Amedisys Inc. has agreed to pay $43.75 million to settle a shareholder suit alleging the health care provider and its top executives hid a Medicare fraud scheme that caused its stock prices to drop by half, ending the case after seven years of litigation and an appeal to the Fifth Circuit Court of Appeals.

The settlement ends long-running claims that Amedisys and senior management defrauded investors by concealing a Medicare fraud scheme that provided patients medically unnecessary therapy visits in order to maximize profits.

Amedisys agreed in April 2015 to pay the federal government $150 million to resolve allegations that the company violated the False Claims Act (FCA) by submitting false home health care billings to the Medicare program, according to a U.S. Department of Justice (DOJ) statement.

Investors first filed the proposed class action against Amedisys in 2010, and the court rejected it two years later. U.S. District Judge Brian A. Jackson said the investors had relied on three pieces of inadequate evidence:

  • news stories featuring interviews with a nurse who alleged overtreating patients,
  • the announcement of a Securities and Exchange Commission investigation, and
  • a DOJ announcement of an investigation.

The Fifth Circuit revived the case in October 2014, criticizing the lower court for applying “an overly rigid rule that government investigations can never constitute a corrective disclosure in the absence of a discovery of actual fraud.” The appeals court panel said it agreed with the district court that the start of government investigations do not amount to corrective disclosure when standing alone, but that they must be viewed “together with the totality” of the other alleged partial disclosures.

The U.S. Supreme Court left that ruling intact when it decided in June 2015 not to take up a case concerning the stringency of pleading standards in securities fraud cases. The investors then filed an amended complaint in September 2015, accusing Amedisys and its executives of improperly inflating Medicare reimbursements by pressuring nurses and therapists to provide patients unnecessary treatment visits in order to trigger higher fees and avoid price adjustments that could have lowered reimbursements.

Amedisys’ shares lost more than half their value as a result of the scheme, dropping from $66 per share before 2011 to $27 in 2015, according to the suit. Proposed class members included investors in a pension fund for retired Mississippi employees and teachers who receive benefits from the Commonwealth of Puerto Rico.

The court reduced the scope of the amended complaint in August, said there was enough evidence to justify allegations that Amedisys, CEO William Borne and Chief Compliance Officer Jeffrey Jeter knowingly and intentionally misrepresented Amedisys’ fraudulent activities to investors under SEC Rule 10b-5 and Section 10(b) of the Securities Exchange Act.

The investors are represented by Robert C. Finkel, Joshua W. Ruthizer and Sean M. Zaroogian of Wolf Popper LLP and John C. Browne, Adam H. Wierzbowski, Adam Hollander and Julia Tebor of Bernstein Litowitz Berger & Grossman LLP. The case is Bach et al. v. Amedisys Inc. et al. (case number 3:10-cv-00395) in the U.S. District Court for the Middle District of Louisiana.

Source: Law360.com

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