Evolent provides health care delivery and payment services to a national network of health systems across Medicare, Medicaid and commercial markets. By the end of 2018, Evolent had contractual relationships with over 35 operating partners. Many of these “partners” were either related parties, or companies in which Evolent had significant ownership or had provided financing at the onset of the relationship. Evolent’s largest and most important partner was University Health Care, Inc., d/b/a Passport Health Plan (“Passport”), which represented 20% of the Company’s revenues.
The Complaint asserts claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Evolent and certain of its senior executives (“Defendants”). The action alleges that during the Class Period, Defendants issued a series of false and/or misleading statements and failed to disclose material adverse facts about Evolent’s business, operations, and prospects, including Evolent’s “partnership” with Passport specifically. Among other things, Defendants mispresented and failed to disclose that: (1) Evolent’s partnership model did not align the Company’s interests with those of its partners, as the model was designed to inflate the Company’s revenue by extracting enormous administrative and management fees at the expense of its operating partners such as Passport; (2) Passport was struggling financially, particularly after Kentucky cut its reimbursement rates, and the partnership between Evolent and Passport was becoming increasingly unsustainable; (3) Evolent was draining Passport of functions, employees and money, to such an extent that Passport was left on the verge of insolvency; (4) Passport was conducting a bidding process for several months to sell itself to prevent liquidation; and (5) as a result of the foregoing, Defendants’ public statements were materially false and/or misleading and/or lacked a reasonable basis.