Hindenburg Alleges PACS' Success Is Systematic Abuse of Taxpayer-funded Healthcare Programmes
Moneylife Digital Team 05 November 2024
US-based short-seller Hindenburg Research alleged that PACS group, a US$6.7bn (billion) operator of skilled nursing facilities (SNFs) that serves 29,000 patients daily, has its success built on a systematic abuse of taxpayer-funded healthcare programmes, creating the appearance of growth and success, while its founders have cashed out an estimated over US$1bn to fuel their extravagant lifestyles.
 
"Our five-month investigation, including interviews with 18 former employees, competitors, and an analysis of over 900 detailed facility-level cost reports, revealed that PACS' 'turnaround' strategy largely boils down to systematically scamming taxpayer-funded healthcare programs," it says.
 
 
One key example, according to the Hindenburg investigation, is how PACS abused a COVID-era waiver, inappropriately accessing skilled care medicare benefits for thousands of patients across its national portfolio of facilities. "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."
 
"We don't think PACS' success has been built on its 'turnaround' strategy or a magical new formula for the highly regulated and highly competitive skilled nursing industry. Without rampantly defrauding Centers for Medicare and Medicaid Services (CMS), we believe PACS would be exposed for what it really is: a deeply unprofitable roll-up of distressed skilled nursing facilities with no honest path to profitability under the current, profoundly corrupt leadership," the short-seller says.
 
According to the report, PACS' two co-founders, Jason Murray and Mark Hancock, paid themselves US$194.5mn (million) in dividends before the April 2024 initial public offering (IPO) and have sold US$656.5mn in stock since. They have also pledged a total of 19mn shares for margin loans, collectively cashing out an estimated US$1bn since the beginning of COVID.
 
"Since COVID, Mr Murray and Mr Hancock have embarked on a spending spree that has included purchasing 2 private jets, luxury and commercial real estate, and sponsorships of Utah's most popular sports teams, despite PACS not operating facilities in the state," the short-seller says.
 
Overall, Hindenburg says it believes PACS risks significant regulatory penalties. "Further, if PACS is forced to curtail its many ongoing billing and staffing schemes, we believe it will be revealed for what it is: an unprofitable roll-up of distressed SNFs with no path to legitimate profitability under the current profoundly corrupt leadership."
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