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Pediatrix Drops 22% on News of Probe

The company says the federal government is investigating its Medicaid billing practices.

Shares of



tumbled during afternoon trading Tuesday, amid news that the federal government is investigating the company's Medicaid billing practices nationwide.

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The U.S. Attorney's Office plans to make a request for documents and information, informally or by subpoena, within the next few weeks, according to a statement released Tuesday by the company. Pediatrix, which runs a network of neonatal physician group practices, said it has resolved similar probes with six state attorneys general since 2000.

However, Matt Ripperger, a J.P. Morgan analyst, said in a report issued Tuesday that this investigation will be "materially more expansive" than those in the past. He downgraded the stock to underweight from overweight. "We view this announcement as another clear indication that the regulators (state and federal) continue to have an issue with the company's business model, billing practices and market share in the neonatal women's health market," he wrote.

Pediatrix wasn't able to predict whether the investigation will have a material adverse effect on its business, but it said it believes that its billing practices have been appropriate.

The company's shares were down 22.7%, or $9.55, at $32.55 Tuesday afternoon.