PACS Group: How To Become A Billionaire In The Skilled Nursing Industry By Systematically Scamming Taxpayers

PACS Group is a $6.7 billion Utah-based operator of skilled nursing facilities (SNFs) that serves 29,000 patients daily. Its stock is up 104% since its April IPO, making it among the most successful IPOs of 2024.
Despite operating in a highly competitive and highly regulated industry, PACS claims to have discovered a winning “turnaround” formula for transforming poorly performing SNFs into cash spigots.
Our 5-month investigation, including interviews with 18 former employees, competitors, and an analysis of 900+ detailed facility-level cost reports, revealed that PACS’ “turnaround” strategy largely boils down to systematically scamming taxpayer-funded healthcare programs.
In one key example, PACS abused a COVID-era waiver, inappropriately accessing skilled care Medicare benefits for thousands of patients across its national portfolio of facilities, according to our investigation.
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.
Typically, at SNFs, “skilled care” Medicare programs can drive up to 3x more revenue per day than Medicaid. However, these programs are normally only accessible after a 3-day hospital stay.
During COVID, Centers for Medicare and Medicaid Services (“CMS”) waived the hospital-stay requirement to keep patients out of already overwhelmed hospitals, allowing patients to access Medicare benefits if they demonstrated a need for skilled nursing care.
However, exposure to COVID and even a positive COVID test were not considered a skilled need, per the DoJ and the American Health Care Association (“AHCA”). Despite this, some SNF operators still claimed those with COVID or those merely exposed to COVID qualified for Medicare-covered skilled care—immediately tripling per-patient revenue.
In one such case, California-based SNF operator ReNew Healthcare settled charges with the DOJ in April 2024 for “knowingly submitting false Medicare Part A Claims” through the waiver based on COVID exposure, according to the settlement agreement between ReNew and the DOJ.
Former PACS employees in California, Texas, Ohio, and South Carolina explained how PACS engaged in the same scheme as ReNew, but at a much larger scale, across its national portfolio and for the entirety of the pandemic.
One former facility administrator told us: “When you see the stuff that comes out with ReNew, you’re like: ‘Oh we [PACS] were doing the same thing.”
Another former administrator said: “[ReNew] settled with CMS for $7 million for improperly using these waivers… ReNew is small… If this were PACS, you might be talking in the hundreds of millions.”
A former PACS regional manager told us as little as one Covid case would be used to flip an entire building to Medicare: “… As soon as one person tested [COVID-19] positive in our building, boom, wildfire, every single person gets flipped [to Medicare], absolutely inappropriately”.
Most revenue earned under the waiver scheme was booked as pure profit, as one former administrator told us: “The margins are – probably 90% of that flows to the bottom line”. A former regional manager told us: “It’s additional revenue with nearly zero additional cost.”
As of June 30^th, 2024, 63% of PACS’ portfolio was in California, where detailed facility-level financial reports are publicly available. These financial reports show an inexplicable rise in Medicare revenue at PACS facilities throughout the pandemic.
When the COVID waiver was implemented, even 26 of PACS’ longest-owned “mature” facilities, which had previously seen stagnating Medicare revenue from 2017 – 2019, inexplicably grew their skilled care revenue from Medicare by 190%, from $52.2 million in 2019 to $151.5 million in 2022, according to the facilities’ financial reports.
PACS’ primary competitor, the Ensign Group, grew Medicare revenue by just 23% during the same period, indicating this was not an industry-wide trend. In 2022 alone, PACS booked 188% more Medicare skilled care revenue than Ensign on a per bed basis, according to facility financial reports.
Another competitor, Plum Healthcare, grew its skilled care revenue from Medicare by just 8% during the first 2 years of the pandemic, despite having full access to the COVID waiver. In November 2021, PACS acquired Plum Healthcare, and promptly increased Medicare skilled care revenue by 173%, from $112 million in 2021 to $306 million in 2022, according to the facilities’ financial reports.
A former Plum Healthcare employee told us: “When [PACS] took over, they had a much more aggressive view of things, where you could have, let’s say that same nurse that was sick got COVID, you would end up picking up every single patient who has [Medicare Part A] in the entire building… we’d go from like 20 Medicare patients to 70 or 80 overnight.”
PACS’ quarterly Medicare revenue declined by an estimated $90 million in each of the 2 quarters after the expiration of the COVID waiver, according to PACS’ financial statements, indicating that PACS generated hundreds of millions of high-margin Medicare dollars from the waiver scheme leading up to its IPO.
A former PACS administrator said: “You know it was funny, there was a posting on LinkedIn about PACS. It was like an analyst talking about them going public and it said, ‘financially PACS group has demonstrated strong performance with net income of $113 million on revenue of $3.1 billion in 2023…’ We all read this and were passing it around, and were like, if they only knew, it’s all the waivers.”
Following the waiver scheme, PACS’ Medicare skilled care revenue declined sharply in 2H 2023. But it rebounded in 1H 2024, according to PACS’ financial statements. Former employees described a “new trick” to get back to “COVID level profitability” involving billing thousands of unnecessary respiratory and sensory integration therapies to Medicare Part B regardless of clinical need or outcomes.
One former California-based administrator commented: “… now there’s a new trick that they’re all using. It’s with Part B, Medicare Part B, that they’re maximizing stuff to get back to these COVID-level profitability things [and] CMS is going to get wind of that pretty soon too… there’s buildings that used to bill, in an average month they bill maybe $15,000 in [Medicare] Part B revenue. Now they’re billing $500,000…”
The former administrator said: “… they’re putting everyone on respiratory therapy for Part B, and they’re putting everyone on sensory integration, even if it’s not really that applicable. They’ll come up with ‘oh they coughed once last month so they must need respiratory therapy’…”
PACS would “basically falsify documentation” by charting that they had performed various therapies when they hadn’t, according to a former clinical director: “… you don’t have time to provide 15-minute treatments 5 times a shift and do all of the charting that encompasses that. They would do the bare minimum or fill in the blanks when they didn’t actually do it.”
Former employees also detailed another scheme whereby PACS attempts to fool regulators by “renting” licenses from third parties to “hang” on buildings. It then either employs unlicensed administrators or has administrators manage multiple buildings in excess of state mandated limits.
A former employee from Colorado told us: “They would pay a licensing fee of like $1,000 a month or $2,000 a month to hang someone’s license… It was very common to have people’s licenses covering multiple buildings and not having enough actual licensed people working. They also had the Regional Director’s licenses hanging in buildings also, even though they weren’t working in the buildings.”
Regional Vice Presidents (RVP) generally oversee ~15 facilities, per company disclosures. Despite this, we found an example of an RVP that was simultaneously also listed as the administrator for a SNF facility, a completely different title, role, and set of responsibilities – and received $1.5 million in compensation for the latter position, according to the facility’s financial reports.
We also believe PACS purposely misleads shareholders by reporting that 75% of its SNFs have CMS 4 or 5 star quality measure ratings, when the standard should be overall ratings. Quality measure ratings are just one of 3 ratings that comprise an overall rating.
The motive for the misleading disclosure seems obvious: only 29% of PACS’ facilities have 4 or 5 star overall ratings, while 46% are 2 star or lower, according to CMS records.
California SNFs must meet minimum staffing requirements, specifically for certified nurse assistants (CNAs), to increase their CMS star ratings and to qualify for significant state bonus programs. PACS lies to regulators about this too, according to former employees.
A former senior PACS manager told us that PACS secretly lists uncertified nurse aides (NAs) as certified in the system, in an apparent scheme to cheat staffing ratios: “… they’d been working for 2 years under a license that wasn’t there… Maybe 1/3 of their buildings, if not more, had these NAs listed as CNAs.”
A former manager also detailed a documentation practice whereby PACS would retroactively add fake RN hours “across the board” in another apparent scheme to meet minimum staffing requirements, boost star ratings, and avoid costly penalties.
PACS’ hiring practices seem to purposely enable these schemes. For example, the company claims its administrator-in-training (AIT) program produces qualified administrators, who operate “autonomously,” serving as “local CEOs” for each facility. It credits this “local leadership” model as a key success driver.
But former employees say PACS’ AIT program is designed to produce lightly trained, inexperienced, overpaid staff who then “fall in” with management’s shady directives: “They look the other way… because as soon as you look the problem in the eye, you can’t buy your wife the next Porsche…”
A former administrator told us: “… part of the reason of hiring these really, really, young guys is that they don’t know better. They will do whatever the upper management tells them to do…”. Another said: “…they just hired young guys that had no experience in the business that didn’t even understand the risk or the regulations.”
In one example, PACS hired a former solar panel salesman with no prior industry experience and quickly installed him as the administrator of a 132-bed, loss-making facility. He took the facility from a ~$1 million loss to a $6.8 million profit in 1 year during COVID, earning $1.6 million in his second year as an administrator— according to the facility financial reports, more than 9x the state average compensation.
PACS’ two co-founders, Jason Murray and Mark Hancock, paid themselves $194.5 million in dividends prior to the April 2024 IPO and have sold $656.5 million in stock since. They have also pledged a total of 19 million shares for margin loans, collectively cashing out an estimated $1 billion since the beginning of COVID.
Co-founder Jason Murray claimed in a March interview that money isn’t a “big factor” in his life, saying: “… the best way I feel like I can spend my money is to give it away, honestly.”
Since COVID, Murray and 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.
Overall, we believe 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.

