Acadiana Business

LHC Group's legal woes continue

by Leslie Turk

Lafayette provider of home health and hospice care is facing a potential class action lawsuit alleging securities fraud. The law office of Scott & Scott, headquartered in Connecticut, is seeking class action certification for a June 13 lawsuit it filed in the U.S. District Court for the Western District of Louisiana alleging securities fraud against Lafayette-based LHC Group. The complaint was filed on behalf of people who bought or acquired the company's stock from July 30, 2008, to Oct. 26, 2011.

Filed by the City of Omaha Police and Fire Retirement System against LHC Group and Chief Executive Officer Keith G. Myers, the suit alleges violations of the Exchange Act, claiming that during the class period the company issued false and misleading statements concerning its business and financial prospects. Specifically, the suit claims the defendants failed to disclose that much of the growth in LHC Group's home-based health care segment was created by the company intentionally increasing the number of Medicare home therapy visits to trigger higher reimbursements. The suit alleges LHC Group manipulated the number of patient visits, "regardless of patient need, to maximize revenue."

In its June 14 8-K filing, LHC Group acknowledged it is aware of the suit, saying it believes the claims are without merit and intends to vigorously defend the allegations. The company had no further comment.

According to the plaintiff's press release announcing the suit:
The complaint alleges that the truth began to come to light on May 12, 2010, when LHC announced that the Company received a letter from the Senate Finance Committee asking LHC to respond to questions regarding therapy utilization in prior years.  It is alleged that this partial disclosure caused LHC's stock price to sharply decline, removing some of the stock inflation. Then, following the Company's July 13, 2010 announcement that it had received a request from the Securities and Exchange Commission to preserve all documents relating to LHC's Medicare reimbursement practices, the Company's stock fell further on heavy trading volume. The complaint alleges that this decrease in the price of LHC's stock was a result of some of the artificial inflation caused by defendants' misleading statements coming out of the price.

On October 3, 2011, the Senate Committee released a report on its investigation that found that LHC and two other home health care companies engaged in practices that "at best represent abuses of the Medicare home program" and "[a]t worst, they may be examples of for-profit companies defrauding the Medicare home health program at the expense of taxpayers." That day, the price of LHC shares fell $1.42 per share, or 8.3%, to close at $15.64. Finally, on October 26, 2011, LHC disclosed that the Company was lowering its earnings forecast, in part because of a payment to the federal government to settle an inquiry into whether LHC improperly billed for home health services that were medically unnecessary. On this news, LHC's stock price fell an additional 15% in a single trading session.
As noted in the June 13 complaint, this federal suit is the latest in a string of problems the company has faced over its billing practices. The settlement with the feds, over a civil inquiry involving Medicare reimbursement for home health services from 2006 to 2008, cost the company $65 million.

When it announced the settlement in September 2011, LHC Group said it cooperated fully with investigators. It also said it disputed the government's claims and maintained that the agreement was neither an admission nor determination of wrongdoing.

Read the retirement system's federal complaint here.