The original complaint charges Healthways and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Healthways provides disease management and wellness programs for health plans, hospitals and small businesses, helping members with diabetes, cancer and other diseases to coordinate care, keep up with treatment and maintain healthy behaviors.
The complaint alleges that, during the Class Period, defendants issued a series of materially false and misleading statements concerning the Company’s financial performance and prospects. According to the complaint, starting in 2005, Healthways, along with four other companies, became involved in the Medicare Health Support (“MHS”) pilot program launched by the Centers for Medicare & Medicaid Services (“CMS”). The MHS program was designed to improve quality of care and life for people with multiple chronic conditions, and to help the Medicare program and its beneficiaries save money. Under the plan’s first three-year phase, patients were tracked to evaluate care, satisfaction and whether the plan achieved savings targets. Based on those results, CMS would decide whether to expand the program to a second phase.
Specifically, the complaint alleges that Healthways failed to disclose that: (i) Healthways was not meeting the savings targets, among other requirements, set by CMS. As a result of Healthways’ failure, CMS would not expand the MHS program to a second phase and the Company would be required to reimburse CMS for the fees they had already received through the program; (ii) Healthways was in danger of losing at least two existing contracts and was experiencing slower enrollment in an existing contract due to a decline in the need for the Company’s services; and (iii) as a result of the foregoing, the Company had no reasonable basis for its revenues and earnings guidance for fiscal 2008.
Then, on February 26, 2008, the Company announced that it was lowering its financial guidance for fiscal 2008 “due to slower-than-projected enrollment in a new Health Support program with one large health plan customer and the recent indication that two previously anticipated contracts will not materialize during this fiscal year.” Upon this news, shares of the Company’s stock fell $13.42 per share, or approximately 30%, to close at $31.93 per share, on heavy trading volume.
On August 8, 2008, West Palm Beach Firefighters' Pension Fund was appointed lead plaintiff and Coughlin Stoia Geller Rudman & Robbins LLP was approved as lead counsel. The Court also consolidated a similar class action, Lloyd v. Healthway, 3:08cv0666. On September 22, 2008, the lead plaintiff filed a Consolidated Class Action Complaint. On November 12, 2008, the defendant filed a motion to dismiss the Consolidated Class Action Complaint. On March 9, 2009, Chief Judge Todd J. Campbell denied the defendants’ pending motion to dismiss.
On June 15, 2009, the lead plaintiff filed a motion to certify the class. On October 2, 2009, the hearing was held before Chief Judge Todd J. Campbell regarding the plaintiff’s motion to certify class. On October 5, 2009, the Court entered the Memorandum and Order denying the motion. On October 20, 2009, a plaintiff filed a motion to certify the class. On April 2, 2010, Judge Campbell granted the plaintiffs’ motion to certify the class.
On May 21, 2010, the plaintiffs filed a Settlement Agreement, proposing a settlement in the amount of $23.6 million in cash. The plaintiffs also filed a motion for preliminarily approval of the proposed settlement. On June 2, 2010, the settlement was preliminarily approved. On September 24, 2010, Chief Judge Todd J. Campbell approved the settlement, the plan of allocation, and the motion for attorney's fees and expenses. The action is now dismissed with prejudice.