Initial Disclosure: After extensive research, we have taken a short position in shares of PACS Group, Inc. (NYSE:PACS). This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report.

Background & Basics: $6.7 Billion Skilled Nursing Facility Operator Based In Utah

PACS Group (NYSE:PACS) is a Utah-based operator of skilled nursing facilities (“SNFs”). SNFs typically serve patients “who need additional help recuperating from acute conditions, illnesses, or serious medical procedures after they have been discharged from the hospital” and “still require 24-hour in-patient services.”

Originally known as the Providence Group, the company was founded in 2013 by Jason Murray and Mark Hancock, who lead the company today as CEO & Chairman and Executive Vice Chairman, respectively.[1]

PACS’ board of directors includes prominent names such as Taylor Leavitt, the son of 3-time Utah Governor Mike Leavitt, who oversaw the Centers for Medicare and Medicaid Services (CMS) during his tenure as the Secretary of Health and Human Services (HHS) under the Bush administration.

The company claims that decentralization is key to its operating strategy. [Pgs. 1, 5] Each SNF is led by a “local CEO,” or administrator, who has “autonomy in the decision-making process because they know what is best for their community and their markets,” according to PACS fillings.[2] [Pg. 95]

PACS has grown substantially since it acquired its first two San Diego-based nursing facilities in 2013, with its most rapid period of growth occurring during the COVID pandemic. From 2019 to 2023, PACS grew its SNF portfolio 240%, from 61 facilities at the beginning of the pandemic to 208 by the end of 2023.

(Source: PACS Q1 2024 Investor Presentation)

Since its IPO on April 11th, 2024, PACS’ stock price has risen ~104%. As of this writing, PACS’ IPO is among the top-15 IPOs of 2024 ranked by return, according to media reports.

Bull Case: PACS Is A Sophisticated SNF Turnaround Expert With A Proven Track Record Of Acquiring Distressed Facilities And Applying Its Profitability Formula

The Company Has Virtually Unlimited Growth Prospects Given The Highly-Fragmented Industry

PACS credits its success to its “expertise in acquiring underperforming long-term custodial care skilled nursing facilities and transforming them into higher acuity, high value-add short-term transitional care.”

The turnaround process typically takes 3 years, and results in “mature” facilities that operate at their “full potential,” according to the company’s registration statement. [Pg. 78]

In its most recent earnings report, Q2 2024, PACS reported that ~70% of its portfolio was not yet “mature,” indicating significant EBITDA growth potential from its existing portfolio.

PACS also states that the fragmented nature of the SNF industry provides fertile ground for it to continue executing its acquisition-heavy growth strategy, according to its registration statement.

Since the beginning of 2024 until September 1^st, 2024, PACS added 68 facilities to its portfolio, bringing its total footprint to 276 SNFs across 15 states that serve ~29,000 patients daily.[3] This makes PACS the second largest publicly traded SNF operator in the country, behind the Ensign Group.

PACS operates in a “highly regulated industry with stringent regulatory compliance obligations” that is subject to “extensive and complex laws and government regulations.” [Pg. 11]

Additionally, PACS expects its business to become “increasingly competitive” due to low barriers to entry, healthcare cost containment measures, and both local and national incumbents. [Pg. 107] As evidence of the competitive nature of the SNF industry, as of 2022, no single operator controlled more than 1.6% of the estimated 15,000 SNFs in the United States. [Pg. 5]

Despite operating in a highly competitive and highly regulated industry, PACS claims to have discovered a winning formula to turn poorly performing facilities into cash spigots. Investors believe this provides a virtually unlimited runway for growth in a fragmented industry ripe for continued acquisitions.

Part 1: PACS’ Growth From 2020 To 2023 Was Driven By A COVID-Era Medicare Billing Scheme That Drove More Than 100% Of PACS’ Operating And Net Income During The Period, Per Our Estimates

Our 5-month investigation into PACS included an in-depth analysis of corporate financials and more than 900+ publicly available facility-level financial reports, as well as interviews with 18 former PACS employees and an industry expert.

Far from finding evidence of a sophisticated “turnaround” strategy, we uncovered a series of fraudulent schemes and aggressive practices seemingly designed to siphon as much money as possible from taxpayer-funded government healthcare programs into the pockets of PACS co-founders Mark Hancock and Jason Murray.

Evidence shows the most aggressive of these practices was a management-driven, company-wide scheme to defraud Medicare through the COVID emergency, evidenced by anomalies in PACS’ Medicare revenue, and corroborated by more than a dozen former PACS employees, ranging from frontline clinical staff to regional managers.

We believe this scheme funded PACS’ aggressive acquisition strategy throughout COVID and drove substantially all of its earnings from early 2020 to the end of 2023, giving investors the illusion of legitimate growth and profitability leading into its IPO.

Since the start of this scheme, PACS’ founders have cashed out an estimated $1 billion through dividends, stock sales, and margin loans to fund private jets, mansions, and perk-filled sponsorships of their favorite college and professional sports teams, as detailed in Part 5.

