Stockholders have filed a lawsuit against InnovAge’s board of directors after regulatory sanctions imposed by the Centers for Medicare & Medicaid Services caused stock and revenue declines.
InnovAge was released from their final sanction earlier this month, but the sanctions left a financial mark on the company. Most recently, it posted a $7.3 million loss in its fiscal third quarter earlier this year. The shareholders opened a derivative class damages suit in Delaware’s Court of Chancery citing the directors’ failures to respond to “red flags of deficiencies.”
“For at least the foreseeable future, InnovAge will suffer from what is known as the ‘liar’s discount,’ a term applied to the stocks of companies who have been implicated in illegal behavior and misled the investing public, such that InnovAge’s ability to raise equity capital or debt on favorable terms in the future is now impaired,” they said in their complaint.
The shareholders are seeking damages for stock and revenue drops that followed CMS sanctions imposed in 2021 on InnovAge centers in Colorado and California.
InnovAge declined to comment on the suit.
“Our company does not comment on active legal proceedings,” InnovAge Public Relations Manager Lara Hazenfield told McKnight’s Home Care Daily Pulse regarding the suit. “The health and well-being of our participants continues to be our top priority.”
InnovAge is the nation’s largest provider under the federal government’s Program of All-Inclusive Care for the Elderly (PACE). It has centers in Colorado, California, New Mexico, Pennsylvania and Virginia.
The shareholders chided InnovAge’s board of directors for failing to fulfill their contractual agreements.
“The individual defendants owed to the company the duty to exercise candor, good faith, and loyalty in the management and administration of InnovAge’s business and affairs, particularly with respect to issues as fundamental as the delivery of healthcare services in accordance with its government contracts,” the complaint said.
