the economic downturn does or does not impact you. I thought maybe Magella coming into the same-store account made a difference or something?

Not, that would not have had an impact on the same-store comp and that really wouldn't have impacted 2003 because that day was an '01. So, there was nothing that was out of the ordinary that would have occurred.

Okay, so when we look at your results, there was absolutely aside from what you are saying is the macro, I mean to the best I can tell in your results there was absolutely zero correlation between volume growth and a weaker economy?

That's correct.

Okay. And then I guess the second thing would be on the mix shift piece of it. It seem to me and this maybe, I may be wrong because this a guess, but it seem to me that in the last big mix shift that you had, really wasn't a function of economics, but it was a function of states pushing Medicaid and SCHIP enrollment in order to secure matching funds from the Federal Government that had become available, I am just wondering if that is consistent with your assessment or would you disagree with that?

Yes, the biggest piece and this is back in 2004 when we saw the biggest change was a function of couple of states one of which is Texas, which is our largest state changed the level at which people were qualified for their programs, their SCHIP program primarily but and that made many more people eligible and it appears that was one of the big drivers of the increase in the payor mix. We are not seeing anything like that in any of these state legislatures at this point going through their sessions going forward this year.

Okay. Thank you.

Okay. And the final question in queue comes in the lines of Brooks O'Neil with Dougherty & Co. Please go ahead. Brooks O'Neil - Dougherty & Co.: Good morning guys.

Good morning Brooks. Brooks O'Neil - Dougherty & Co.: I have two questions. Actually the first is, can you just help us to figure what the impact on your guidance would be say if your same-store volumes were 1% versus what you actually assumed or maybe thinking about it differently if there was a decline of 1% in same-store volumes, how much of an impact would it have on your guidance?

Yes, we are... I mean, I just... we don't want to be at the point of time kind of speculated on what's going to happen with that in giving if this happens that occurs, I mean, one, it's a mix of where does the volume change happen? I mean if I have a volume change in one state versus another state, or one region. So it's really difficult for us to even say specifically what it's going to be at this point. And we don't want to be speculate on what that impact is going to be. Brooks O'Neil - Dougherty & Co.: Okay. Secondly, can you say whether you have seen, I know you didn't own the anesthesia business last year, but in talking with them I assume you asked them if they were seeing the same kind of softness in same-store volumes that you are seeing in your NICU business. And if you had that conversation, can you give us any insight into what they are seeing?

On the anesthesia business, the volumes are stronger this year, in the practice... I can't speak to general anesthesia across the country, we have one practice at a very strong hospital that is growing. So I mean we did see growth in the first quarter in that anesthesia business compared to what they had a year ago, they are working our numbers a year ago, but we do have... Brooks O'Neil - Dougherty & Co.: I know. Okay, that's very helpful. Thank you very much.

Thanks, Brooks.

And at this time, we have no further questions in queue.

Okay. Well if there are no further questions, we thank you for listening this morning. And we appreciate your cooperation. Thank you.

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