Background: SNFs Make 3x More Revenue From Short-Term Patients That Can Access Medicare Benefits Than From Long-Term Medicaid Patients, According To A Former PACS Administrator

Historically, The More Profitable Medicare Rates Can Generally Only Be Temporarily Accessed After A Qualifying 3-Day Hospital Stay, Per Medicare Regulations

In 2022, the SNF industry derived 72% of its revenue from government-funded programs including Medicare and Medicaid, according to the Center for Medicare and Medicaid Services (“CMS”). Edging ahead of the industry trend, in 2023, PACS derived 76.2% of its $3.1 billion in revenue from Medicare and Medicaid. [Pg. 38]

PACS receives higher reimbursement rates from Medicare beneficiaries who typically require a higher level of skilled care. CMS defines skilled care as services like nursing or rehabilitation that “require the skills of qualified technical or professional health personnel.” [4] [Pg. 23]

On the other hand, Medicaid beneficiaries are typically “lower acuity” patients and result in lower payments, according to PACS.

PACS states that skilled patients (i.e. high acuity patients– those who receive a higher level of skilled care) are what drives the financial sustainability of its facilities:

“Reimbursement rates provided for caring for skilled patients are more likely to meet or exceed the costs of providing care to those patients, thus allowing the facility to be fiscally sustainable.” [Pg. 19]

A former PACS administrator from California estimated that a Medicare beneficiary drives 3-3.5x more revenue per day than a Medi-Cal (California’s Medicaid) beneficiary:

“If those people were under Medi-Cal … you’re making maybe $300, $350 per day on that patient, then all of the sudden they flip over to Medicare, and now you’re making $1,100 a day. That’s a delta of, what, $800 per day…”

However, to qualify for the higher-paying “skilled care” Medicare coverage at an SNF, a patient must normally “have spent a minimum of three consecutive inpatient days in the hospital.” Further, the coverage is limited to 100 days.[5]

From March 2020 to May 2023, CMS Provided A COVID Emergency Waiver That Allowed SNFs To Access Patients’ Higher-Paying Medicare Benefits Without The 3-Day Hospital Stay, But COVID Itself Was Not A Qualifying Condition

In April 2024, California-Based SNF Operator ReNew Healthcare Settled Charges With The DoJ For “Knowingly Submitting False Medicare Part A Claims” Under The Waiver Based On COVID Exposures

On March 13^th, 2020, as part of the declaration of the COVID-19 Public Health Emergency (PHE), CMS issued a waiver for healthcare providers such as SNFs. This was commonly referred to as the “COVID-19 waiver.”

In an effort to keep patients out of the nation’s overwhelmed hospitals, the waiver allowed beneficiaries of Medicare Part A to receive skilled nursing care at a SNF without the previously required 3-day inpatient hospital stay.[6]

Waiving this 3-day stay requirement was intended to “not increase total payments made under the Medicare program,” as stated by CMS on March 13^th, 2020. The waiver was designated specifically for extreme or emergency scenarios:

“…SNF care without a 3-day inpatient hospital stay will be covered for beneficiaries who experience dislocations or are otherwise affected by the emergency, such as those who are (1) evacuated from a nursing home in the emergency area, (2) discharged from a hospital (in the emergency or receiving locations) in order to provide care to more seriously ill patients, or (3) need SNF care as a result of the emergency, regardless of whether that individual was in a hospital or nursing home prior to the emergency.”

Potential exposure to COVID-19, or even a confirmed diagnosis, did not count as justification for accessing a patient’s skilled care benefits from Medicare Part A, according to the American Health Care Association (“AHCA”):

“The presence of a confirmed diagnosis of COVID-19 in a beneficiary, confirmed or suspected beneficiary exposure to someone with COVID-19, the presence of symptoms that are suspected to be COVID-19, or any symptoms associated with receiving a COVID-19 vaccine does not automatically qualify a beneficiary for SNF Part A coverage.”

The COVID waiver expired on May 11^th, 2023, but any patients who had already accessed Medicare benefits under the waiver could continue doing so until their 100-day benefit period had ended, meaning SNFs could benefit financially from the waiver as late as August 2023, according to the AHCA.

On April 26^th, 2024, the DOJ announced that it had reached a $7 million civil settlement with ReNew Health Group, a small operator of SNFs in California, for “knowingly submitting false Medicare Part A claims for nursing home residents.”

The DOJ and the State of California alleged that ReNew misused the COVID waiver by:

“Routinely submitting claims for nursing home residents when they did not have COVID-19 or any other acute illness or injury, but merely had been near other people who had COVID-19”.

The settlement agreement between the parties explained ReNew’s abuse of the COVID waiver to inappropriately access Medicare benefits, providing clear precedent that SNF operators should not have used possible or even confirmed COVID exposures to justify accessing Medicare benefits for its patients.

Throughout The Pandemic, PACS Seems To Have Excelled At Capturing Higher-Value Medicare Patients When Compared To Its Competitors, Which It Credits To Its Turnaround Model, Not The COVID Waiver

For Example, In 2022, PACS Generated Up To 47.6% Of Its Revenue From Medicare Compared To 28.6% For Its Closest Competitor, The Ensign Group

In 2022, up to 47.6% of PACS’ revenue was derived from Medicare, while 30.20% of its revenue came from less-profitable Medicaid — an impressive mix relative to competitors such as the $8.5 billion market cap Ensign Group (NASDAQ:ENSG), the largest publicly traded operator of SNFs and one of PACS’ main competitors.[7]

In 2022, Ensign reported that just 28.6% of its revenue was derived from Medicare, while 46.8% of its revenue came from Medicaid— almost an inverse Medicare-Medicaid mix to that of PACS.

As mentioned, PACS credits its success in attracting higher value-add, short-term transitional care patients, typically covered by Medicare, to its “local operating model” and “comprehensive suite of technology, support, and back-office services.”

The company’s registration statement included a risk factor indicating that the wind down of COVID waivers could negatively impact its business, without detailing any specific revenue implications. It also vaguely mentioned that COVID waivers had an impact on revenue growth, buried on page 83 of the same document.

Former Employees Told Us That PACS Engaged In The Same Scheme As Renew, But At A Much Larger Scale Across Its National Portfolio And For The Entirety Of The Pandemic, Explaining The Massive Rise Of PACS’ Medicare Revenue During This Period

“When You See The Stuff That Comes Out With ReNew, You’re Like: ‘Oh We [PACS] Were Doing The Same Thing’” — Former Administrator Of PACS Facility #1

“[ReNew] Settled With CMS For $7 Million…ReNew Is Small…If This Were PACS, You Might Be Talking In The Hundreds Of Millions” – Former Administrator of PACS Facility #2

During our research, we conducted in-depth interviews with 18 former PACS employees who had worked in clinical, compliance, and human resources departments. Former employees detailed how PACS engaged in a multi-year, nationwide scheme to use the COVID waiver to “flip” patients from Medicaid to Medicare based on COVID exposure, roughly tripling per-patient revenue, even though the great majority of these patients didn’t need Medicare-covered skilled nursing care.

One former administrator told us flat-out that the scheme mirrored that of ReNew Healthcare:

“I mean, you know, when you see the stuff that comes out with Renew, you’re like: ‘oh we were doing the same thing.’”

