Chicago-based healthcare technology firm Veradigm has recently completed the acquisition of the revenue cycle optimization platform Koha Health. Simultaneously, law firm Robbins Geller Rudman & Dowd LLP has filed a class action lawsuit against Veradigm, alleging that the company and its executives misled investors by overstating historical revenues by at least $20 million.
The lawsuit, filed on behalf of Veradigm’s common stock purchasers, specifically targets the period between February 26, 2021, and June 13, 2023. It accuses Veradigm and certain current and former top executives of violating the Securities Exchange Act of 1934 by allegedly engaging in practices such as overstating historical revenues, recording duplicate transactions for over two years, inflating earnings and margins, lacking financial reporting controls, and disregarding generally accepted accounting principles related to revenue recognition.
Investors interested in joining the class action suit have until January 22 to participate. The legal action was triggered by Veradigm’s February 28, 2023, announcement, revealing internal control failures leading to a misstatement of reported revenues by approximately $20 million between Q3 2021 and Q4 2022. Subsequently, on June 13, 2023, Veradigm disclosed additional revenue misstatements dating back to fiscal year 2020, causing a decline of over 4% in its stock value.
Despite these legal challenges, Veradigm proceeded with the acquisition of Koha Health, a strategic move to enhance its revenue cycle services portfolio. Koha Health specializes in providing advisory services to healthcare providers for improving financial health through efficient revenue cycle management. The acquisition allows Veradigm to integrate Koha’s services into its musculoskeletal medicine specialty offerings, reinforcing its commitment to delivering comprehensive healthcare solutions.
In response to the developments, Tom Langan, President and Chief Commercial Officer at Veradigm, expressed optimism, stating, “Today’s announcement represents an exciting opportunity for Veradigm to scale our revenue cycle services portfolio by leveraging additional capabilities and subject matter expertise to better serve the needs of the market.”
However, it’s notable that Veradigm did not address the ongoing class action suit in its official announcement regarding the acquisition. The juxtaposition of legal challenges and strategic business moves highlights a complex period for the company, as it navigates both its legal responsibilities and expansion plans in the healthcare technology sector.
