Grabar Law Office is investigating potential claims against the officers and directors of InnovAge Holding Corp. on behalf of current long-term stockholders.

A securities fraud class action complaint has partially survived a motion to dismiss. According to the complaint, on March 4, 2021, Defendants took InnovAge public by boasting that the healthcare provider’s meteoric growth over the previous four years resulted from a business model that provided comprehensive care for the most frail seniors in the United States. InnovAge claimed it had created a “virtuous cycle” of continued, flywheel-like growth in a virtually untapped $200 billion healthcare market. But in just eight months, government audits and investigative reporting revealed that InnovAge’s growth resulted not because of its services for seniors, but at the expense of them.

To convince investors that InnovAge would be able to tap into the $200 billion market for growth, InnovAge claimed it was uniquely suited to “drive sustained, organic census growth.” and could “improve participants’ experiences and health outcomes.” InnovAge assured investors that its business model enabled the Company to “consistently deliver high-quality care, achieve high participant satisfaction and retention, and attract new participants.”

Unbeknownst to investors, however, InnovAge executives had received internal audits and responded to calls with center directors and other medical staff who conveyed that InnovAge’s rapid enrollment was overwhelming its ability to provide necessary healthcare across its facilities in three states. For years, InnovAge’s singular focus on maximizing enrollment in its existing centers, without the necessary staff resources and specialist care network, had led to severe staff shortages, high caseloads, scheduling delays, lack of coordination by caregivers, insufficient training on using electronic medical records (“EMR”), and substandard medical care. By the time of the IPO, InnovAge’s patients’ healthcare needs were unmet despite the fact that InnovAge received monthly payments for their participation.

Rather than disclose that the Company’s model for providing care was failing, InnovAge and Defendants told investors that they were not only “consistently deliver[ing] high-quality care,” but also that the model could easily and successfully be scaled for continued growth. At the same time, Defendants Hewitt and Gutierrez cashed out approximately $42 million of stock options and other compensation.

On September 17, 2021, Center for Medicare & Medicaid Services (“CMS”) notified InnovAge that the agency was suspending enrollment at the Company’s Sacramento, California center after its audit of the facility found that InnovAge “substantially failed” to “provide to its participants medically necessary items and services that are covered PACE services.” InnovAge also revealed that, in May and June 2021, CMS and Colorado regulators had also conducted audits of all the Company’s Colorado programs, while disclaiming that the problems identified in Sacramento were pervasive across InnovAge’s facilities. On this news, from September 20 to 23, 2021, the price of InnovAge stock fell by more than 50% from $14 per share to $6.76.

Three months later, on December 23, 2021, InnovAge announced that CMS and Colorado had decided to suspend enrollment at the Company’s Colorado centers, responsible for more than 50% of the Company’s revenue, based on deficiencies identified in their audits which had focused on patient care provided mostly or partially prior to the IPO. On this news, InnovAge’s stock price plummeted by 36% from December 22 to 23, from $8.25 to $5.31, representing a 78% decline from all-time highs in March 2021.

Additional sanctions followed in 2022 both from regulators and states rejecting InnovAge’s expansion efforts.

As a result of Defendants’ alleges misconduct alleged, the company and its shareholders suffered significant damages.

If you have continuously held InnovAge shares since on or around its March 4, 2021 IPO date, you may be able to seek corporate reforms, the return of funds back to company coffers, and potentially a court approved incentive award if appropriate.

If you would like to learn more about this matter at no cost to you, contact us at [email protected] or call 267-507-6085.