A second former PACS administrator also referenced ReNew, calling it the “very same issue”:

“Go Google right now, ‘ReNew Healthcare settlement with Medicare,’ I think there was an article today. They settled with CMS for $7 million for improperly using these waivers, for this very same issue… ReNew is small… if this were PACS, you might be talking in the hundreds of millions for a settlement…”

Former PACS Employees Said The Company Would Use A Single Positive COVID Test As Justification To “Flip” Entire Patient Populations To Medicare Coverage Under The COVID Waiver

“…As Soon As One Person Tested [Covid-19] Positive In Our Building, Boom, Wildfire, Every Single Person Gets Flipped [To Medicare], Absolutely Inappropriately…” – Former PACS Regional Manager

A regional manager told us that PACS would “flip” an entire building of patients from Medicaid to Medicare based on a single person testing positive for COVID:

“… that meant that all of our Medicaid folks, who would be typically be sitting there at $200 a day, as soon as one person tested [COVID-19] positive in our building, boom, wildfire, every single person gets flipped [to Medicare], absolutely inappropriately. They get flipped on the 1135 [COVID] waiver, we get to bill Medicare… You know, you’re doing nearly nothing, almost literally zero different to these folks… What you’re probably doing is checking their vitals a little more frequently, and honestly, you’re probably not even doing that. You’re probably just documenting that you did that…

… it’s really easy. It was really easy to artificially pump up the Medicare number with the [COVID] waiver in place because it was just internal documentation.”

A third former administrator provided more details about how PACS considered COVID exposure a “skilled need,” allowing the company to access higher-paying Medicare skilled care benefits:

“All of a sudden, COVID became a skilled need, and so if there was this patient got sick with COVID, that nurse treated that patient. But that nurse walked up and down the hall and potentially exposed everyone else. You could then ‘skill’ them and access their Medicare benefit without having to go to the hospital and have a 3-night stay and without needing a 60-day wellness period in between skilled services.

So, then we could say, we’re gonna skill that patient automatically for 14 days and then anytime someone shows a symptom or tests positive you can increase it for another 14 days. And so, you had administrators that would skill their entire facility. And so all of a sudden, you go from a census of 5-10 Medicare patients to, oh, all 80 of my patients, because of COVID are skilled.”

We shared this conduct with another former administrator of a PACS facility and asked if it was isolated conduct of certain facilities. They told us:

“I don’t think that this is an isolated thing … I mean, I had and felt very pressured in a very similar way … I did have and got pressured that when I had a positive [COVID test], that they expected me to have more than just one person flip [to Medicare] in that situation. And like I said, I was not on board with that aspect of it.

… you could easily flip the financial performance of a building in one month from losing $50 thousand to making $150 thousand just by flipping people over to Medicare… That’s the other thing too, is that they wanted you to run those days. You have 100 Medicare days that you can run, and they would want you to try and run those out. But in my opinion, the person’s recovered. They’re fine. And why are we still running them on isolation? Why are we still doing this? It just didn’t, it never made sense to me. And those were the kinds of things I was not okay with… I had my RVP [Regional Vice President] come in and literally yell at me over it.”

“… The Margins Are — Probably 90% Of That Flows To The Bottom Line” – Former PACS Administrator #1

“… Most Of That Flowed Right To The Bottom Line” – Former PACS Administrator #2

“It’s Additional Revenue With Nearly Zero Additional Cost” – Former PACS Regional Manager

Former PACS employees told us that revenue earned under the COVID waiver was immensely profitable. A former PACS administrator, told us:

“…you’re really not doing much more in terms of expense. You maybe have some more nursing care because you have to document all of this but that’s really about it. They’re not getting therapy. They’re not getting a lot of these other ancillary services. You maybe have to pay a little more for meds and labs and radiology but the margins are – probably 90% of that flows to the bottom line.”

A former administrator corroborated that most of the revenue earned under the COVID waiver “flowed right to the bottom line.”:

“… most of that flowed right to the bottom line. Because, I mean, other than some monitoring, we didn’t really increase services… we were doing less and less, but the payments were still there.”

Another former regional manager told us that there would be “some marginal cost” for the residents who tested positive, but no extra cost for the “exposed”:

“It’s additional revenue with nearly zero additional cost, cause we’re not staffing up. Once we found that somebody was positive, we had to create a red zone and that had to be staffed in a silo. So there would be some marginal additional costs, but not to the exposed”.

While a dozen former employees we interviewed corroborated the existence of the COVID waiver scheme, it is also supported by PACS’ publicly available SNF financial reports.

At The Outset Of The Pandemic, PACS Operated 26 “Mature” Facilities In California That Were Operating At “Full Potential,” According To PACS

When The Pandemic Struck, These 26 Facilities Inexplicably Reported 190% Growth In Skilled Care Medicare Revenue, Up From $52.2 Million In 2019 To $151.5 Million In 2022, Per California Healthcare Records

PACS may claim that the rise in Medicare revenue was due to its turnaround strategy. However, the significant rise in Medicare revenue is visible even at the “mature” facilities that PACS owned for several years prior to the pandemic.

As of June 30^th, 2024, 63% of PACS’ facilities are located in California. Using publicly available financial reports from the state of California, we analyzed the financial performance of the 26 PACS facilities that would have been considered “mature” at the onset of the pandemic, or that had already undergone a 3-year post-acquisition transaction in which best practices were implemented (i.e. the turnaround), based on PACS’ definition.[8]

These facilities therefore would be expected to already be operating at or near their “full potential” before the COVID pandemic even started.

Despite the maturity of these 26 facilities, they collectively reported increasing their skilled care Medicare revenue by 190% during the pandemic, from $52.2 million in 2019 to $151.5 million in 2022. [9]

(Total skilled care Medicare revenue reported by PACS’ California Facilities that had Matured by Jan 1^st, 2020. Source: HCAI and Hindenburg Research calculations)

PACS’ Main Competitor, Ensign, Grew Its California Medicare Revenue By Just 23% From 2019 To 2022 At Its “Mature” Locations, A Fraction Of PACS’ 190% Growth During The Same Period

Measured On A Per Bed Basis, PACS Inexplicably Drove 188% More Skilled Care Medicare Revenue Than Ensign In 2022 At “Mature” Facilities

We identified 39 California-based SNFs operated by PACS’ competitor, the Ensign Group, that also would have been considered “mature” by PACS’ definition at the outset of the pandemic to compare their skilled care Medicare revenue during the pandemic.[10]

Ensign’s 39 SNFs increased their combined skilled care Medicare revenue from $67.2 million in 2019 to $82.8 million in 2022, or just 23% in total. PACS’ mature facilities, on the other hand, reported 190% growth in the same period, as detailed in the previous section.

On a per-bed basis in 2022, PACS drove 188% more skilled care Medicare revenue than Ensign at “mature” facilities, or facilities that had been owned for at least 3 years prior to the COVID pandemic.[11]

(Skilled care Medicare revenue per bed by facilities operated in California by The Ensign Group and PACS since at least Jan 1^st, 2017. Source: HCAI and Hindenburg Research own calculations)

This analysis indicates that PACS’ triple-digit growth in skilled care Medicare revenue while the COVID waiver was in place wasn’t an industry trend experienced by its largest key competitor.

