- Company Name
- Mednax, Inc.
- Stock Symbol
- Class Period
- February 4, 2016 to July 27, 2017
- Motion Deadline
- September 9, 2018
- Southern District of Florida
The complaint charges Mednax and certain of its officers with violations of the Securities Exchange Act of 1934. Mednax is a health care administration business that acquires and administers physician practice groups. The Company’s business strategy focuses on acquiring physician groups in subspecialties such as anesthesia, newborn, maternal-fetal, radiology and teleradiology, and pediatric cardiology. Historically, the main driver of Mednax’s revenue growth was the acquisition of pediatric practices. As opportunities diminished in pediatrics, Mednax moved to acquire anesthesiology practice groups.
The complaint alleges that during the Class Period, defendants made false and misleading statements and/or concealed adverse information regarding the Company’s business model, which depended upon growth from the acquisition of new practice groups, primarily in anesthesiology. Specifically, the complaint alleges that Mednax’s business model was not sustainable and its growth was based on suppressing physician compensation and enforcing non-compete agreements to deter physician defections. As a result of defendants’ false statements and/or omissions, the price of Mednax stock was artificially inflated to as high as $76.29 per share during the Class Period.
On April 20, 2017, Mednax announced negative financial results for the first quarter of 2017, including missed earnings. Senior executives, including defendant Roger J. Medel, blamed the poor results on negative “trends,” including “payor mix” degradation, lower volume of newborn infant patients, and wage inflation. On this news, the price of Mednax stock dropped $5.39 per share to close at $61.30 per share on April 20, 2017, a decline of over 8%.
Then, on July 28, 2017, Mednax announced during its second quarter earnings call with investors and analysts that the Company had failed to complete any acquisitions of anesthesiology practices during the quarter. Significantly, the Company also disclosed that any future anesthesiology practice acquisitions were unlikely, which Mednax attributed to the “challenging” payor mix combined with “continued . . . growth in compensation expense for nurse anesthetists.” As a result of this news, the price of Mednax stock dropped $8.76 per share to close at $47.73 per share on July 28, 2017, a decline of nearly 16%.