A week after its stock dropped 23.5% in one day on news that federal officials were investigating its Medicaid billing practices, neonatal and perinatal PPM Pediatrix Medical Group is the target of at least four class action suits by angry shareholders.
Four East Coast law firms said Monday that each has sued Pediatrix in U.S. District Court in Miami on behalf of anyone who purchased Pediatrix stock between April 17, 2002, and June 23, 2003.
Fort Lauderdale, Fla.-based Pediatrix on June 24 said that an unspecified U.S. attorney's office was conducting a civil inquiry and was preparing to request documents and information regarding the company?s Medicaid business.
The announcement sent Pediatrix shares down by 23.5% last Tuesday, to $32.20 from the previous closing price of $42.10. Analysts at J.P. Morgan Chase & Co. and Wachovia Securities also downgraded the stock.
Pediatrix stock since has rebounded somewhat and is trading above $36 today.
Each of the suits alleges that Pediatrix artificially pumped up its stock price for 14 months prior to last week's sell-off by lying in public disclosures of the company's financial conditions. Specifically, Pediatrix is accused of upcoding its bills to health insurers, thereby claiming higher revenues and earnings than it should have, according to plaintiffs' attorneys.
Pediatrix is denying the charges.
"We believe these (lawsuits) are without merit," says company spokesperson Bob Kneeley. "We are very confident that our billing is appropriate."
Kneeley says the company stands behind earlier claims that its Medicaid billing practices are "appropriate." Pediatrix said last week that it has resolved similar Medicare billing questions with attorneys general in six states since 2000, including publicly announced settlements with officials in Florida, Arizona, Nevada and Colorado.
In addition to the new suits and the Medicaid probe, Pediatrix faces a Federal Trade Commission investigation over whether the company's 2001 acquisition of former rival Magella Healthcare Corp. was anticompetitive. The $190 million deal gave Pediatrix about one-sixth of the national market for neonatal intensive care patients.
It also is under investigation for its dealings with the Tricare program for dependents of military personnel.