HCA to settle class action lawsuit for $215M

HCA Holdings has reached a preliminary agreement to pay $215 million to settle a class action lawsuit filed by shareholders who alleged the company used false and misleading information to sell stock during its 2011 initial public offering (IPO).

HCA did not admit to any wrongdoing. “While we believe the allegations were without merit, we also believe that eliminating the risk, cost and distraction of the litigation is in the best interest of our shareholders," the Nashville-based hospital giant said in a release.

The lawsuit alleged that HCA sold more than $4.3 billion of HCA common stock at $30 a share based on a misleading registration statement it filed with the Securities and Exchange Commission (SEC). HCA stock price fell to less than $19 by October 2011, when the shareholder lawsuit was filed.

The SEC registration left out important information including that the company's Medicaid revenue was "suffering from adverse trends" at the time of the IPO. The shareholders further alleged HCA accounted improperly for a 2006 reorganization and a 2010 restructuring.

That led to investors getting "a distorted picture of the company's potential growth and were not indicative of HCA's future operations, according to the suit.

An SEC filing revealed that HCA also reached preliminary agreements to settle several shareholder derivative cases related to the 2011 IPO. The legal claim costs were estimated at about $120 million for the settlements of the shareholder action and shareholder derivative cases.

Beth Walsh,

Editor

Editor Beth earned a bachelor’s degree in journalism and master’s in health communication. She has worked in hospital, academic and publishing settings over the past 20 years. Beth joined TriMed in 2005, as editor of CMIO and Clinical Innovation + Technology. When not covering all things related to health IT, she spends time with her husband and three children.

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