Healthways to pay $9.4M to Minn. Blues over telehealth feud

Tennessee-based health services firm Healthways has agreed to pay $9.4 million to Blue Cross and Blue Shield of Minnesota to resolve a contract dispute, the company announced last week.

Under the settlement, Healthways agrees to pay BCBSMN a total of $4 million by the end of this month and a second payment of $5.5 million in January 2015. The settlement amount will be incurred as a charge within Healthways' first quarter 2014 results, the company said in a statement.

The dispute began after Blue Cross in 2008 ended a contract it had with Healthways since 2001 to provide disease-management telehealth services for its members. The insurer opted to develop its own program to provide such services.

In January 2010, Blue Cross filed a notice of arbitration with the American Arbitration Association in Minneapolis claiming Healthways had violated certain contract provisions, which entitled it to reimbursement for part of the amount paid.

The two companies were locked in arbitration proceedings until October 2013, when both requested that the arbitrator in the case not issue an award or decision, leading to a settlement agreement.

The agreement comes when the health solutions provider's executive leadership is facing continued criticism about its management from Conan Laughlin, founder and portfolio manager of Boston-based hedge fund North Tide Capital, the second-largest investor in Healthways with an 11% stake in the company.

On April 4, North Tide filed a preliminary proxy statement and investor presentation with the Securities and Exchange Commission expressing concerns about the company's performance and detailing plans to nominate four people to replace members of Healthways' Board of Directors.

“We have serious concerns with Healthways' prolonged underperformance under the direction of the current management team and board,” the document states. “We believe change is needed on the board to ensure that appropriate actions are taken to improve execution, drive better financial performance and hold management accountable.”

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