Healthways talks up new business as quarterly loss rises

Health services firm Healthways, under fire from a major investor, put the best face on its earnings Thursday despite reporting a $9.6 million net loss for the quarter, noting that the company had signed 20 contracts in the first quarter and secured a deal with an unnamed Fortune 100 employer for services starting in the second quarter.

This latest deal will cover more than 300,000 eligible members, the company said in its earnings release. “This new contract is further evidence that large self-insured employers understand and embrace the value of our proprietary Well-Being Improvement Solution,” President and CEO Ben Leedle Jr. said in a news release.

Nashville-based Healthways reported a first-quarter net loss of $9.6 million compared with a net loss of $3.9 million in the same period last year. Revenue for the quarter hit $176.8 million, a 7% rise compared with $165.2 million in the same quarter last year.

Leedle said the 20 contracts signed in the first quarter spanned all of the company's markets: commercial health plans, Medicare Advantage plans, large employers and health systems, hospitals and physicians. He said the company has more business with new and existing customers in the pipeline.

On April 4, Boston-based hedge fund North Tide Capital, the second-largest investor in Healthways with an 11% stake, filed a preliminary proxy statement and investor presentation with the Securities and Exchange Commission expressing concerns “with Healthways' prolonged underperformance under the direction of the current management team and board.” The hedge fund plans to nominate four people to replace members of Healthways' board of directors.

Wall Street has been relatively cool toward Healthways' prospects as well. Analysts at Jefferies Group this month began coverage of the company's NASDAQ-traded shares with a hold rating and a $17 price target for the stock. Dougherty & Co. recently downgraded the stock from a buy to a neutral rating while analysts with Zacks lowered it from a neutral to an underperform. Healthway shares closed Thursday before the earnings announcement at $16.08, down 24 cents a share.

Earlier this month, Healthways agreed to pay $9.4 million to Blue Cross and Blue Shield of Minnesota to resolve a contract dispute.

Follow John N. Frank on Twitter: @MHJFrank