Ladies and gentlemen, thank you for standing by. Welcome to the MEDNAX Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would like to turn the conference over to our host, David Parker, Vice President of Investor Relations. Please go ahead.

Thank you, Cara, and good morning, everyone. Thank you for joining us. 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. These forward-looking statements are based on assumptions and assessments made by MEDNAX's management in light of their experience 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 are made as of today, and MEDNAX undertakes no duty to update or revise any such statements, 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 section entitled Risk Factors. With that, I'd like to turn the call over to Dr. Roger Medel, our CEO.

Thank you. Good morning, and thanks for joining our call today. Earlier this morning, we again reported strong results from operations for the 2013 second quarter, which reflects the continued successful execution of our long-term growth strategy. Our revenue for the second quarter increased by approximately 18%, with growth attributable to contributions from recently acquired practices at 16% and the remainder coming from our same-unit results. We also generated solid operating income and net income growth for the second quarter and continued to leverage our infrastructure as we integrated practices into our national group model. We had a very active quarter on the acquisition front, adding 3 anesthesia practices to our American Anesthesiology division and 2 neonatology practices to our Pediatrix Medical Group division. As I mentioned on our first quarter call, in early April, we acquired Neonatology Associates, a neonatal physician group practice based in Phoenix, Arizona, followed in early May by the acquisition of Gwinnett Anesthesia Service in Lawrenceville, Georgia. In late May, we acquired Anesthesia Specialists of Houston, the third Texas-based anesthesiology practice to join our American Anesthesiology division. In mid-June, we acquired Anesthesia Group of Onondaga based in Syracuse, New York. This is the first New York-based anesthesiology practice to join American Anesthesiology, which now consists of 20 practices throughout 9 states. To round out our very successful quarter of acquiring and integrating practices, in late June, we acquired Neonatal Intensive Care Associates based in Lubbock, Texas. Also, as we announced yesterday, since the end of the second quarter, we have added an additional practice to our Pediatrix Medical Group division. Sanjay Patel, is a neonatology practice, consisting of 5 physicians based in Odessa, Texas. With these acquisitions, 6 physician group practices have become private MEDNAX in 2013, 3 as part of American Anesthesiology and 3…

Good morning, and thanks for joining our call. As we highlighted in our press release this morning, our results for the second quarter 2013 reflect strong revenue and earnings growth, primarily driven by acquisitions over the last year. We reported earnings per share of $1.37 for the 2013 second quarter. Net patient service revenue for the 3 months ended June 30, increased by 17.7% or $79.7 million to $529.2 million from $449.5 million for the comparable prior year period. During the 3 months ended June 30, we started to receive parity payments from a few states that are now paying at the Medicare rate for Medicaid services. Our second quarter results include approximately $2.5 million in revenue from parity payments that contributed approximately $0.02 to our net income per diluted share, reflecting the impacts from incentive compensation and income taxes. Of our 17.7% revenue growth, contributions from recently acquired practices were 16%, while same-unit revenue grew by 1.7% when compared to the prior year period. To add some detail to our acquisition-related revenue growth, American Anesthesiology practices contributed 84%, with the remaining 16% coming from acquisitions in Pediatrix Medical Group. Same-unit revenue grew by 1.7%, with revenue growth attributable to net reimbursement-related factors of 2%, partially offset by a volume decrease of 0.3%. Our same-unit revenue growth from net reimbursement-related factors was principally due to continued improvement in reimbursements received from third-party commercial payors. As we highlighted in our release this morning, for the first time in 5 quarters, same-unit payor mix showed a favorable shift. On a sequential basis, same-unit payor mix showed 100 basis points positive shift towards a higher percentage of services reimbursed from commercial payors as compared to government programs. Same-unit growth attributable to patient volume decreased by 0.3% for the 2013 second quarter when compared…

Thank you, Vivian. With that, operator, let's open up the call for questions, please.

[Operator Instructions] Our first question will come from the line of Ryan Daniels with William Blair. Ryan Daniels - William Blair & Company L.L.C., Research Division: Let me start with a quick one on the parity. I just want to get a better feel for the impact in both the second and third quarters. Does that include both the payments you receive during the period, as well as some catch-up dating back to the start of the year? Any way you can kind of break that down for us, Vivian?