PACS Acquired Competitor Plum Healthcare At The End Of 2021

The Plum Portfolio’s Skilled Care Medicare Revenue Skyrocketed By 173% The Following Year, Which Former Employees Credited To PACS’ Abuse Of The COVID Waiver

“When Providence [PACS] Took Over, They Had A Much More Aggressive View Of Things, Where You Could Have, Let’s Say, That Same Nurse That Was Sick, Got COVID, You Would End Up Picking Up Every Single Patient Who Has Med A [Medicare Part A] In The Entire Building”— Former Plum Healthcare Administrator

Plum Healthcare was a California-based operator of SNFs that was founded in 1999 and operated SNFs facilities in California and Nevada. On November 5^th, 2021, in the midst of the COVID pandemic, PACS acquired Plum Healthcare for $121 million.[12]

Based on the current list of facilities available on its website, we identified 52 Plum facilities in California. We analyzed their cumulative growth in Medicare skilled care revenue during the first 2 years of the COVID pandemic.[13]

Despite being an experienced operator with full access to the COVID waiver, these 52 Plum facilities only grew their combined skilled care Medicare revenue from $103 million in 2019 to $112 million in 2021, or just 8.7% during the period prior to PACS’ acquisition.

Following PACS’ November 2021 acquisition, the skilled care Medicare revenue from these 52 facilities skyrocketed by 173%, from $112 million in 2021 to $306 million in 2022, and kept climbing to $340 million in 2023, according to the financial reports from these facilities. From 2021 to 2022, Plum facilities’ total “other” revenue, excluding skilled care Medicare revenue, grew by only 4%.

(Total skilled care Medicare revenue reported by 52 Plum facilities. Source: HCAI and Hindenburg Research calculations)

We interviewed 2 former administrators who worked at Plum facilities before, during, and after the PACS acquisition. Both corroborated PACS’ aggressive use of the COVID waiver to “flip” patients to Medicare. One told us:

“When Providence [PACS] took over, they had a much more aggressive view of things, where you could have, let’s say that same nurse that was sick got COVID, you would end up picking up every single patient who has Med A in the entire building…

So suddenly, if we had a nurse that was positive COVID, we’d pick up anyone who had Med A on their side [of the building]. And then we’d look at the cameras and if they even went over the other side of the building for any period of time at all, then we’d pick up those patients too. So, we’d go from like 20 Medicare patients to 70 or 80 overnight.”

The other former Plum administrator told us:

“When I was under the direction of PACS, they would encourage, I was encouraged to just flip the entire building Medicare, because we had one person who had COVID. And I didn’t do that because I never felt good about it… my manager would come in and say, ‘Why are you not flipping the whole building?’ And I would say, ‘well that’s, that’s not how I was taught’, at least, and per regulation. I never, that’s just how we felt it was the right way.

But, I mean, in the industry, all during COVID, it was like all of a sudden all these buildings who didn’t have a lot of Medicare, overnight, had tons of Medicare. And that was concerning and troubling and PACS is very financially driven. Like, finances is number one. In my opinion, and this is what I was told: it’s money first, and then everything else comes after that.”

PACS’ Quarterly Medicare Revenue Inexplicably Declined By An Estimated 26% Or ~$90 Million Following The Expiration Of The COVID Waiver In Mid-2023, Or ~$360 In Annualized Revenue

“If They Only Knew, Its All The Waivers” – A Former PACS Administrator Told Us It Was An Open Secret Amongst Employees That Abuse Of The COVID Waiver Enabled PACS To Go Public With The Illusion Of Rapid Growth And Profitability

As mentioned, core to PACS’ operating strategy is a focus on growing its “skilled mix,” or the number of patients receiving higher-value skilled care, which is typically paid for by Medicare or managed care programs.

PACS credits this focus as the primary driver of its unprecedented growth. Given this, we would expect to have seen a steady rise in Medicare revenue throughout 2023 as PACS implemented this strategy.

However, after the COVID waiver expired, PACS’ quarterly Medicare revenue declined suddenly and without explanation from a reported peak of ~$340 million in Q1 2023 to an estimated $271 million in Q4 2023— a decline that investors would miss if they only looked at full year revenue.[14]

When accounting for and removing the impact of newly acquired facilities, the fall-off in Medicare revenue was an estimated ~$90 million per quarter, equivalent to ~$360 million in annualized revenue.[15]

(Source: PACS Financial Statements [Pgs. 15, 15, and F-17] and Hindenburg estimates)[16]

We believe this decline indicates that PACS was generating hundreds of millions of dollars a year in Medicare revenue from the COVID waiver scheme, allowing it to go public with the illusion of rapid, legitimate growth and profitability.

A former PACS administrator agreed with this theory, saying:

“You know it was funny, there was a posting on LinkedIn about PACS. It was like an analyst talking about them going public and it said, ‘financially PACS group has demonstrated strong performance with net income of $113 million on revenue of $3.1 billion in 2023…’ We all read this and were passing it around, and were like, if they only knew, it’s all the waivers.”

With former employees explaining that most of the COVID waiver revenue flowed right to the bottom line, we estimate that the scheme flipped PACS’ financials from negative to strongly positive, likely contributing more than 100% of PACS’ 2022 and 2023 operating income of $229 million and $207 million, respectively.

Part 2: PACS’ “New Trick” To Maintain Growth Post-COVID Is Abusing Yet Another Medicare Program

With the expiration of the COVID waiver in 2023 and a sudden decline in Medicare revenue, PACS was faced with the challenge of maintaining reported growth and profitability as the company would have to contend with Wall Street’s high post-IPO expectations.

PACS appears to have met this challenge, as evidenced by the sharp recovery of its Medicare revenue in early 2024, which reached an all-time high in Q2 2024, according to PACS’ disclosures, public facility-level financial reports and our own calculations.

Former PACS Employees Say The Company Has A “New Trick” To Get Back To “Covid Level Profitability”: Systematically Bill Medicare Part B For Tens Of Thousands Of Unnecessary Treatments

Former PACS employees told us that the rebound in Medicare revenue is being driven by defrauding yet another Medicare program, Medicare Part B, which is insurance for medically necessary care that isn’t covered by Medicare Part A.

Former PACS employees in California, as well as newer markets like Colorado, described a widespread, top-down directive to perform unnecessary respiratory therapies, among other therapies, on thousands of patients, regardless of clinical need or outcomes.

The former employees called the “program” a “cash cow” that could drive anywhere from $150 thousand to $1 million per month in high-margin revenue per facility.

Using costs provided by former PACS administrators, we estimate the program has 80%+ margins and contributed the substantial majority of PACS’ Q2 adjusted EBITDA of $99.7 million.

Former California Administrator: “… There’s Buildings That Used To Bill, In An Average Month They Bill Maybe $15,000 In [Medicare] Part B Revenue, Now They’re Billing $500,000…”

“…They’re Putting Everyone On Respiratory Therapy… Even If It’s Not Even Really That Applicable”

A former PACS administrator from California explained that the scheme involves billing respiratory and sensory integration therapies to Medicare Part B, even when these therapies aren’t applicable to patients.

“… now there’s a new trick that they’re all using. It’s with Part B, Medicare Part B, that they’re maximizing stuff to get back to these COVID-level profitability things [and] CMS is going to get wind of that pretty soon too.

…there’s buildings that used to bill, in an average month they bill maybe $15,000 in [Medicare] Part B revenue. Now they’re billing $500,000 in [Medicare] Part B revenue. And what they’re doing is they’re putting everyone on respiratory therapy for Part B, and they’re putting everyone on sensory integration, even if it’s not really that applicable. They’ll come up with ‘oh they coughed once last month so they must need respiratory therapy’…”

According to the former administrator, the widespread implementation of respiratory therapy programs, among other Part B programs, was a way to “cover up” a loss of net operating income from the COVID waiver.

