Investors Sue Gentiva


Investors of Gentiva Health Services Inc. (NasdaqGS: GTIV - News) have filed two federal securities class action lawsuits against the company in a US District Court.

Yesterday, law firm Levi & Korsinsky filed a complaint on behalf of people who purchased Gentiva’s stock between July 31, 2008 and July 20, 2010. On Monday, law firm Robbins Umeda LLP, which specializes in shareholders’ rights litigation, filed a similar suit against the company.

The shareholders of Gentiva contend that the management of the company issued a series of false and misleading financial statements from July 31, 2008 onwards, to drive up the share value of the company.

The complaints further claim that management overstated the in-home therapy visits to patients with the intention of generating higher Medicare reimbursement rates for Gentiva and failed to disclose the same to the investors. Thus, they not only misled the government, but also misinformed the investors about the performance of the company and its future prospects.

Additionally, Shuman Law Firm announced yesterday that it is investigating the allegations with a view to filing potential claims against Gentiva.

As per The Wall Street Journal, the company is also being investigated by the US Senate Finance Committee since May 2010 as part of a broader program to determine whether health care companies inflate their in-home therapy visits to generate higher Medicare reimbursement rates . The committee has requested for information about such visits during 2006-2009.

Additionally, since July 2010, the company is facing an investigation by the Securities and Exchange Commission concerning its involvement in the Medicare Home Health Prospective Payment System.

The charges and investigations against Gentiva led to a serious decline in shareholders’ confidence. The company is a leading national provider of comprehensive home health services and competes with organizations like Amedisys Inc. (NasdaqGS: AMED - News) and Lincare Holdings Inc. (NasdaqGS: LNCR - News).

Earnings Review

Gentiva reported second-quarter adjusted operating earnings of $15.1 million or 49 cents per share, lagging behind the Zacks Consensus Estimate of 65 cents. Additionally, the company’s total net revenues climbed 54.0% year over year to $456.9 million, beating the Zacks Consensus Estimate of $482.0 million.

The Zacks Consensus Estimate of earnings for the third quarter of 2011 is currently at 48 cents per share, down 33.9% year-over-year. Of the 8 firms covering the stock, 3 firms revised their estimates downward in the past 30 days, while no upward revisions were witnessed.

For 2011, Gentiva’s earnings are expected to be $2.07 per share, sinking about 26.6% year-over-year.The company currently carries a Zacks #5 Rank, implying a short-term Strong Sell rating.

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