Yes, so basically, Ryan, we only have 1 state that has included the retro payment, which basically was not during the quarter. So the estimate for the third quarter does include some of that retro payment. But we haven't seen much of that yet, but I do anticipate that the third quarter activity will start getting much better. Ryan Daniels - William Blair & Company L.L.C., Research Division: Okay. That's helpful. And then, Roger and Vivian, I guess a question for both of you. You've discussed a lot of the investments you're making in the anesthesia side and that's helpful color. I'm curious if that will show a noticeable uptick in SG&A, kind of given the R&D and management expenses that you anticipate going into Q3 and Q4. Will that be noticeable to us in the financial line?

Well, we will have a little bit of an uptick, but I do think that there will still be some favorability, obviously, that does get impacted by top line growth as we leverage some of the infrastructure, even with us doing some of these bills. So we had roughly about 40 basis points, so we think that, that potentially could be good going forward here.

Yes, I would also add to that, Ryan, that we have been making investments all along. And this is not the first time that we -- we just wanted to highlight the fact that we, in fact, have decided to go with a model similar to our Pediatrix model, where we're splitting the country into different regions, and that was mostly the intent here. Ryan Daniels - William Blair & Company L.L.C., Research Division: Okay. That's helpful. And then last one, I'll hop off into the queue. Just any color on kind of the Medicaid front as we look forward? I know all the state budgets are done. And last time we spoke, you indicated it looked pretty good, no rate reductions in the large state. But what's the look overall for the entire book of business?

Yes, so Ryan, we still believe that to be the case, as we had our call last week. And right now, we're faring quite well on that, kind of similar to last year.

Next, we'll go to the line of Kevin Ellich with Piper Jaffray.

Roger, I guess, first, I wanted to start off with the volumes, the negative 1.3% same-NICU patient day growth. And I understand you guys had a tougher comp this quarter and next quarter. What are you seeing in terms of birth trends? And then how do you split up the volume between anesthesia and NICU?

Well, the birth volume, and I think have been kind of flat actually in most of our hospitals, and so we haven't really seen any significant uptick in birth volumes at least in our facilities. And speaking with some of my partners and peers across the country, I think they're experiencing the same thing. We did have somewhat of a downtick as well in anesthesia. And it's -- may be Karl can address that a little better. I have Karl sitting here.

Yes, for the quarter, we saw a slight downward trend in total cases. Part of that actually in our facilities, we did see a slight decrease in OB volume, so the epidurals and the C-section that we're doing were actually down. We did see a trend towards higher inpatient volume for inpatient surgeries, and the offset that we got was lower outpatient volume at both the hospitals and the surgery centers, which is where you're going to see more of your elective-type volumes. So we did see it, but it was very slight as far as the change for the quarter.

Karl, you don't -- that's actually kind of counterintuitive from what we've been hearing from the hospitals in terms of weaker inpatient trends. So do you have any explanation as to what's behind the uptick in inpatient?

Yes, well, I think, one, we're not necessarily a cross-section of the country of what's going on there. So we're in 20 practices, about 50 to 60 hospitals, which is a small picture as to what's going on across the country as far as that goes. And when you speak to the hospitals and I'm certainly not a hospital expert, I don't know if you speak to hospital inpatient services overall versus hospital surgical volumes, I can't really comment if there's a reduction in their medical volumes at all.

Okay. No, that's helpful. And then I guess, just switching back over to the parity. Have you confirmed with all of your states that you'll be receiving the payments? Or I guess what sort of visibility do you have at this point?

Yes, so even though I know that CMS has said that pretty much all the state plans have been approved, I guess, with the exception of California, from our parity work group, we have about 18 states that have confirmed that they have gotten their applications approved. And so we still have a little bit of road to go. But again, the timing of these payments is still the more challenging thing. And frankly, the consistency of the payments as well. So I do think, as I mentioned to Ryan, Kevin, that we are making a lot of progress with that even from the second quarter when we closed the activity that we're seeing in the third quarter. That's why we bumped our estimates up in the third quarter. So I just think, as I've mentioned to you guys before, it's kind of a slow process, but it sounds like we're making some pretty good progress here.

