According to the law firm press release, American Renal operates as a dialysis services provider in the United States focused exclusively on joint venture partnerships with physicians. The Company, through its subsidiaries, owns and operates kidney dialysis facilities for patients suffering from chronic kidney failure or end stage renal disease (“ESRD”). As of March 31, 2016, it owned and operated 194 dialysis clinics in 25 states and the District of Columbia.
On or about April 21, 2016, American Renal completed its IPO, issuing 8.625 million shares of common stock and raising net proceeds of approximately $189.75 million.
The Complaint alleges that throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) American Renal was engaged in a fraudulent scheme to steer patients away from qualified-for Medicare and Medicaid plans into more expensive Affordable Care Act (“ACA”) plans to obtain greater reimbursement for the Company’s dialysis services; (ii) the foregoing scheme was in violation of federal and state laws; and (iii) as a result of the foregoing, American Renal’s public statements were materially false and misleading at all relevant times.
On July 1, 2016, three insurance companies filed a lawsuit against American Renal and an affiliated entity in the United States District Court for the Southern District of Florida, alleging that American Renal was engaged in a “fraudulent and illegal scheme” that involved persuading patients who qualified for Medicare or Medicaid coverage to enroll in commercial healthcare plans and then putting those patients in touch with an American Renal-patronized charity that would pay the patients’ insurance premiums in full or in part. As Medicaid and Medicare provide for only predetermined reimbursement rates for dialysis services, the suit alleges that American Renal would thus receive much larger reimbursements from the ACA insurer as a commercial payor than it would have from Medicare or Medicaid coverage.
On news of the lawsuit, American Renal’s stock price fell $2.82 per share, or 9.88%, to close at $25.71 on July 5, 2016, the next trading day.
On August 18, 2016, the Centers for Medicare and Medicaid Services (the “Agency”), a federal agency within the U.S. Department of Health and Human Services, announced that it had sent warning letters to all dialysis centers that participate in the federal Medicare program. The Agency also stated that it is weighing financial penalties on providers found to have directed people eligible for Medicare into ACA plans instead—as American Renal is alleged to have done.
On this news, American Renal’s share price fell $2.31, or 10.44%, to close at $19.81 on August 19, 2016.
On October 28, 2016, this case was voluntarily dismissed by Plaintiff. A related action continues in the District of Massachusetts under 16-CV-11797.
On May 18, 2017, Defendants filed a Motion to Dismiss the case. On January 10, 2018, the Court issued an Order denying the Motion. The parties entered into a Stipulation of Settlement on January 30, 2018. On February 8, the Court issued an Order granting the motion to certify a class in this action and preliminarily approving Settlement.