While Pediatrix Medical Group has expanded with two purchases since mid-August, the company was hit with a shareholder derivative lawsuit over the granting of stock options to executives. Pediatrix purchased a Seattle-area physician practice in a cash deal of an undisclosed amount, while its new American Anesthesiology division completed its purchase of Fairfax Anesthesiology Associates, Falls Church, Va., a news releases said. Pediatrix had already purchased three other practices this year, in Munster, Ind., San Antonio and San Francisco, says Bob Kneeley, director of investor relations for the Sunrise, Fla.-based provider of neonatal and pediatric services in 32 states and Puerto Rico. According to an Securities and Exchange Commission document, the lawsuit was filed in a U.S. District Court in Florida on Aug. 30, and it charges that the company, as well as current and former officers are charged with violating their fiduciary duties with respect to the awarding of and accounting of stock option grants going back to at least 1996.
The Seattle deal involves seven radiologists, specializing in ultrasounds for high-risk obstetric patients; they join 950 physicians already under the Pediatrix umbrella, including a pediatric-cardiology practice in Tacoma, Wash. Fairfax Anesthesiology includes 53 anesthesiologists and 60 certified registered nurse anesthesiologists, and is the exclusive anesthesiology provider at the 927-bed Inova Fairfax Hospital in Falls Church. A news release said Pediatrix paid cash for the practice but did not disclose how much, only that after various expenses the deal is expected to add about 2 cents per share in annual earnings.
In August, Pediatrix Chief Financial Officer Karl Wagner and General Counsel Thomas Hawkins both reported exercising stock options for $30.99 apiece and then selling them for $56.59 apiece. Wagner reportedly sold 37,500 shares, while Hawkins sold 32,674 shares. Kneeley says these deals had nothing to do with the recent purchases, and were part of a prearranged plan that would automatically go into effect when the stock hit the right price. The U.S. attorney's office in Miami is investigating the company's past stock-option granting practices, and a preliminary review conducted by the Pediatrix board's Audit Committee in December 2006 uncovered oversight deficiencies. Kneeley says the committee has completed its review, and the case is now proceeding through the SEC and the U.S. Justice Department. Kneeley added that the company was cooperating with the investigation, but he didn't have any estimates on when the matter would be resolved.