“Now they have this Part B thing to kind of limp them through another year or two before CMS catches onto this and shuts it down.”

The former administrator explained that the practice started in California and spread across the PACS network, just like the abuse of the COVID waivers:

“… I think it started down in Santa Monica with a building that just started blowing this up and then everyone’s like, how are they doing this? So, it’s like the [COVID] waivers, ‘oh, well let’s do it too.’ So, then it spreads to that region, and then other regions say, oh, well we’ve gotta do that too, and they start doing it. Before you know it, everyone and their mom is on respiratory therapy.”

A former administrator from Colorado said the respiratory program was pushed onto their facility by PACS management, despite the treatments being unnecessary:

“The respiratory therapy program, I have never heard of it or done anything like this in my work… They brought in [the Regional VP] and that was his immediate thing. That’s all he talks about is the respiratory program and how much profit they’re making…I was paying a respiratory therapist, or like I had two full time people, I was paying them about like $32 an hour to make me $100k a month or plus.”

“The government is gonna catch on eventually… I would not be surprised if people went to jail.”

Another former PACS manager who had worked as a regional clinical leader explained that the respiratory program was a top-down initiative:

“[The Regional VP] implemented something called the respiratory program, and he mandated it for everybody… he just wanted, you know, that program equals dollars. And so it was ineffectively rolled out and mandated and it caused, I believe, patient care to suffer because they weren’t allocating resources to the right areas…”

“[The Regional VP] was the one who was basically saying, ‘do this or don’t work here’.”

PACS Encouraged Charting Therapies That Were Never Actually Performed On Patients, According To A Former Employee: “They Would Basically Falsify Documentation…”

The former regional clinical leader from PACS, told us that the clinical staff didn’t have time to deliver the volume of respiratory therapy that PACS management was asking for, so they would simply document that they had, even if they hadn’t:

“… they would basically falsify documentation. More so because, like we told [the Regional VP] repeatedly… you don’t have time to provide 15-minute treatments 5 times a shift and do all of the charting that encompasses that. They would do the bare minimum or fill in the blanks when they didn’t actually do it.”

They also told us that PACS would have higher-paid registered nurses (RNs) chart respiratory therapy, while it was actually performed by lower-paid respiratory therapists (RTs):

“… that’s the other thing. RT’s make a lot less money hourly than an RN, so that was their other way of increasing the revenue was to have these respiratory therapists come in and provide the treatments. And then nurses had to chart on it, on the treatments that were provided by the RTs.”

“… the RNs would have to chart what the RT did or chart that they did it even though they didn’t do it; the RT did it. It was a mess. There was no clear guidance or way to do it. There was no black and white. You know, basically, PACS turned a blind eye and said, whatever you need to do to get these numbers and get this filled out, do it.”

More scrutiny of PACS’ various therapeutic programs under Medicare Part B will put an end to a scheme that we believe has driven nearly all of PACS’ earnings in 2024, and which we believe continues as of this writing.

Further, based on interviews with former employees, we believe there is significant clawback risk to the great majority of revenue earned from the various unnecessary therapies covered by Medicare Part B.

Part 3 – PACS Hired An Army Of Inexperienced Staff And Incentivized Them To Commit A Series Of Billing And Staffing Violations

Claim: PACS Says Its Administrator-In-Training (AIT) Program Produces Qualified, Homegrown SNF Administrators, Which Serve As “Local CEOs” For Each Facility

Reality: Former PACS Employees Say Its AIT Program Produces Lightly Trained, Inexperienced Staff Who “Fall In” With Management’s Directives And Who Will “Do Whatever The Upper Management Tells Them To Do”

PACS claims its facilities are led by “experienced and highly qualified” administrators, who effectively serve as a “local CEO” of each facility to coordinate care alongside large teams of medical professionals.

PACS discloses that many of its administrators come from the company’s internal “Administrator-In-Training” (“AIT”) program which is “geared towards recent college graduates.” The company says it provides “valuable, intensive training and mentorship” to aspiring administrators.

During the company’s Q2 2024 earnings call, CEO Jason Murray said that the “robust” AIT program continues to be a focus, providing PACS with a “pool of talent ready to take on leadership roles at new facilities.” [Pg. 3] According to Murray, many of PACS’ facilities are run by administrators who graduated from this program:

“The AIT program’s success includes roughly 200 PACS AITs hired since our founding, with 157 still employed with us in licensed administrator and other leadership positions, a retention rate of about 75 percent, which we’re very proud of.” [Pg. 3]

However, former employees of PACS describe the AIT program as a tool to replace experienced administrators with young and inexperienced staff who don’t push back against PACS’ shady business practices.

We interviewed a former PACS regional manager with 8+ years of experience who told us:

“So, they will take guys who are 10-year, 12-year, 15-year administrators, who maybe will say to their Regional Vice President, ‘I don’t feel like it’s right for me to cut my nursing hours per patient day to 3.2. I see what happens when I do that. I hear the complaints. I send people out to the hospital… I don’t feel like that’s the right thing to do.’

They’ll replace those administrators who have been in the industry for many years with a 25-year-old from BYU [Brigham Young University] who will just say ‘absolutely sir’, ‘yes sir’, ‘right away sir’, and there’s just no faster way to a margin than cutting down the labor metrics…”

Former Employees Describe PACS’ Administrators As “Children” Who Do What They’re Told Because They’re Overpaid To Stay Silent

Former Administrator: “They Look The Other Way … Because As Soon As You Look The Problem In The Eye, You Can’t Buy Your Wife The Next Porsche …”

The former regional manager said that PACS’ internally trained administrators follow management’s directives because they are inexperienced and paid extremely well:

“Providence [PACS] makes millionaires out of young men—children … there are a lot of millionaires there… A guy who’s getting a monthly bonus check for $100,000, he’s probably going to do whatever the hell he has to do to keep that going.”

“They look the other way because they’re all being paid so well. So, it wouldn’t behoove one to look the problem in the eye, because as soon as you look the problem in the eye, you know, you can’t buy your wife the next Porsche, or whatever.”

We interviewed a former PACS administrator who separated from the company for ethical reasons. They described PACS’ practice of hiring young and inexperienced administrators who don’t push back against upper management’s directives due to their generous bonus structure:

“Yeah, I mean they’re paying them [administrators] 15% of their net [income]… yeah if you have a building that’s doing $300,000 or $500,000 a month, you’re getting 15% of that, and that adds up to be a ton.

And part of the reason of hiring these really, really, young guys is that they don’t know better. They will do whatever the upper management tells them to do… I consider myself a pretty ethical person, and when I was asked to do things I just didn’t feel good about, I questioned them…And they obviously didn’t appreciate that.”

A second former PACS employee, an administrator with 15 years of industry experience, told us that PACS hired “bros that did summer sales” with “no experience in the business”:

“They weaponized the money… it’s super obvious that they just hired young guys that had no experience in the business that didn’t even understand the risk or the regulations. And they weaponized the bros that did summer sales and just got out of the way.”

We interviewed a former administrator from Arizona who told us that experienced administrators are replaced by AITs who “fall in” with management’s directives:

“… they were just getting rid of who they felt weren’t cutting it as an administrator to replace them with these AITs, and I’m thinking, dude I’ve got [decades] of leadership experience and you’re going to replace me with a guy that’s a few years out of college?

