I sincerely hope that none of my family, friends, or readers ever have reason to need Pediatrix's (NYSE:PDX) primary services. Pediatrix is the largest provider of services for neonatal intensive care units (NICUs) -- where very sick and often premature babies spend their first days or weeks of life. On the other hand, the success that management has had in growing this business makes it a much happier story from the perspective of investors.

Second-quarter results were quite healthy. Revenues climbed 14% as the company saw 8.3% same-facility growth. This latter number was fueled by patient volume growth of 5.6% and good pricing trends.

As expected, a significant change in the composition of who pays Pediatrix's bills has hurt margins. Operating margin moved from 26.5% in the year-ago quarter to 25.3% in this quarter. As a result, net income growth was a modest 7%, though EPS grew 15% on the basis of fewer shares outstanding.

Unfortunately, there's still not much in the way of news on the company's major government investigations. A four-year FTC investigation of an acquisition remains open, and it's anybody's guess as to what (if anything) will come of this. Similarly, a national Medicaid investigation that began in 2003 is still pending; the company has made a settlement offer, but the government has not yet accepted or rejected it.

Investors are right to be cautious about a company with a history of government investigations, but it's important to keep it in context. So far, Pediatrix has managed to escape these matters with only nominal sanctions. Of course, the company should strive for zero investigations in the future, but it's good to put matters in perspective.

Overall, I like the business that this company is in. It is the only major consolidating force in the neonatology market (with less than 20% share) and it has a history of making solid, all-cash acquisitions. What's more, many hospitals want to offer a full suite of pediatric care, but don't want to run NICUs themselves. So the basic business conditions for Pediatrix look solid.

Further, while reimbursement cuts from the government are always a threat (and Pediatrix gets a lot of its revenue from Medicaid clients), I'd argue that this company is better protected than most. It's one thing to cut reimbursement for home oxygen; from a political perspective, it's another thing entirely to cut reimbursement for medical care for sick babies.

Pediatrix may not look like the cheapest stock, but it's in a very good, growing niche. Health care in general is a solid market and as other consolidators like Psychiatric Solutions (NASDAQ:PSYS) and VCA Antech (NASDAQ:WOOF) have shown, the combination of home-grown growth and prudent acquisitions can be potent.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).