Coram and Aetna settle lawsuit over home healthcare services
By MEREDITH BONNER
HHBR Assistant Managing Editor
Coram Healthcare (Denver) and Aetna U.S. Healthcare (Blue Bell, PA) have settled all legal claims related to a contract dispute over home health services.
The companies resolved the dispute amicably, Coram said. But they also made an agreement to keep the settlement’s terms confidential. The companies say they plan to negotiate a new contract covering home infusion services.
Coram sued Aetna on June 30, alleging fraud, misrepresentation, breach of contract, and rescission related to an agreement between the companies. A Pennsylvania district court dismissed Coram’s fraud, misrepresentation, and mistake claims on Nov. 17, but the breach of contract claim against Aetna still stood.
The five-year agreement held that Coram would provide and manage home care services for Aetna members in eight states. Coram, in the suit, claimed Aetna understated the amount of services its enrollees used. Aetna called Coram’s claim a frivolous accusation.
"This settlement will allow us to focus all of our energy and resources on providing quality care for patients and on the key operating and financial initiatives that will give Coram Healthcare the opportunity to succeed as we go forward," Coram President, Chairman, and CEO Daniel Crowley told the CCN Disclosure.
"The next major corporate initiative is to create a capital structure that will position Coram on a stronger financial foundation by reducing debt," Crowley said. "We believe one of the ways to accomplish this is to convert a significant portion of the debt to equity."
Crowley says Coram has met with the debt holders to discuss the topic and is retaining legal and financial advisors to assist it in evaluating alternatives.
Coram said the forbearance period on its interest obligations on series A and series B notes ended with the litigation’s resolution. The company said its quarterly debt-service obligations of about $5.3 million on the notes would resume. As of March 31, the aggregate principal amounts outstanding under the series A and B notes were $168.4 million and $92.1 million, respectively, said Coram.
In November, Coram said its principal debt holders agreed to forego interest payments until either May 15 or the settlement of the litigation, whichever came first. Coram said its debt holders also waived any noncompliance with certain financial covenants set forth in the company’s senior credit facility for the period ended Dec. 31. The company said the waivers demonstrated a commitment on the part of its debt holders to a management plan for restoring profitability. It said the concessions, as well as improvements in core business operations, made it more confident that it would be able to overcome short-term financial challenges.
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