…They’ll fall in because, hey, they’re gonna make a ton of money and they’re the ‘CEO’ of this big operation. Of course they’re gonna fall in. They’re not gonna question that.

… I’m the guy that got fired because I couldn’t ‘turn around’ [a facility], but I will go to my grave saying that the way I was doing it was the right way to do it.”

Another former administrator told us that no one “pushed back” on PACS’ practices because of the high pay-outs:

“All of us, we’re sitting around talking as administrators, we’re like, is this right? Should we be doing this? … Now all of a the sudden you make $1.2 million in a month [in net income], and your bonus is $180,000. I mean, how much are you really going to push back on this?

Not to mention, we’re all talking, do we have to worry about our licenses as administrators? And we’re like, hey we have enough PowerPoints and slides from PACS and everything to clearly show, and emails. No one’s gonna try and pin this on us and say this was [redacted] doing this on an island somewhere, right? But no, this is a PACS directive straight from the executives at PACS to push this forward.”

A former Director of Nursing from PACS told us her 27-year-old administrator didn’t know “jack shit” and that she also resigned for “ethical concerns”:

“Oh, no, man he [the administrator] didn’t know jack shit… He was 27 years old. Got his administrator’s license like yesterday. Basically, yeah, didn’t really know much. I mean, really focused on profits very much…”

We interviewed one former PACS administrator who graduated from Brigham Young University, went through PACS’ AIT program, and in a matter of months, was running a facility with more than 100+ beds independently in his early twenties:

“I had never worked in a facility before to starting my training and then in three months I was practically over a facility…”

Example: PACS Put A Former Solar Panel Salesman Through 9 Months Of Training And Installed Him As An Administrator

Within A Year, His Facility Grew Skilled Medicare Revenue From ~$1 Million To $13.5 Million, A 1,252% Gain, Flipping The Facility From A $1 Million Loss To A $6.8 Million Profit

The Facility Paid Over $1.2 Million A Year To The Administrator During 2022 And $1.6 Million During 2023

In another example, PACS purchased a 132-bed SNF called Stoney Point Healthcare in November 2021 as part of its broader acquisition of Plum Healthcare.[18]

After the acquisition, PACS installed Smitty Hartley, a former BYU attendee and solar panel salesman with no healthcare experience, as Stoney Point’s administrator after he attended PACS’ 9-month training program, per his LinkedIn profile.

In the first year of PACS ownership, Stoney Point grew its skilled care Medicare revenue from ~$1 million to $13.5 million, a 1,152% gain in 1 year, per its financial reports. It went from a net loss of $1 million a year to net income of $6.8 million in net income in 2022, according to the same financial reports.

Stoney Point was described to us, by a former PACS administrator as “a tough building. Then they got the waivers pumping.”

While Stoney Point currently has a 4-star quality measures rating, the sole metric touted by PACS, it received 1-star for health inspections and 2-stars for staffing, leading to an overall CMS rating of just 1 star.

Stoney Point recently applied for a staffing waiver due to its claimed inability to meeting minimum staffing standards in California, yet it was able to compensate Smitty Hartley $1.2 million in 2022 and $1.6 million in 2023, roughly 9x the state average for SNF administrators.[19]

Hartley was promoted to Regional Vice President in July 2024, based on his LinkedIn profile.

Former PACS Employees Say The Company Allowed Unlicensed Individuals To Run Entire Facilities, While PACS “Rents” A License From Someone Else To “Hang” On The Building In An Apparent Effort To Fool Regulators

In California, SNF administrators must be licensed and are not allowed to manage more than 200 beds, which can be spread across a maximum of 3 facilities.

A former administrator described how PACS places unlicensed individuals in administrator positions, while paying retired administrators ~$3,000 a month to “hang” their licenses on the facilities, despite them not working at that facility, or for PACS in any capacity:

“… a lot of the times they were putting guys in the buildings that weren’t even licensed. So they were running buildings without being licensed, and they would just hang a license until that guy did have one… I mean, I had a buddy that wasn’t even working in the industry, and PACS paid him to hang a license on a building. I think they paid him like $3,000 a month to hang his license… I think the Regional [Vice President] Venmo’d him.”

A second former administrator corroborated this practice, saying that PACS will simply use someone else’s license for a facility, despite that person not actively working at the facility:

“As a matter of fact, I know a building in Long Beach right now where the guy doesn’t even have a college degree. But he’ll get it, and in the meantime, they’ll put someone else’s license on the building…”

“… what they’ve done, at least what I’ve heard, is that they’ll find people that have a license who are not actively working and they’ll rent their license from people.”

The former administrator stated that he had heard PACS would pay third parties as much as $5,000 a month to “rent” their licenses.

“I’ve heard different stories. I’ve heard five grand a month, I’ve heard them encourage people to get a license. But they are not actually the operator of the building. But they use the license of that person.”

We interviewed a former senior-level PACS employee, who confirmed that PACS employs unlicensed administrators in Colorado, where they pay a “licensing fee” to “hang someone else’s license”:

“They would pay a licensing fee of like $1,000 a month or $2,000 a month to hang someone’s license, and then you would have a AIT actually operating that building … They acted like it was a totally normal thing … It was very common to have people’s licenses covering multiple buildings and not having enough actual licensed people working. They also had the Regional Director’s licenses hanging in buildings also, even though they weren’t working in the buildings.”

The former employee told us that individuals who questioned this practice were terminated:

“… Pretty much anyone who spoke up ended up not having a job anymore… People would call me and say that they weren’t comfortable being the actual admin because they weren’t licensed… And basically, I would be told, ‘oh, you don’t need to worry about that’… And then I would typically get a call, maybe 30 days or less… telling me that we needed to terminate that person because their numbers were too low or whatever, and it did happen kind of often…”

A third former PACS administrator corroborated the practice, citing an administrator in San Francisco who runs 3 facilities with a combined bed count of ~400 beds, nearly double the state limit, but uses the license of a Regional Vice President to skirt regulations:

“The regulation is, if you’re going to run multiple buildings, you can’t run more than 3, and you can’t run more than a total of 200 beds. But they even fudge those too… like there’s a guy in San Francisco I know, he runs 3 buildings that’s a total of like, it’s like almost 400 beds. So, he’s way, way over the cap. But he has, one of the buildings, the larger one, he has the Regional [Vice President] just put their license on the wall.”

PACS’ Regional Vice Presidents Cover On Average 15 Facilities Within A Region, According To PACS’ Disclosures

Yet California Financial Reports Show That A Regional VP Was The Administrator On A Facility In California In 2023 Despite His Full-Time Role As A Regional VP

We found evidence corroborating the former employee accounts.

PACS discloses that its facility-level administrators report to Regional Vice Presidents [“RVPs”]. Those RVPs are responsible for an average of ~15 facilities each, presumably making it impossible for them to also directly manage any one facility.

A LinkedIn profile for one PACS RVP, Matt McLane, states that he has served as a PACS Regional Vice President since 2021.

Despite his apparent role overseeing an entire region of facilities, McLane was also listed as the administrator of record for Las Colinas Post Acute during 2023. He was compensated $1.5 million for the role in 2023, according to California financial reports. [20]

(Source: HCAI – 2023 Las Colinas Cost Report)

Given his simultaneous roles, this calls into question who was actually managing the facility.

