IPC Makes a Quick Recovery From Stock Swoon

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The announcement of a U.S Justice Department investigation can be a nightmarish event for any company.

But executives at IPC The Hospitalist Co. quickly calmed analysts and investors with a detailed explanation of the Medicare and Medicaid billing practices that concerned the U.S. Attorney’s Office for the Northern District of Illinois.

Investigators on June 7 sent a letter to the North Hollywood company, which manages hospital-based physician practices, seeking a wide range of documents dating as far back as 2003. The letter was disclosed on June 9. Shares quickly sank 17 percent.

But management’s presentation at a previously scheduled analyst day in New York City the day after the disclosure calmed most apprehensions. IPC shares popped back up to the pre-disclosure price a week later.

At the presentation, Chief Executive Adam Singer laid out the complexities of the company’s billing and compliance policies. The company plans to meet with investigators soon to start answering their questions.

“I came away from the meeting with the feeling that things were OK,” said RBC Capital Markets analysts Kevin Ellich, who has a neutral “sector perform” rating on shares. “If anything, I was disappointed that since management had to spend so much of the event answering questions about the investigation, there was less opportunity to get more information about other aspects about the company’s strategy, growth rate and long-term opportunities.”

Hospitalist practices have become popular because they allow primary care physicians to stay in their offices and see more patients while hospital-based doctors keep them informed about patients there.

IPC is one of the largest hospitalist management companies in the country, and is considered the only public company that’s a pure hospitalist play for investors. It employs or is affiliated with more than 1,400 doctors and medical professionals at more than 500 inpatient facilities.

IPC gets about 40 percent of its revenue from Medicare alone.

IPC executives were not available for comment.

Arthur Henderson, a Jefferies & Co. Inc. analyst, said he wasn’t concerned by the investigation.

“What I think has happened here is that this is a sector that has seen remarkable growth and regulators are simply seeking to understand what has changed,” said Henderson, who had raised his recommendation on the stock to “buy” prior to the disclosure.

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