And just to finish up on that thought, we are going to remain cautious and conservative. Just to give you an example, the state of Texas told us the other day they're not -- we're not going to see any payments from them until January of 2014. So although we expect that we're going to get paid from Texas and we absolutely think that Texas' word will be good, we're not sure exactly how we're going to account for that. So we've got a lot of work to do and there's still a lot of questions on these payments.

Did they give you a reason why they're not going to pay until January '14?

Yes, I mean, Texas, as you guys know, is a pretty high-managed Medicaid state. And with some of those states, they have to basically do the negotiations on that and the practicalities of getting that implemented. So again, as Roger said, I don't think that it's not that we're going to get the payment, although we're trying to speak to them to get something more affirmative on that because obviously, from year-to-year, we'd like to have more clarity on that. But I do think part of it is, when they have a lot of managed Medicaid, they do have to, then negotiate that as well.

Got it. And then just switching over to pricing, Vivian. 2% growth in net reimbursement-related factors is pretty good and obviously, the sequential parity mix shift was a positive as well. How does that split between pricing on the neonatal business versus anesthesia? Are you seeing positive commercial pricing growth in both businesses?

Yes, yes, we're seeing commercial pricing growth in both of those. Yes, absolutely. As you said, Kevin, one of the biggest positives on the net pricing side is that year-over-year, the P [ph] mix was only slightly negative. Again, it was positive on a sequential basis, but year-over-year, it was only slightly negative, the best improvement that we've seen in a long time.

When you say slightly negative, are we talking like 20 basis points or 30 basis points?

About 30, yes.

. And next, we go to the line of Ralph Giacobbe with Credit Suisse. Ralph Giacobbe - Crédit Suisse AG, Research Division: I guess going back to the volume, I think in the past, you've discussed how you didn't think some of the macro factors in terms of hospital volume generally would affect you given smaller number of practices versus larger numbers. Does your opinion change at all just given anesthesiology becomes a bigger component of the business? And maybe specifically in the context of kind of what we saw this quarter, which was slightly negative volume and guidance even for next quarter that assumes flat given sort of just volume environment that we're hearing from many of the hospitals.

Well, you know, -- Ralph, good morning. It's hard to guess, right? We continue to see variability. It isn't any region specifically that we're looking at where we're seeing lower volumes. If we look again on a month-by-month basis, you'll see some regions are up, and then the following month, that region will be down. So I'm not seeing anything still 5 years into this conversation consistently across the country, where I feel like maybe because there are fewer immigrants coming into Texas that's having an impact or just isn't playing out that way. So what we're trying to do is remain conservative and give you our best guess for where the volume is going to be. And we're just -- a, we're looking at the quarter comparison; and b, we're looking at just what happened over the last couple of quarters and trying to come up with our best guess. Ralph Giacobbe - Crédit Suisse AG, Research Division: Okay, all right, that's fair. And Vivian, do you actually have the payor mix numbers for the quarter and what it was last year?

I mean, we just talk about that generally about how it's gone up or down. We don't give the absolute number. We do disclose that once a year. But as I mentioned to Kevin, basically, quarter-over-quarter it was positive, and then year-over-year on a quarterly basis, it was slightly negative at about 30 basis points. And then on a year-to-date basis, it was slightly -- it was a little bit more negative because of the first quarter, so basically roughly about 75 basis points or so negative on the year-to-date basis, year-over-year. Ralph Giacobbe - Crédit Suisse AG, Research Division: Okay. And then maybe is there any way you can break out or give us what same-unit margin was and how that compares to a year ago, right? So I understand that margins are going to be compressed as you change your mix. But I'm just wondering and trying to get a sense of what sort of the underlying margin did for the quarter?

Yes, well, I mean, we did give some direction on that because I did talk about the margins being primarily driven by the mix of practices that we acquired. So it was not related to same unit, but we haven't specifically broken them out. But that's my idea of giving you guys direction on where it's coming from. Ralph Giacobbe - Crédit Suisse AG, Research Division: I guess, so directly, would you expect -- I mean, if you strip those out, even same-unit margin was up on a year-over-year basis?

