Overview
On April 11, 2022, Cohen Milstein was appointed sole Lead Counsel and the El Paso Firemen & Policemen’s Pension Fund, San Antonio Fire & Police Pension Fund, and Indiana Public Retirement System were appointed Lead Plaintiffs.
On June 21, 2022, Cohen Milstein filed an amended securities class action complaint before the United States District Court for the District of Colorado on behalf of El Paso Firemen & Policemen’s Pension Fund, the San Antonio Fire & Police Pension Fund and the Indiana Public Retirement System which bring claims under the Securities Exchange Act of 1934 and the Securities Act of 1933, individually and on behalf of all persons who purchased or otherwise acquired InnovAge common stock between March 4, 2021 and December 22, 2021 in connection with the InnovAge’s initial public offering (IPO).
Plaintiffs claim that InnovAge’s IPO registration statement was materially false and misleading and omitted critical information about the company’s business and operations.
In addition to InnovAge, CEO Maureen Hewitt, the lawsuit also names CFO Barbara Gutierrez, two private equity firms and InnovAge’s principal shareholders, Welsh, Carson, Anderson & Stowe (“WCAS”) and Apax Partners (“Apax”), the underwriters in the company’s IPO, and members of the Company’s Board of Directors, including the former Governor of Florida, Jeb Bush, and former Senator, Edward Kennedy Jr.
On December 21, 2023, Defendant’s motion to dismiss was denied in part for Defendants InnovAge; former President and CEO Maureen Hewitt; former CFO Barbara Gutierrez; directors John Ellis Bush, Andrew Cavanna, Caroline Dechert, Edward Kennedy, Jr., Pavithra Mahesh, Thomas Scully, Marilyn Tavenner, Sean Traynor, and Richard Zoretic; and principal owners WCAS and Apax. On January 18, 2023, the court further ordered that Underwriter Defendants’ motion to dismiss be denied in part.
Case Background
InnovAge (NASDAQ: INNV), a national healthcare company providing medical care to ailing seniors, allegedly violated federal securities laws when it went public in March of 2021.
The filing describes InnovAge’s singular focus on aggressive enrollment for profit at the expense of healthcare for senior citizens whose needs went unaddressed. On average, InnovAge received a fixed amount of $95,000 a year per enrolled patient, meaning that the fastest and simplest way to grow revenue was to increase enrollment. Yet, unbeknownst to investors, InnovAge’s rapid enrollment growth resulted not because of participant satisfaction and health outcomes but at the expense of dissatisfaction and adverse results.
InnovAge centers suffered from severe staff shortages, high caseloads and significant delays and lack of contracts from specialists, lack of coordination with caregivers, and insufficient training on the use of medical records. Nevertheless, InnovAge focused its resources on hiring sales and marketing staff and ignored substandard home and clinical care for its participants. When faced with government audits, InnovAge executives allegedly instructed staff to “clean up” or delete hundreds of records for medical care that were over 180 days outstanding. As a result, in just nine months, InnovAge is facing penalties in three states.
In May of 2016, InnovAge became the first Program of All-Inclusive Care for the Elderly (“PACE”) organization to achieve for-profit status. As detailed in a recent MarketWatch report, its prior C.E.O., Maureen Hewitt, led the company’s aggressive lobbying campaign to transform from a regional nonprofit to the first national for-profit PACE Provider. PACE, a joint Medicare and Medicaid program, provides comprehensive, community-based medical and social services to frail and elderly people. As Hewitt and InnovAge’s private equity leadership prioritized growth in enrollment, the goal was to advance InnovAge’s vision of rapid growth by providing healthcare to the burgeoning senior population in the United States, a massive market on which InnovAge was poised to capitalize.
During its IPO, led by InnovAge directors including Jeb Bush and Edward Kennedy Jr. as well as the largest investment banks, InnovAge boasted to investors that its meteoric growth was due to its provision of comprehensive care for vulnerable seniors, even though InnovAge was consistently failing to provide timely specialist care and adequate home health services.
InnovAge is facing a number of governmental investigations. In September 2021, the Centers for Medicare and Medicaid Services (‘CMS’) notified the company that the government agency was suspending enrollment at InnovAge’s Sacramento, California center after an audit of the facility found that InnovAge “substantially failed” to “provide to its participants medically necessary items and services that are covered PACE services.” InnovAge also revealed in 2021 that CMS and the state of Colorado had decided to suspend enrollment at InnovAge’s Colorado facilities, and the company is currently under investigation by the Colorado Attorney General.
In just the first six months of 2022, CMS has suspended enrollment in existing centers or canceled agreements for new centers in Florida, Indiana, New Mexico and San Bernadino, California.
Original case name: El Paso Firemen & Policemen’s Pension Fund, San Antonio Fire & Police Pension Fund, and Indiana Public Retirement System v. InnovAge Holding Corp. et al., Case No. 1:21-cv-02770, United States District Court for the District of Colorado
Operative case name: Texas and Indiana Pension Funds v. InnovAge Holding Corp. et al., Case No. 1:21-cv-02770, United States District Court for the District of Colorado