Pediatrix to review stock option grants

Pediatrix Medical Group Inc. says it has launched an internal investigation into its stock option practices.

The Sunrise, Fla.-based physician practice-management company, which specializes in pediatric subspecialties and high-risk obstetrics, announced on Aug. 3 that it was launching a voluntary review of its stock option grants. Among those investigating are the company board's audit committee and the company's outside legal counsel.

Few details were given about what prompted the review, or what specific practices were being targeted. The company said in a news release that the review was initiated after "a shareholder inquiry and in light of recent reports in the financial media regarding stock option practices."

Scores of other companies have been publicly identified recently as targets of federal investigations into how they awarded stock options to their executives, though Pediatrix has not been named as a target.

Many of the inquiries have focused on whether the companies illegally "backdated" stock option grants to make executives' stock more valuable. In backdating, a company awards an executive stock options, but finds a way to make the options effective as of the date when the company's stock hit its past 52-week low or some other date when the stock price is low.

Backdating is not necessarily illegal, particularly if a company outlined such a practice in its regulatory filings and had it approved by its board.

Several health care companies have been drawn into queries, including the nation's No. 2 private-pay health plan, UnitedHealth Group; the pharmacy benefits manager CaremarkRx, and Renal Care Group, a dialysis company.

UnitedHealth has declined to comment on the probe (though it has announced it would no longer award options to top executives), and CaremarkRx and Renal Care have denied wrongdoing.

Bob Kneeley, director of investor relations for Pediatrix, said the company was not aware of any investigation by securities regulators into its option-granting practices. He said the review was simply prompted by the shareholder inquiry and declined to provide further details.

Pediatrix also announced that it would delay reporting its financial results until the review was complete.

The company and its affiliates employ more than 860 physicians in 32 states and Puerto Rico.