Well, again, what I said before, I mean, that fluctuates from quarter to quarter because you have to look at where the same-unit growth is coming from. This quarter, as we said, it wasn't -- the volume was lighter and the pricing was better. And then sometimes, it has to do with the bonus accruals and the expense accruals related to where you're at with malpractice, et cetera. So it does jump around from quarter to quarter. But this quarter, specifically, the negative impact on the margin was driven by the mix of practice and specifically anesthesia practices. Ralph Giacobbe - Crédit Suisse AG, Research Division: Okay. And then just last one. You mentioned anesthesiology is now 30% of revenue. Any willingness to talk about what percentage of profitability or EBITDA that piece is to the business?

That's a good try, but no. Yes, not at this point. We're going to try to give more color.

Karl is vigorously shaking his head.

And next, we go to the line of Kevin Fischbeck with Bank of America Merrill Lynch.

Okay. Maybe just going back to one of Ralph's questions there. With the -- when you say that the same contract growth was pretty much flat from a margin perspective and that most of the margin deterioration was because of new -- of acquisition? Are you saying inherently because of the margin profile of the acquisition or just because acquisition has generally come online a little bit low from a margin perspective and that over time, you would expect to ramp them back up?

That's right.

So it's a combination of both. I mean, we have said that obviously, the anesthesia margins are slightly lower than the neonatology volumes, although -- I'm sorry, margins. But that, again, changes depending on what's happening with the volume of NICU, et cetera. But there are improvements to the anesthesia margin after we acquired them. As we've said before, specifically on the revenue cycle management side, as we talked about here, we're still getting positive commercial pricing on anesthesia, as well as pediatrics. And so there are some improvements. But the margin profile is slightly different.

Okay, that's helpful. And then as far as the Medicaid parity number, I guess you're talking about a lot of different ways. I just wanted to make sure I understood. So are you saying that the $0.05 number that you're looking for, for Q3 kind of reflects the 18 states that are currently paying you and that if more states pay you, then the Q4 number would be higher? Or is that also potentially you'd be making some assumption about more states coming back to you during Q3 to get to the $0.05 number? I just want to understand if $0.05 is a right run rate to think about in Q4 or next year?

Yes, no, well, we're hoping that in Q4, it will be higher because as Roger said earlier, we're anticipating for more activity. So the -- let's just clarify what I said. The 18 is 18 states that we know from talking to our Medicaid folks that basically there's -- planned amendments have been approved. That does not mean that they started paying us because basically, we had around 5 or 6 states that basically had started paying us. And so we do anticipate that to go up, hopefully, during the third quarter and certainly into the fourth quarter. So hopefully, the run rate in the fourth quarter will be higher than what we have estimated in the third quarter. And we do think in the third quarter, there is some potential upside to that. But at the moment, it's hard for me to know that because of the inconsistency of how these payments have come in.

Okay. And it sounds like you probably wouldn't even be at your run rate number until Q1 because at least Texas is not going to flow that through until then.

Well, that's true, yes. And so we're trying to get a little bit more color around that and see if they can -- would put anything in writing as to exactly what we can expect on that.

Okay. And then last question. As far as capital deployment goes, I guess why not a larger share repurchase authorization? I guess -- obviously, you are looking to do a $400 million deal, so that's obviously a good place to put money. But you've got a lot of capital flexibility. Why stop at just offsetting dilution?

Yes, well, because I want to spend it all buying practices. So that's the real answer. I do think that we have opportunity to maybe spend a little more if things fall our way. And so until we get some clarity on that, I think my choice is always to put the money to work by acquiring more practices. They come with not only earnings but lots of cash flow. And to me, that's a better place to go than competing with our shareholders to buy our shares. I think that we took a good first step in talking to our board about making up for our equity programs, and I'm pretty happy with where we're at actually.

