Last week,
Gentiva Health Services Inc.
(
GTIV
) announced a settlement agreement with the US Department of
Justice (DoJ), whereby the company will pay a $25 million one-time
fee. The settlement is related to an investigation into the
provision of continuous care services of its subsidiary, Odyssey
HealthCare Inc.
Additionally, Gentiva's Hospice segment, which covers Odyssey,
will undergo auditing for five years. Moreover, the company has
agreed to provide special education to its employees. Gentiva also
inked a Corporate Integrity Agreement with the US Department of
Health and Human Services for five years.
Nevertheless, the payment is not expected to substantially
affect Gentiva as the company has adequate cash balance. The
company exited 2011 with cash and cash equivalents of $164.9
million.
Moreover, the goodwill of Gentiva is not likely to be adversely
affected as the investigation pertained to the activities of
Odyssey in the period between January 1, 2006 and January 22, 2009,
i.e., before Gentiva acquired the company in August 2010.
However, Gentiva is facing substantial legal trouble over its
own Medicare reimbursements. The company faced an investigation by
the Senate Finance Committee in October 2011, after which the
committee alleged that Gentiva and two other leading health care
companies --
Amedisys Inc.
(
AMED
) and
LHC Group Inc.
(
LHCG
) -- deliberately increased their visits to patients in order to
reach the thresholds for bonuses and hence, receive higher Medicare
payments from the government.
Investors of Gentiva had also filed multiple lawsuits against
the company in September 2011, claiming that management issued a
series of false and misleading financial statements from July 31,
2008 onwards, with the intention to drive up share value. The
complaints further claimed that management failed to disclose the
overstatement of in-home therapy visits to investors, thereby
misleading them about the company's performance and future
prospects.
However, Gentiva stated that it maintains a high quality in its
healthcare services and receives Medicare payments within the
reimbursement standards set by the Center for Medicare and Medicaid
Services. Gentiva also denied that changes in its utilization
pattern were driven by the changes in the reimbursement system in
January 2008.
Gentiva currently carries a Zacks #2 Rank, implying a short-term
Buy rating. Considering the fundamentals, we maintain our long-term
Neutral recommendation on the stock.
AMEDISYS INC (
AMED
): Free Stock Analysis Report
GENTIVA HEALTH (
GTIV
): Free Stock Analysis Report
LHC GROUP LLC (
LHCG
): Free Stock Analysis Report
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