Dumping Madison Medical but going after the money. It was Madison Medial loans that caused the crash in June. ADVH had loaned money to Madison and were counting fees from Madison as A/R. The essence of the Class action fraud accusations is that ADVH knew that Madison was going to default, and therfore the "quality of ADVH's revenues" was overstated. In essence the accusations were that ADVH was paying capital from the IPO out one door and bringing it back in as "revenue" through another door. I doubt that was true, and I doubt that GAAP would require them to state that income as repayment of the loan instead of fees for PPM services unless Madison was officially in default on the loan, which they were not until November 1998.
Advanced Health Terminates Contract With Madison Medical Group - The Private Practice Group of New York, L.L.P
TARRYTOWN, NY--(BUSINESS WIRE)--Jan. 15, 1999--In connection with a previously announced default notice, Advanced Health Corporation (Nasdaq: ADVH) has notified Madison Medical Group - The Private Practice Group of New York, L.L.P. (Madison Medical) that it has terminated its Management Services Agreement ("MSA") with Madison Medical because of Madison Medical's continuing breach of the MSA. Madison Medical breached the MSA by failing to pay Advanced Health contractually obligated management fees. Advanced Health will commence arbitration proceedings against Madison Medical for payment of these outstanding fees. Advanced Health intends to show in the arbitration proceedings that it provided quality management services to Madison Medical as agreed to in the MSA and, therefore, is entitled to the management fees. In total, Advanced Health is seeking approximately $4.5 million from Madison Medical, including approximately $2.1 million in management fees and approximately $2.4 million relating to a Promissory Note. Advanced Health has already filed a lawsuit against Madison Medical in December, 1998 in connection with the Promissory Note, to which Madison Medical has counterclaimed that Advanced Health breached the MSA causing them $2.4 million in damages.
Madison Medical was a client of Advanced Health's outsourcing services unit, which has over 30 network and physician group clients. As previously announced, the Company is exploring strategic alternatives for this unit with investment bank Hambrecht and Quist, as the Company's primary focus is now healthcare e-commerce.
Advanced Health participates in the growing healthcare e-commerce market. The Company provides information technology enabling the electronic management of laboratory and prescription transactions. The Company's goal is to become a leading provider of Internet-based clinical e-commerce among physicians and healthcare organizations. Effective February 1, 1999, the Company is changing the name under which it will conduct business to AHT Corporation and is changing its Nasdaq stock symbol to AHTC.
This press release contains forward-looking information. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including statements as to the merits or outcome of claims, lawsuits or disputes, may be significantly impacted by certain risks and uncertainties, including, but not limited to, the risks of partially or completely adverse decisions inherent in any litigation and the risks of collecting on judgments. No assurances can be given as to the outcome of any pending lawsuits or proceedings by or against the Company. Additional risks and uncertainties are described in the Company's public filings with the Securities and Exchange Commission.
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