CorVel Carnage Following Copperfield Report

Shares of CorVel

, the provider of medical cost containment and managed care services, are plunging 10% today on almost double the average daily volume following a report by Copperfield Research in which the research firm says "CorVel operates in the grey area of ethical and legal business practices." In its

Copperfield draws comparisons between CorVel and accusations of Medicare fraud that recently plagued shares of Community Health Systems

. "In CYH's case, the U.S. Department of Justice, the Office of Inspector General, and multiple U.S. attorney offices moved quickly to open investigations after Community Health's practices were exposed. CYH's stock is down nearly 60% since these allegations surfaced. Based on our findings, we would expect attorney generals, state insurance oversight bodies and even federal regulators to have reason to question the legitimacy of Corvel's business. We have forwarded our research and findings to some of these officials," according to the Copperfield note. Copperfield goes on to say it doesn't need to accuse CorVel of fraudulent business dealings because those assertions "have already been made "by industry experts, consultants, former employees, accredited journalists, physicians, lawyers, and a former client's internal audit report." The report says CorVel may be operating as a silent PPO, which Copperfield says provide insurance companies with a back-door method to systematically underpay healthcare providers. Copperfield, which has a short position in CorVel, says on law suit has blatantly accused the company of operating as a silent PPO. Copperfield also criticizes CorVel's software that Copperfield says has"been accused of arbitrarily lowering reimbursement payments to doctors, healthcare providers and even individuals." While acknowledging that shares of CorVel have surged over the past five years and decade, Copperfield says the double-digit multiple is at risk and that the stock could face downside of 50%. "If in fact some of their business practices are found to be illegal, the unquantifiable liability could permanently impair the business, resulting in our inability to set an appropriate downside price target," Copperfield said.