Why Accretive Health Shares Imploded
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shareholders of revenue cycle management services company Accretive Health (NYS: AH) are finding themselves in need of a hospital today after their stock tumbled 28% in response to comments from Minnesota's attorney general.
So what: In late March, Accretive Health agreed to no longer collect debt on behalf of Fairview Health Services in response to this same lawsuit. Today's news widens the scope of that investigation beyond just Fairview, and the allegations made by the attorney general contend that Accretive's employees didn't properly disclose their roles to patients and that they attempted, in some cases, to collect from patients prior to them even receiving care. Further, it appears that Fairview Health's tax-exempt status may be in jeopardy because of Accretive's aggressive debt-collecting tactics.
Now what: Last month when Accretive announced the loss of the Fairview account, it shaved about 6% of its revenue off its full-year forecast. With the scope of this investigation expanding, it's quite possible the impact to Accretive's bottom line may expand as well. At some point Accretive will be worth a look, but even after today's drop, 14 times forward earnings is still too much to pay with so many questions still on the table.
Craving more input? Start by adding Accretive Health to your free and personalized watchlist so you can keep up on the latest news with the company.
At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.