Who is PACS Group?
PACS Group is a Utah-based operator of skilled nursing facilities (SNFs), founded in 2013 by Jason Murray and Mark Hancock, who run it today as CEO/Chairman and Executive Vice Chairman. At the time of the report it operated 276 facilities across 15 states, serving roughly 29,000 patients daily — making it the second-largest publicly traded SNF operator behind the Ensign Group. Its April 2024 IPO was among the most successful of the year, with shares up about 104%.
Activ8 Classification
Business Model
PACS makes money operating skilled nursing facilities, drawing 76.2% of its $3.1 billion in 2023 revenue from government programs — Medicare and Medicaid. The economics hinge on patient mix: a Medicare "skilled care" patient can generate up to three times the daily revenue of a Medicaid patient, so capturing higher-acuity, short-term patients is central to profitability. The growth strategy is acquisition-led — buying underperforming facilities and applying a roughly three-year "turnaround" to convert long-term custodial care into higher-value transitional care. Each facility is run by a local administrator the company frames as a "local CEO."
Hindenburg Research's Key Allegations
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Hindenburg alleges PACS ran a company-wide scheme to abuse a COVID-era Medicare waiver, "flipping" entire buildings of patients from Medicaid to Medicare — roughly tripling per-patient revenue — on the basis of a single positive case or mere exposure, even though COVID exposure was not a qualifying skilled need. Former employees said most of this revenue flowed straight to the bottom line, and the report estimates the scheme drove more than 100% of PACS's operating and net income from 2020 through 2023.
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After the waiver expired and Medicare revenue fell sharply, the report alleges PACS adopted a "new trick": systematically billing Medicare Part B for unnecessary respiratory and sensory integration therapies regardless of clinical need. Former staff described facilities jumping from roughly $15,000 to $500,000 in monthly Part B billings, and a former clinical director said employees would "basically falsify documentation," charting treatments that were never performed.
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Former employees alleged PACS placed unlicensed or inexperienced staff in charge of facilities while "renting" licenses from third parties — paying as much as $5,000 a month to "hang" a non-working person's license on a building — and had administrators or regional executives cover multiple facilities in excess of California's 200-bed, three-facility legal limit.
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The report alleges PACS listed uncertified nurse aides as certified and retroactively added fake registered-nurse hours to meet minimum staffing rules, lift CMS star ratings, and qualify for state bonus payments. It further contends PACS misleads investors by touting that 75% of facilities hold 4- or 5-star quality-measure ratings, when only 29% earn that on the broader CMS overall rating and 46% sit at two stars or below.
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While the business's reported profitability rests on the alleged schemes, co-founders Murray and Hancock extracted an estimated $1 billion since the pandemic began — through $194.5 million in pre-IPO dividends, $656.5 million in stock sales, and 19 million shares pledged for margin loans — funding two Gulfstream jets, luxury real estate, and sports-team sponsorships in a state where PACS operates no facilities.
Key Charts
PACS's 26 long-held "mature" facilities grew skilled-care Medicare revenue from $52.2M to $151.5M over the period. Competitor Ensign's comparable mature facilities grew just 23%, which the report argues shows the surge was not an industry-wide trend. Bars are scaled to PACS's 190% growth.
Under prior ownership these facilities grew Medicare revenue just 8.7% from 2019 to 2021. In the year after PACS's November 2021 acquisition, skilled-care Medicare revenue jumped 173% — a rise former employees attributed to aggressive use of the COVID waiver. Bars are scaled to the 2022 figure.
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