Short Seller Accuses Skilled Nursing Facility Operator Worth Almost $7B Of 'Scamming Taxpayers'
A $6.7B Utah-based operator of skilled nursing facilities has seen its turnaround strategy for struggling facilities described as “systematically scamming” taxpayer-funded healthcare programs in a short report by Hindenburg Research.
Since going public in April, PACS Group had seen its stock rise 104%, but its price tumbled 28% Monday after Hindenburg’s report was published, Bloomberg reported. The stock dropped from $30.80 per share at the close of trading Monday to $29.35 at 10:50 a.m. Eastern Standard Time on Tuesday before climbing back to $30.85 per share just before noon.
PACS manages nearly 300 nursing facilities in 16 states and serves more than 27,000 patients per day, according to a recent filing. The Hindenburg report accuses PACS of using a pandemic-era waiver to “inappropriately” access skilled care Medicare benefits for thousands of its facilities’ patients.
“We estimate the scheme drove more than 100% of PACS’ operating and net income from 2020 – 2023, enabling PACS to IPO in early 2024 with the illusion of legitimate growth and profitability,” Hindenburg wrote in its report.
PACS did not immediately respond to Bisnow’s request for comment.
Skilled care Medicare benefits can be as much as three times those of Medicaid but are usually only offered following a three-day hospital stay. During the pandemic, however, Centers for Medicare and Medicaid Services waived that requirement to help overburdened hospitals.
The U.S. Department of Justice and the American Health Care Association have said positive Covid-19 tests don’t need skilled care. But some operators of skilled nursing facilities claimed otherwise to triple per-patient revenue, which has landed them in hot water, Hindenburg claimed.
An April 2024 settlement agreement between skilled nursing facilities operator ReNew Healthcare and the DOJ over similar charges cost the California-based company $7M for “knowingly submitting false Medicare Part A Claims.”
Hindenburg interviewed 18 former PACS employees as part of its five-month investigation into the company and was told PACS did the same thing as ReNew “but at a much larger scale.” A former PACS administrator estimated the company could be on the hook for hundreds of millions of dollars based on the cost of ReNew’s settlement.
After the skilled care waiver expired, PACS saw its skilled care revenue drop off during the second half of 2023. But it bounced back during the first half of this year thanks to what former employees told Hindenburg was a “new trick” to bill Medicare Part B for thousands of unneeded respiratory and sensory integration therapies.
PACS is slated to give its Q3 results report Thursday following the close of trading.
Hindenburg has a history of issuing reports with market implications.
Axos Bank saw its shares plummet in June after a report from the short seller alleged the bank had manipulated or distorted its credit metrics to hide exposure to potentially troubled commercial real estate loans. And in May, data center REIT Equinix denied Hindenburg’s claims of it using accounting tricks and misleading practices to inflate the firm’s value.
