CardioNet Inc. (NSDQ:BEAT) won a lawsuit filed against it by shareholders last year, accusing the mobile cardiac monitoring firm of misleading investors about Medicare reimbursement.
Judge Stewart Dalzell of the U.S. District Court for Eastern Pennsylvania granted Conshohocken, Pa.-based CardioNet’s move to dismiss the case August 10, calling on each aprty to bear its own legal costs.
The suit, filed in August 2009, accused CardioNet, then-president and CEO Randy Thurman and CFO Martin Galvan of issuing too-aggressive earnings forecasts that sent the company’s stock soaring to artificially high levels.
Shares reached $19.60 May 19, according to court documents, after the company released its guidance for 2009 through 2011. But on June 30, CardioNet lowered its 2009 guidance and rescinded its forecast for 2010 and 2011 “based on lower-than-anticipated commercial reimbursement rates,” according to the documents.
That sent shares plunging more than 41 percent to $9.57 July 1, down from $16.32 on June 30.
Then came news that Pennsylvania’s Medicare carrier, Highmark Medicare Services, was slashing its reimbursement rate for Mobile Cardiac Outpatient Telemetry by 33 percent.
That prompted CardioNet to rescind its 2009 guidance and sent share prices down another 34 percent, from $8.83 to a $5.87 close July 13.
CardioNet argued that it approached the Centers for Medicare and Medicaid and Highmark directly and was assured that neither had communicated with a Jefferies & Co. analyst who predicted the rate cut in April 2009. In addition, its public statements about the reimbursement issue included "fair warning" language cautioning investors, according to court documents.
“We are pleased with the Court’s ruling and believe that the facts in the case clearly supported the Company’s position,” current president and CEO Joe Capper said in prepared remarks.