We go to the line of Brooks O'Neil with Dougherty & Company. Brooks G. O'Neil - Dougherty & Company LLC, Research Division: I just have a couple of questions. Number one, I was curious, Vivian, if you've given a lot of thought at maybe actually establish a policy for how you're going to account for the retroactive collection of those parity payments, particularly as they get quite a bit bigger. I could envision a lot of money coming in with not much expense to offset it. Is that how we're going to see it? Or are you going to do it some other way?

No, I mean, you do see it in the net revenue line. And so that's where it should be because it's an increased reimbursement. Right now, we're primarily doing it on a cash basis of accounting because again, I don't have a lot of color yet. The idea would be to try to go on an accrual basis, which is typically what you do with revenue of this size company. But again, I haven't really had a lot of clarity on some of the states, but that's where we'd like to go to. So right now, we're doing cash basis, and it does show up on the net revenue line as a pick up. Now I would like to just remind everybody that for us, that does basically get bonus affected, as well as tax affected because a lot of those practices on a same-unit basis, that would impact your bonus. Brooks G. O'Neil - Dougherty & Company LLC, Research Division: Sure. That makes total sense. But a lot of the other expenses probably have already flowed through once those payments come in.

What other expenses do you mean, Brooks? Brooks G. O'Neil - Dougherty & Company LLC, Research Division: Well, just your normal G&A expense. And you have the practice expenses as revenue that's going to come in after you've handled the traditional accounting for your business.

Yes, I mean, the other expenses, right. I mean, we would basically accrue for them as we incur them. So this revenue, we're just, like right now, waiting to get the cash and accruing it. Like I said to Ryan, I mean, there's only one state so far that we've seen -- we've received any retro payment. So hopefully, there's a lot more to come. Brooks G. O'Neil - Dougherty & Company LLC, Research Division: Yes, that's good. So switching gears, I'm just curious if the timing of acquisitions has largely mirrored what you had expected for the year or whether anything has changed dramatically relative to what you're sort of thinking for 2013.

Okay. We never get them done as fast as I want, but we also are not... Brooks G. O'Neil - Dougherty & Company LLC, Research Division: Come on, you've got to get those guys moving.

Right. We're not rushing either. We're going to wait until they're right to get them done. So I would like to have seen one other acquisition completed by now. Having said that, there are a couple of anesthesia acquisitions that we're working on that I'm fairly confident we'll get done this quarter. So I'm happy about that. To sort of put my $0.02 worth into your question to Vivian, I think that the parity payments only need to be affected by the bonus and the tax. It's a fixed cost business. You've been around long enough. We're not hiring more people. We're not paying more malpractice insurance. We're not incurring any other additional expenses. But they do have to be affected by bonus and taxes. Brooks G. O'Neil - Dougherty & Company LLC, Research Division: Sure. So I guess my gut tells me that will help the margins over time, at least for the 2 years or maybe 2 years plus that you'll be collecting, I mean, it will be a good thing?

Yes, let's hope it's longer than 2 years. Brooks G. O'Neil - Dougherty & Company LLC, Research Division: Right, exactly. I was just curious. One last thing. Obviously, traditionally 3Q, you see a little bit of uptick in the Medicaid mix. We're a little bit into 3Q now. I'm assuming you have seen the normal shifts. So we probably shouldn't be expecting the payor mix shift in the favorable direction we saw in the second quarter as we go through the summer period. Is that how you're thinking about it right now?

Well, what we did for the forecast, Brooks, is that we basically put it at the same favorability as Q2, which is about 30 basis points as -- I'm sorry, not favorability, but negativity, which is the 30 basis points or so. But it is higher than Q2 because of what you just said. We agree with you that basically, year-over-year, hopefully it won't be as dramatic, but it is a higher mix generally in Q3 than Q2.

And next, we go to the line of Rob Mains with Stifel. Robert M. Mains - Stifel, Nicolaus & Co., Inc., Research Division: Vivian, a couple of clarifying questions. First of all, on the payments that you're receiving for parity. If they're being done on a cash basis, then there are some catch-up payments that you're going to be booking that aren't going to be recurring. I guess from what you're saying is that you expect the volume of the states that are coming on going forward to eclipse any kind of kind of a onetime benefit that you're going to receive in any given quarter from the catch-up payments. Is that a fair statement?

