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Nobilis Overstated Revenue and Growth Securities Class Action

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Nobilis Health Corp., together with its subsidiaries, acquires and manages ambulatory surgical centers and healthcare facilities in the United States. Its facilities are licensed ambulatory surgery centers that provide scheduled surgical procedures in clinical specialties, including orthopedic surgery, podiatric surgery, ENT, pain management, gastro-intestinal, gynecology, and general surgery. As of March 18, 2015, Nobilis owned and managed 10 healthcare facilities in Texas and Arizona; a surgical hospital in Houston; six ambulatory surgery centers; two MRI centers; and an urgent care center.

Who Is Affected?

This class action is brought on behalf of a class consisting of all persons who purchased Nobilis securities between April 2, 2015 and October 8, 2015, both dates inclusive, seeking to recover damages and pursue remedies under the Securities Exchange Act of 1934.  Nobilis is headquartered in Houston, Texas and was incorporated in British Columbia, Canada.  Its shares trade on NYSE under the ticker symbol “HLTH.” 

Procedural History

This class action was filed on October 21, 2015 and is captioned Shawn M. Hall, et al. v. Nobilis Health Corp., et al.  It was filed in the Texas Southern District Court and its civil docket number is 4:15-cv-03098.  The class period runs from April 2, 2015 through October 8, 2015, inclusive.

This federal securities class action complaint stems out of Nobilis’s material misrepresentations related to the acquisition and incorporation of Athas Health, LLC, along with Athas’ subsidiary, North American Spine, a company which marketed itself as “The Leader in Minimally Invasive Spine Care.”  Through the acquisition of Athas and North American Spine, Nobilis also acquired the rights to offer the proprietary AccuraScope procedure, a spinal procedure marketed as minimally invasive decompression designed to alleviate pressure on spinal nerves.

The misrepresentations began on April 2, 2015, when Nobilis filed its 10-K annual report with the Securities and Exchange Commission, announcing a net income of $6.72 million for 2014, compared to $1.42 million for 2013.  Nobilis listed AccuraScope trademark as an intellectual property asset and ascribed the 153% increase in medical supplies and drugs expense to “the shift in case mix to include a greater percentage of orthopedic and spine cases.” 

In addition, on July 13, 2015, North American Spine issued a press release entitled “North American Spine’s AccuraScope Procedure Featured on FOX43, WPMT,” which touted the purported benefits of the AccuraScope Procedure.  A month later, Nobilis announced its second quarter financial results reporting a net loss of $1.59 million, which it again attributed to an increase in marketing expenses related to “strategic growth initiatives of growing bariatric, spine, podiatry and gynecological brands.”

Consequently, on October 9, 2015, Seeking Alpha, a stock market insights and financial analysis content service, issued a report summarizing its findings with respect to Nobilis and its recent acquisition, which concluded the following:

  1. Questionable marketing with paid studies touting inappropriate success rates for its medical procedures;
  2. Four CFO changes in few years along with recent auditor resignations;
  3. Potentially overstated revenues; and
  4. Newly acquired acquisitions with Accounts Receivable issues.

As soon as the report was released, Nobilis shares fell 27% the same day.

Current Case Status: 

This case is in the notice period.  When a shareholder brings suit under certain federal securities laws, generally that shareholder must give notice via a press release.  This notice starts a sixty-day period of time when any shareholder can investigate the underlying claims of the lawsuit and then elect to bring suit as well.  At the end of this sixty-day period, the court appoints one shareholder (or a group of shareholders) to prosecute the securities litigation.  We will review the docket again in December and update this page as warranted.

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