Minn. AG's report prompts stock plunge, shareholder lawsuit

John O'Brien Apr. 30, 2012, 10:24am


NEW YORK (Legal Newsline) - A New York City law firm has followed up on Minnesota Attorney General Lori Swanson's lawsuit against Accretive Health, filing a securities class action suit against the company.

In January, Swanson filed a suit against Accretive, a Chicago company that engages in medical debt collection, for allegedly failing to protect patient health care confidentiality. Last week, the firm Bernstein Liebhard initiated a shareholder suit that alleges the company and some of its executives failed to disclose they were violating health privacy laws.

Accretive's stock plunged 42 percent last week after Swanson released a report on her investigation. It says the company may have violated state and federal laws by asking patients to pay their bills as they sought care.

The company filed its motion to dismiss Swanson's lawsuit on Monday.

"The suggestion that our focus or practice is to put bedside pressure on patients to pay their medical bills out of pocket is a flagrant distortion of fact," a statement released last week by the company says.

Bernstein Liebhard's complaint says it should have alerted shareholders to its actions and that its stock was trading at artificially inflated prices, peaking at $30.80 per share on Aug. 1.

On March 29, Accretive agreed to no longer collect debts on behalf of Fairview Health Services, a change it expected to negatively impact its 2012 revenue by $62 million to $68 million.

A month later, Swanson issued her report, and Accretive's stock went down nearly $8 per share to finish at $10.86 on Wednesday.

Swanson's probe began when an Accretive employee allegedly lost a laptop that contained the unencrypted health data of approximately 23,500 patients in Minnesota, including patients of Fairview.

Swanson's lawsuit alleges that Accretive gained access to patient data that was sensitive through contracts with the hospitals and used a numerical score to determine patients' risk of hospitalization and medical complexity. The lawsuit also alleges that the company graded patients' "frailty," compiled per-patient loss and profit reports and identified patients that were deemed "outliers."

"The debt collector found a way to essentially monetize portions of the revenue and health care delivery systems of some nonprofit hospitals for Wall Street investors, without the knowledge or consent of patients who have the right to know how their information is being used and to have it kept confidential," Swanson said.

"Accretive showcases its activities to Wall Street investors but hides them from Minnesota patients. Hospital patients should have at least the same amount of information about Accretive's extensive role in their health care that Wall Street investors do."

The lawsuit includes a screen shot that Fairview allegedly sent to a Minnesota patient who requested to know the patient's data that was on the laptop. The screen shot allegedly included personal identity information, such as the patient's Social Security number, name, address and date of birth. It also allegedly included a checklist to show whether the patient has 22 different chronic medical conditions and, if so, what the current condition of the patient was.

Accretive allegedly gained access to data about patients through two types of contracts with hospitals. The first was through revenue cycle operations contracts with North Memorial and Fairview and the second was a Quality and Total Cost of Care contract with Fairview. Under the contracts, Accretive allegedly directed and controlled the work of hospital employees and infused its own employees into the hospital staffs. Accretive allegedly received base compensation and incentive pay for aiding the hospitals in boosting revenue or cutting costs.

Accretive allegedly told Wall Street investors that its revenue cycle operations contract starts "when a patient registers for future service or arrives at a hospital or clinic for an unscheduled visit" and ceases when "the hospital has collected all the appropriate revenue from all possible sources."

Under the terms of these contracts, Accretive allegedly controlled the revenue functions of the hospitals, including patient access, billing and collections. The company has allegedly reported to Wall Street investors that it carries out these functions using algorithms related to data mining, consumer behavior modeling and propensity to pay.

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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