Well, we're still expecting to get more onetime payments, too, because -- so not only am I going to get more states, I'm hoping, but I also need to get more of the retro payments because as I said, there's only one state right now that's paid me retro. So it should be on both fronts. Robert M. Mains - Stifel, Nicolaus & Co., Inc., Research Division: Okay. But that -- the $0.05 for the third quarter shouldn't be viewed as a high watermark?

No, no. I think we've been conservative because again, we basically don't have a lot more visibility onto this. And like I said, we meet every couple of weeks or so, and it does continue to be favorable on the number of states that have their plans approved, et cetera. But until I see that cash and they start paying me on a more regular basis, it's hard for me to estimate that. Robert M. Mains - Stifel, Nicolaus & Co., Inc., Research Division: Okay, fair enough. And then if births are flat and NICU volumes are down, is that a percentage of babies admitted to the NICU issue? Is it a length of stay issue? Is it a little of both?

The percentages are down slightly, but I mean, nothing that -- I mean, it's basically within historical -- well within historical ranges, as well as the length of stay. So it's not the longest length of stay that we've ever had and it's not the highest percentages, but if it's 12 -- I don't have the numbers in front of me, but if it was 12.1, may be 11.9. Or if it was 12.3, it may be -- it's not what's causing the drop in admissions.

Yes, it's about the -- the admit rate is really pretty much right on track. And as Roger said, it's miniscule, the difference. And so is the length of stay. So it's really not that at all, Rob. Robert M. Mains - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So an obvious follow-up, there's no trend to be read from that?

Yes, right.

That's right.

And next, we go to the line of Matthew Weight with Feltl and Company.

I don't recall in the past you guys citing declines in anesthesia same-unit volumes. So I'm wondering, it would be helpful if you could provide any kind of range of what the historical same-unit volume growth in anesthesia has been?

Well, Karl is here, so I'm going to let him add a little bit more color. But the one clarifying statement I want to make is that it was slightly down. So the volume impact, the biggest volume impact overall on MEDNAX is related to NICU volumes. So with that, Karl, you want to do more color to that?

Yes. I mean, I think traditionally, you've been seeing growth in our anesthesia volumes. So I think Vivian is right. We're slightly down. I mean, that almost felt[ph] flat. So we didn't see dramatic change there. Some of what we know is a function of we had a hospital lose some business, a payor moved a chunk of the business out. We know that impacted in one place. But we did see it in other locations being down a little bit on the outpatient. But there was nothing that was concerning. We didn't see drastic moves and it was -- as Vivian said, that was slight. Historically, we have seen increases. So this was a little bit of a difference, and we'll continue to watch to see if it changes as we move forward. But I don't think there's any major concerns that things are changing at this point.

Okay, that's helpful. And then Vivian, one more parity question here. For 2014, outside of any retroactive payments you receive, would you hope to be recognizing revenue on an accrual basis?

God, I hope so. I hope so. But I'm hoping that things will get much better in the third quarter as predictability so that we can start estimating it. Because right now, as I said to you guys in prior quarters, there are some practical things with it. Our patient accounts folks are still looking to see the payments that we get, really how do they size up to what we expected, are all managed Medicaid programs being paid and just that rate differential because there are some locale differences on some of the codes and all that. So without getting into a lot of these practical issues, I'm hoping that for sure that will be the case.

That would be great. And then, Roger, last question here. I'm curious, from an M&A perspective with anesthesia, you referenced in your prepared remarks escalating interest. And I don't want to take too much into the escalating, but it sounds more bullish. Why are you seeing that? Is it Healthcare Reform? Or any color around that would be helpful.

