Community Health Systems, Inc.
- Company Name
- Community Health Systems, Inc.
- Stock Symbol
- Class Period
- February 20, 2017 to February 27, 2018
- Motion Deadline
- July 28, 2019
- Middle District of Tennessee
The complaint charges Community Health and certain of its officers with violations of the Securities Exchange Act of 1934. Community Health, through its affiliates, operates general acute care hospitals. The Company’s affiliates own, operate or lease 107 hospitals in 18 states with approximately 17,000 licensed beds.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose material adverse information about the Company’s business, operations, and prospects. Specifically, defendants failed to disclose that the Company had understated its contractual allowances and provision for bad debts, which resulted in the Company overstating its net operating revenue and understating its net loss. As a result of this information being withheld from the market, Community Health securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of more than $10 per share.
Then on February 27, 2018, the Company announced its fourth quarter and full year 2017 financial results, which included a $591 million increase in contractual allowances and bad debt provision. Specifically, the Company stated that it had “completed an extensive analysis of its patient accounts receivable and developed new accounting processes and methodologies” in connection with its adoption of new revenue recognition accounting standards on January 1, 2018, as required by generally accepted accounting standards. The analysis also included “an evaluation of patient accounts receivable retained after the 2017 divestiture of 30 hospitals, and certain other revenue.” Based on this analysis, the Company’s financial results included “a change in estimate recorded by the Company during the three months and year ended December 31, 2017 to increase contractual allowances and the provision for bad debts by approximately $591 million.” On this news, the Company’s stock price fell $1.06 per share, or more than 17%, to close at $5.12 per share on February 28, 2018.