According to the Complaint, Mednax, Inc. ("Mednax" or the "Company") acquires physician practice groups and then provides those physicians with administration services. As part of the acquisition process, the affiliated physicians agree to employment contracts with Mednax, which provide for a base salary and incentive bonuses, having terms of three to seven years. In exchange, Mednax handles billing patients and third-party payors for services rendered by the affiliated physicians.
The Company’s “roll-up” 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 has been acquisitions of anesthesiology practice groups. In 2016, Mednax added 13 physician groups through acquisitions, including eight anesthesiology practices, and concluded that year with a total of 1,390 affiliated anesthesiologists.
On July 11, 2018, Plaintiff's law firm issued a press release announcing the lawsuit. According to the press release, the Complaint alleges that during the Class Period, Mednax violated the Exchange Act by misleading investors regarding the sustainability of the Company's business model. Throughout the Class Period, Mednax's business model depended upon growth from the acquisition of new practice groups, primarily in anesthesiology. In truth, Mednax's business model is not sustainable and its growth was based upon suppressing physician compensation and enforcing non-compete agreements to deter physician defections. When the truth regarding the sustainability of Mednax's business model was finally revealed at the end of the Class Period, the price of the Company's stock had declined by over 23%.
On December 21, 2018, the Court issued an Order appointing Lead Plaintiff and Counsel. Lead Plaintiff filed an amended Complaint on March 8, 2019. Defendants filed a Motion to Dismiss the amended Complaint on April 12. On October 2, 2019, the Court issued an Order granting Defendants' Motion to Dismiss. Lead Plaintiff was given leave to file a second amended Complaint. On October 25, Lead Plaintiff filed a second amended Complaint.