Arriva, which develops durable medical equipment for diabetic testing, was informed Oct. 12 that its Medicare enrollment would be revoked by CMS over issues with an excess of claims submissions for deceased patients.
CMS asserted that “over a 5-year period, Arriva had allegedly submitted claims for 211 deceased patients,” according to the filing. The CMS letter only identified 47 of the 211 cases, Alere added.
The company attempted to appeal the determination, but the appeal was denied Nov. 2 and the group’s enrollment in CMS was revoked effective today.
“We have conducted an initial investigation into the issue and do not believe that Arriva received or retained improper reimbursement for the DME items furnished. We are continuing to work through the appeals process, with the goal that Arriva’s enrollment status will be reactivated retroactively to November 4, 2016,” Alere wrote in the SEC filing.
The 211 claims made up less than 0.003% of the 5.7 million claims filed by Arriva, Alere said. Arriva contributed $88 million in revenue for the company, which is approximately 15% of the company’s total revenue as reported this quarter.
Alere said it is pursuing an appeal, and is hopeful that Arriva’s enrollment will be retroactively reactivated so the company will be able to bill and be reimbursed for all products and services furnished during that time.
The company’s earnings fell sort of what The Street was looking for, missing on both revenue and earnings per share.
Alere posted profits of $21.8 million, or 19¢ per share, on sales of $582.4 million for the 3 months ended September 30. The company saw its bottom-line swing from $2 million while sales shrunk 3.5% compared with the same period.
Adjusted to exclude 1-time items, earnings per share were 46¢, 8¢ below what analysts on Wall Street were expecting to see. Revenue also fell short, with The Street’s consensus at $605.5 million.
The company did not release any updated guidance or outlook for future quarters.
Shares in Alere have dropped over 12% today in response, trading at $36.87 as of 1:30 p.m. EDT.
Yesterday, Abbott reportedly leveled a breach-of-contract lawsuit against Alere, seeking more information on legal investigations of the Waltham, Mass.-based diagnostics giant’s sales practices in Africa, Asia and Latin America.
“We’re continuing to seek relevant information about this issue as well as the other issues that have come to light since the agreement was signed,” an Abbott spokeswoman told MassDevice.com via email, in response to our questions about the latest Alere revelation.
The $5.8 billion deal, announced in February, soon ran into trouble. A March 11 subpoena from the U.S. Justice Dept. sought documents on Alere’s dealings with 3rd-party distributors and foreign healthcare officials and the company was late in filing its full-year results for 2015.
Alere in April rejected a $50 million offer from Abbott to spike the merger and a few months later sued Abbott, looking to force its would-be acquirer to obtain all antitrust approvals required to complete the acquisition. In early September, Delaware Chancery Court Judge Sam Glasscock put the lawsuit on the fast track and urged the companies to try and talk things out; an attempt at mediation failed later that month.
Abbott’s suit in the Delaware state court seeks to compel Alere to divulge more information about the legal investigations, according to The Deal.