Why Accretive Health Plunged (AH)

Why Accretive Health Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Accretive Health (NYSE: AH ) , a revenue cycle management services company for the health-care industry, are sick as a dog, diving as much as 19% earlier in the trading session after the company agreed to shutter an aspect of its business.

So what: Accretive Health agreed this morning, in response to a lawsuit filed by Minnesota's attorney general, to no longer collect debts on behalf of hospital operator Fairview Health Services. This is expected to negatively impact revenue by $62 million to $64 million in fiscal 2012. The lawsuit began in January when a laptop of an Accretive Health employee was stolen containing confidential patient health records that Minnesota's attorney general claimed Accretive should not have had in the first place.

Now what: No longer collecting revenue from Fairview will remove about 6% of Accretive's sales from the equation, but the stock is seeing a considerably larger haircut. Some of that is most assuredly related to whether more legal or ethical problems could be in the offing for Accretive. Even with today's drop, and assuming its EPS forecast drops in accordance with the loss of revenue, I don't see much to like about the company at 22 times forward earnings.

Craving more input? Start by adding Accretive Health to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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