By Zeba Siddiqui
July 30 Medical billing services provider
Accretive Health Inc said it would wind down its
Minnesota operations to settle a 6-month-old lawsuit by the
state that has led to the loss of a contract for the company.
The lawsuit, brought by state Attorney General Lori Swanson
in January, followed an investigation into the Chicago-based
company's debt collection practices. It alleged that Accretive
had violated state and federal health privacy laws through
aggressive collection tactics, including having its management
"imbedded" into the staff of Minnesota hospitals and managing
hospital employees engaged in collections and patient
Accretive must pay $2.5 million and stop all business
operations in Minnesota within the next 90 days under the
settlement. The money will partly be used to compensate
patients, with the rest going to the state treasury.
Accretive said in a statement that it has not yet determined
when it will complete the wind down process.
Following the 90-day period, "Accretive will be subject to
an outright ban on operating in Minnesota for two years," the
office of the Attorney General said in a statement.
The company would not be allowed to reenter the state for
six years after that, unless it enters an agreement with the
Attorney General Lori Swanson.
"A hospital emergency room is a place of medical trauma and
emotional suffering for patients and their families. It should
be a solemn place, not a place for a financial shakedown of
patients," Minnesota Attorney General Swanson said.
The company did not admit to any wrongdoing alleged in the
complaint and said it does not expect the settlement to have a
material adverse effect on its financial condition.
Oppenheimer & Co analyst Bret Jones said the settlement
payment means nothing to Accretive, which ended the
January-March quarter with a cash balance of $214.5 million.
Resolution of the dispute removes a significant overhang for
the company, and puts the risk of the lawsuit spreading to other
districts to bed, Jones said in an interview.
Soon after news of the lawsuit became public in early April,
Accretive's customer Fairview Health Services terminated its
contract with the company, fuelling investor concerns that more
customers would follow Fairview's footsteps.
Accretive estimates its adjusted earnings before income tax,
depreciation and amortization (EBITDA) for the April-June period
to be "significantly lower" than that in the year-ago period,
citing higher operating costs related to ending the Minnesota
operations and the lawsuit.
The company, which is expected to report second-quarter
results on Aug. 8, posted adjusted EBITDA of $20.7 million in
the year-ago quarter.
As of Monday, the combined projected contracted annual
revenue run-rate for the Minnesota operations was between $23
million and $25 million, the Chicago-based company said in a
Accretive's stock, which has fallen 7 percent since the
lawsuit was announced in early April, rose 20 percent on news of
the settlement after the bell on Monday. It closed at $10.01 on
the New York Stock Exchange.