Ft. Lauderdale, Fla.-based Pediatrix Medical Group says its own physicians are partially to blame for the company's expected third-quarter losses.
The neonatology and obstetrics practice management company, which for many months was the golden child of the PPM world, announced last month that its third-quarter earnings would fall far short of analysts' expectations. Net income for the quarter, which ended Sept. 30, will be $4.7 million to $5.2 million, or 30 to 33 cents per share. That's down from $7.8 million and 50 cents per share in the second quarter and compared with $7.6 million and 48 cents per share in the third quarter of 1998. Net income in 1998 was almost $30 million.
News of the declines sent Pediatrix' stock down to about $7 at Modern Physician's press time. As recently as January, the shares were trading for more than $60.
This spring, attorneys general in Arizona, Colorado and Florida confirmed that they were investigating Pediatrix for its Medicaid billing practices. Shortly thereafter, the company "began seeing lower acuity codes," or downcoding and undercoding by its physicians, says company spokesman Bob Kneeley.
"We can't make a direct link to anything," he says, "but it would appear that the overall environment for healthcare billing and reimbursement is related (to the drop in earnings)."
Kneeley says the company recently embarked on a nationwide campaign to encourage its physicians to "bill appropriately."
"What we're doing is an aggressive education program so that the doctors feel comfortable with a little more clarity on the boundaries of these codes," he says, adding they are not now, and never have encouraged physicians to upcode. "We have said consistently for years, and particularly since April, that what we've been doing is appropriate."
Modern Physician contacted numerous Pediatrix medical directors for reaction, but none would comment.