A class action has been filed against neonatal and perinatal physician services provider Pediatrix Medical Group, Inc. (NYSE: PDX) and certain of its officers and directors by stockholders who purchased the company's common stock between April 17, 2002, and June 23, 2003. The action claims that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.

The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between April 17, 2002 and June 23, 2003, thereby artificially inflating the price of Pediatrix common stock. The Complaint alleges that these statements were materially false and misleading because they failed to disclose and misrepresented the following adverse facts, among others: (1) that the defendants engaged in fraudulent ``upcoding'' in its billing practices while telling the investing public that its billing practices were legitimate; (2) by virtue of having improperly received and recorded as revenue payments to which Pediatrix was not entitled, Pediatrix materially inflated several key indicators, including operating income, net inpatient revenue per admission, EBITDA and EBITDA margins; (3) that these unsafe and unsound business practices materially misrepresented the Company's business operations and financial performance by enabling the defendants to post better financial results; and (4) that as a result, the Company's stock price was artificially inflated.

On June 24, 2003, the Company issued a press release with the headline: ``Pediatrix Notified of Billing Inquiry.'' Therein, the Company announced that it had been advised by the U.S. Attorney's Office that it was conducting a civil investigation into Pediatrix's Medicaid billing practices nationwide. Additionally, the Company announced that the U.S. Attorney's Office intended to make a document and information request, informally or by subpoena, within the next few weeks.

Market reaction to the news was swift. Pediatrix's shares fell 24% or $9.90 per share, on unusually high trading volume, to close at $32.20 per share.