Healthcare Matters

Well, it was bound to happen. When your YTD stock price is off by a mere 54% based on what are alleged to be “concealed, deplorable business practices,” being a public company BOD member can be a dangerous line of work. Just ask business titan Edgar Bronfman (CEO of Warner Music Group), former Secretary of State George Shultz and nine other Accretive Health director defendants.

Of course, that’s why there’s such a thing as Directors & Officers insurance –and that’s why Accretive Health’s board members, officers and investors are probably spending more time on the phone with their insurance agents than their defense lawyers. This is how you accept responsibility, but none of the consequences.

A shareholder-led class action suit against Accretive’s directors alleges that its CEO knew the company was violating patient privacy law by making private health information available to its debt collectors, and concealed from shareholders the effect the company’s violations would have on earnings.

Lead shareholder plaintiff, Jeffrey Goodwin, claims that in January this year, “Minnesota’s Attorney General filed a lawsuit against Accretive Health alleging that the company had violated health privacy laws, state debt-collection laws and state consumer protection laws. The lawsuit centers on a medical privacy security breach that occurred in July 2011 when an employee of Accretive Health had a laptop stolen out of a rental car. The laptop contained unencrypted medical records of 23,500 patients.” The complaint continues: “The Attorney General’s office was not only concerned with the theft itself and how the company subsequently handled it but also with the extent of the confidential medical information Accretive Health had within its possession and the use of that information.”

The defendants then announced that “in response to the lawsuit filed by Minnesota’s Attorney General, the company had agreed to no longer collect debt on behalf of Fairview [Health Services] … and that they expected this change to negatively impact the company’s fiscal year 2012 revenue by $62 million to $68 million,” according to the complaint. Accretive’s stock price then fell $4.46 per share to $19.60, a decline of almost 19 percent, the complaint states.

“Then, on April 24, 2012, the Minnesota Attorney General released a report which detailed Accretive Health’s aggressive practices, which included demanding payments from people seeing care in emergency rooms, cancer wards and delivery rooms. The report raised concerns about these deplorable practices,” according to the complaint. Goodwin cites a New York Times article that reported: “Hospital patients waiting in an emergency room or convalescing after surgery are being confronted by an unexpected visitor: a debt collector at bedside.

“In March 2011, doctors at Fairview complained that such strong-arm tactics were discouraging patients from seeking lifesaving treatments but Accretive officials dismissed the complaints as ‘country club talks,’ the documents show.” After this report, Accretive stock “sank $7.63 per share to close at $10.86 per share on April 25, 2012, a one-day decline of 41 percent,” Goodwin claims. He claims that Accretive’s directors and CEO knew the company was violating patient privacy law by making private health information available to its debt collectors, and concealed from shareholders the effect the company’s violations would have on earnings.

“As a result of the individual defendants’ illegal actions and course of conduct, the company is now the subject of a class action lawsuit that alleges violations of federal securities laws. As a result, Accretive Health has expended, and will continue to expend, significant sums of money,” the complaint states. Goodwin seeks damages for breach of fiduciary duty and proposes new procedures to improve internal oversight of Accretive’s corporate officers. He also seeks restitution of all profits and benefits obtained by the individual defendants.

It’s rich when you consider that shareholders can not only force a class action against a company for exercising bad judgement and causing loss to its stock value, but also for spending the millions required to defend itself.

—Tom Finn

Source: CourthouseNews.com