Janet,

It is not umcommon for premature infants to be fed watered down milks
for early feeds and/or after some sort of gastrointestinal insult.
It is also common in my area (Maryland, US) for the ratio of milk to
sterile water to gradually increase over a period of days.

I admit I have only seen this done with formula, but it could be the
neonatologist is thinking along these lines but not generalizing it to
EBM.  I fail to see any reason why, if this infant needs say 1/4
strength milk, or 1/2 strength, etc... that EBM could not also be
diluted.

Carla D'Anna