I think it is that. I think there is instability and uncertainty about where all of this is leading, whether -- even any of it is going to happen. And I think that hospitals are putting a lot of work into these hospital-based groups, hospitals here like they have to have flexibility in order to be able to contract with whatever systems may end up happening. And so I mean, there's just a lot of unknowns. And the physician groups are looking to see -- they're starting -- I think -- I'm sorry, I think they have realized that they need to do something and their need to partnering -- they need to partner. And so their questions are, should we partnering with our hospitals? Should we partnering with large groups like ours? And so we are seeing, I think, as a result of that, an escalating number of groups that are looking for what their alternatives -- exploring their alternatives. Yes, let me also add to answer Rob's question. The admit rates for the second quarter was 13.3%. And that is down 10 basis points from same quarter a year ago. And the average length of stay was 18.2 days, and that's down 20 basis points from same quarter a year ago.

And next, we go to the line of Darren Lehrich with Deutsche Bank.

I'm just -- I wanted to clarify one thing as it relates to the buyback authorization. Is the amount you've authorized, does that equate to the number of options that were exercisable at year end last year? So is it like 1.5 million shares? Or can you just kind of identify numerically how the authorization works?

Yes. It's roughly about just the whole dilutive impact, which obviously, most of it comes from the equity programs. So it's roughly in a range of 1 million to 1.2 million shares a year.

Okay, that's very helpful. And then just going back to your volume outlook for the third quarter, I just want to make sure I understood what you're messaging here. You referenced the comp, which we obviously can see for NICU was very strong. In terms of how the third quarter volumes are being contemplated, is there any differential that you'd want us to consider for the guidance between anesthesia and the pediatrics business? Will one be positive and one be negative and so it ends up all being flat? Or is there any way to distinguish?

Yes, I mean, when we talk about it, we talk about it overall. And so potentially, like I said, this quarter, and Karl has reiterated that, I mean, most of that slight negativity was not coming from anesthesia because like I said, anesthesia was slightly negative. It was more weighted towards the NICU side of the house. And so we'll continue to look at that, and when we look at it, we just look at it all in. I mean, typically, all of our specialties, some could be up, some could be down. Other pediatric services is up. So it's just all in. It's hard to predict any one specifically.

Sure. That's fair, okay. And then just in terms of the bonus effect of the parity, I know you've talked about this before, but just the split. Have you -- is there a set number that you'd guide us to going forward on this?

Well, no. I mean, typically, as we said, the bonus -- for the practices that are in bonus, we have the 50/50 incentive plan. And so roughly, that works out to about 45% or so. I mean, it could -- in any given quarter, it could be different or for the year or depending on where they're at. But we do plan on sharing that with them as part of their practice upside.

And our last question is a follow-up from the line of Kevin Ellich with Piper Jaffray.

Just 3 quick follow-ups. Now that anesthesia is 30% of revenues, and I know that you have pretty good payer mix, just wondering if you saw any impact from sequestration this quarter.

Yes. So anesthesia impact of sequestration, our estimate for the whole year basically is pretty immaterial, yes.

Okay, that's fair. And then well, to that point, Vivian, could you say what percent of anesthesia revenues comes from Medicare?

It's not -- we haven't disclosed it, but we just -- like I said, it's just not material, the 2% sequestration.

Got it, okay. And then on the debt and interest expense, I guess, should we -- with buyback and the increased expectation for maybe more acquisition spend on the back half, safe to assume interest expense is going to ramp up and you guys will continue to use the balance sheet, Roger?

Yes, I mean, again, these practices come with a lot of cash flows. So when we acquire one of these practices, it's not just the earnings. It's also the cash flow. But we will continue to use both our line of credit and the cash flow from our practices.

Got it. And then just very minute issue here, Vivian. Tax rate was just a little bit lower than I expected this quarter. I'm curious if there's anything behind that and where you think tax is going to shake out this year.

Yes, I do think it will be -- that's a good question, Kevin. I do think that the tax rate is going to be slightly lower than last year. We continue to see some positive items that are called discrete items for tax. So basically, they're occurring every quarter as we basically just have some of our uncertain tax positions that are reversing. And so that's kind of what you've seen.

Okay. Well, if there aren't any more questions, thanks, everyone, for participating this morning. And we'll look forward to speaking with you next quarter. Thank you, operator.

This concludes our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. This conference will be available for replay today after 12:00 p.m. through August 11 at midnight. You may access the system by dialing 1(800)475-6701 and enter the access code 296008. International participants, (320)365-3844. Thank you.