Evolent Health, Inc.
- Company Name
- Evolent Health, Inc.
- Stock Symbol
- Class Period
- March 3, 2017 to May 28, 2019
- Motion Deadline
- October 7, 2019
- Eastern District of Virginia
The complaint charges Evolent and certain of its officers with violations of the Securities Exchange Act of 1934. Evolent provides health care delivery and payment services to a national network of health systems across Medicare, Medicaid and commercial markets.
By the end of 2018, Evolent had contractual relationships with over 35 operating partners. Many of these “partners” were either related parties, or companies in which Evolent had significant ownership or had provided financing at the onset of the relationship. Evolent’s largest and most important partner was University Health Care, Inc., d/b/a Passport Health Plan (“Passport”), which represented 20% of the Company’s revenues.
The complaint alleges that during the Class Period, defendants issued a series of false and misleading statements and/or failed to disclose material adverse facts regarding Evolent’s business, operations, and prospects, including about Evolent’s “partnership” with Passport. Among other things, defendants misrepresented and/or failed to disclose that: (1) Evolent’s partnership model did not align the Company’s interests with those of its partners, as the model was designed to inflate the Company’s revenue by extracting enormous administrative and management fees at the expense of its operating partners, such as Passport; (2) Passport was struggling financially, particularly after Kentucky cut its reimbursement rates, and the partnership between Evolent and Passport was becoming increasingly unsustainable; (3) Evolent was draining Passport of functions, employees, and money to such an extent that Passport was left on the verge of insolvency; and (4) Passport had been conducting a bidding process for several months to sell itself to prevent liquidation. As a result of these misrepresentations and/or omissions, the price of Evolent common stock was artificially inflated to more than $29 per share during the Class Period.
Ultimately, on May 29, 2019, Evolent unexpectedly announced that it was buying a controlling interest in Passport, which was essentially a bailout of the financially distressed health plan. Evolent acquired Passport despite previously stating that, for the foreseeable future, it had no intention of buying Passport or any other health plan, and that acquiring health plans was not part of its strategic focus. In addition, Evolent admitted that Passport was performing poorly and was not being run or managed properly, despite paying massive management fees to Evolent for what was previously understood by investors to be an aligned relationship. In reaction to these disclosures, Evolent’s stock price fell nearly 30%.