Shares of Accretive Health Inc. (NYSE: AH) soared on Tuesday following the company’s announcement that it settled a legal wrangle with the state of Minnesota.
Earlier shares of hospital revenue management Company were under persistent pressure due to unresolved dispute.
According to the settlement, the company will pay $2.5 million in compensation for patients and return data to client hospitals.
The company will cease its operations in Minnesota by coming November; in addition, it won’t be allowed to do business in the state for up to six years.
Accretive has accepted a two-year ban; and, just in case, if any of the agreements require Accretive to return to the state over the subsequent four years then it will be subject to an approval from the Minnesota Attorney General.
Although Accretive ruled out any wrong doing in the past, it decided to settle the dispute as it “wanted to move on”.
Following the news, Accretive’s stocks surged $3.66, or 36.6 percent, to $13.67 in afternoon trading. Year-to-date, Accretive shares were down 62.1 percent since lawsuit was revealed on Jan. 19.
According to Eric Coldwell, analyst at Robert W. Baird & Co, the settlement is likely to wipeout $12mn in revenue for 2012 even as stocks are expected to rally.
Accretive Health business lines include: assisting hospital systems to manage their revenue cycles, works on bill preparation, and follow up medical treatments.
In January the company was sued by State Attorney General Lori Swanson. The allegation was that Accretive used high pressure tactics to collect money from several patients; and the patients were only treated once the payment was recovered.
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