We suspect PACS used McLane’s license to either cover for an unlicensed administrator or to cover up a licensed administrator who was illegally managing multiple facilities in violation of state law.

Part IV: The Reality Of PACS’ Star Ratings

PACS Misleads Shareholders By Reporting That 75% Of Its Facilities Have 4 Or 5 Star CMS Quality Measure Ratings, Which **Is Just One Of 3 Aspects Used By CMS To Determine An Overall Quality Rating For A SNF**

**Only 29% Of PACS Facilities Have A 4 Or 5 Star Overall Quality Rating, While 46% Of The Facilities Are 2-Star Or Lower**

SNFs are rated by CMS on a 5-star quality rating system, created to help the public “compare nursing homes more easily”. The 5-star quality rating for each SNF is published on CMS’s website.

PACS claims that its “focus on quality is reflected in [PACS’] CMS Quality Measures (QM) Star rating.” The company also says, “Execution of [PACS’] strategy has also increased our number of facilities with QM Star ratings of 4 or 5 Stars over time.”

PACS CEO Jason Murray told investors in the company’s Q2 2024 earnings call:

“Our leading indicator of better clinical results is the CMS Quality Measure or QM Star rating. Over the second quarter, we had 7 buildings move into 4 star rating, resulting in 165 or 75% of our skilled nursing portfolio having achieved a 4 or 5 star CMS QM rating.”

PACS’ reported results about its star ratings might sound like a reflection of a successful strategy promoting high-quality care. However, PACS fails to clarify that its reported CMS Quality Measures star rating is only one of three areas that CMS evaluates to provide an Overall Quality Rating of 1 to 5 stars.[21] [Pgs. 6-7]

For example, one of PACS’ facilities, Primrose Post-Acute, has a Quality Measure of 5 stars, according to CMS’s Care Compare tool. However, the facility has a 1-star Health Inspection rating and a 2-star Staffing rating, resulting in a CMS Overall Quality rating of 2-stars. The 2-star rating means that Primrose Post-Acute has an overall quality that is below average.

At the end of Q2 2024, when PACS CEO Jason Murray said that PACS had 165 facilities with 4 or 5-star CMS/QM ratings, the company operated 220 facilities. We checked the CMS Overall Quality star rating for 205 facilities acquired before the end of Q2 2024, and we found that there were more PACS facilities with 1 or 2 star CMS Overall Quality ratings than with 4 or 5 star ratings.[22]

(Source: Care Compare, PACS, and Hindenburg Research calculations)

Out of the 205 facilities we checked, we found that 46% of the facilities have below-average quality scores of 1 or 2 stars, and only 29% of the facilities have a 4 or 5 star Overall Quality rating.[23]

As a comparison, as of December 31^st, 2023, the Ensign Group reported that 45% of its facilities had 4 or 5 stars under the CMS 5 Star Quality Rating System. [Pgs. 1, 5]

Despite not focusing on its facility’s Overall Quality rating, PACS recognizes in its risk factors disclosures that if their facilities “fail to have attractive or otherwise acceptable ratings on the Care Compare website, it could negatively impact their operations, including their ability to attract or retain patients and an increase in expenses to improve such ratings.”

**California SNFs Must Hire A Sufficient Number Of Certified Nurse Assistants (CNAs) To Increase Their CMS Quality Ratings, And To Qualify For State Bonus Programs**

**A Former Senior Employee Told Us That PACS Secretly Employs Uncertified Nurse Aides (“NAs”), Which Are Listed In The “System” As Certified, In An Apparent Scheme To Cheat Staffing Ratios**

“Maybe 1/3 Of Their Buildings, If Not More, Had These NAs Listed As CNAs” – Former PACS Employee

Appropriate staffing is critical for quality of care. It also impacts a facility’s star rating, which, as mentioned, is a quality management framework from CMS that helps both families and caregivers choose SNFs.

Furthermore, appropriate staffing impacts an SNF’s ability to qualify for government money. States generally have a required minimum staffing ratio, which in California is 3.5 nursing hours per patient day, with a minimum of 2.4 of those hours being met by Certified Nurse Assistants (CNAs). [Pg. 1]

As mentioned earlier, as of June 30^th, 2024, 63% of PACS’ facilities are located in California and are subject to these stringent staffing requirements.

According to a senior executive of a PACS competitor in California, if SNFs can’t staff their facilities with enough CNAs, or hit other staffing metrics, they can face daily penalties:

“Big picture… Is that you can get penalized per day if you are under the state [staffing] minimums… plus, you aren’t eligible for annual bonuses.”

Further, according to the senior executive, SNFs lose eligibility for a state incentive program known as the Quality Accountability Supplemental Payment program (“QASP”), which offers significant bonuses to SNFs that meet staffing the other requirements:

“You are eligible for bonuses in the state of CA if you staff well. And if you don’t staff well, you lose your ability to get extra bonuses. It’s call the QASP bonuses. We [the competitor] typically get $200 to $400k per year per building, sometimes much more, in these bonuses.”

The QASP program was replaced by the Workforce & Quality Incentive Program (WQIP) on January 1^st, 2023, but continues to serve as an incentive program for SNFs to improve the quality of care and invest in their workforce.

In 2023, under the WQIP, many PACS facilities received significant payments from this program, according to the payment reports published by the California Department of Health Care Services. For example, a PACS SNF called Riverwalk Post Acute earned ~$260 thousand in bonus payments in 2023.

As of Q2 2024, PACS claims in its SEC filings to have employed approximately 12,633 CNAs across its network of 220 facilities. But a former senior level employee told us that for over 2 years during COVID, PACS had Nurses Aids (“NAs”) in its system as CNAs, in an apparent effort to circumvent minimum staffing requirements while simultaneously lowering costs and boosting bonuses:

“… they would manipulate those numbers because the NAs you can pay less, so they would have more NAs on the floor than the CNAs. But they would have them in the system as a CNA, even though they didn’t actually have their CNA certification. But then they could count them as a CNA… they’d been working for 2 years under a license that wasn’t there, and they were billing according to staffing which was inaccurate.”

“I would say it was probably happening at most of their original 57 buildings… I’m not sure how long it was happening, but my assumption is that they were doing it during all of COVID, because they could… I do know that probably, maybe 1/3 of their buildings, if not more, had these NAs listed as CNAs…There’s no reason to put someone into the system as having an actual license unless they have an actual license, unless you’re trying to cheat your staffing ratios.”

The former employee said that in addition to having appropriate staffing levels, it was also important for PACS to show low employee turnover so that it could qualify for QASP incentive payments from the state. According to the former employee, PACS artificially deflated turnover rates by moving employees to “on call” status when they separated from the company:

“There were some other things around, turnover rates that they were manipulating. And I know that for a fact because [redacted] and I got told that they just found a loophole… the state of California had something called QASP… it’s a like a quality assurance payments that the buildings could actually get every single year. And there was multiple metrics tied around it, and one was turnover. And so turnover had to be under a certain percentage. And so, in order to kind of beat the system, when someone quit, instead of actually terminating them out of our system, they would just move them to like ‘on a call’ status so that they had like almost a 0% turnover rate.

So, they would have like 500 or 600 people active on their books, but literally only like 100 are working, because they were trying to show that they didn’t have a turnover, even though those people were no longer working for them anymore… then they would get these crazy bonuses every year for having a low turnover rate.”

Former Employees Claim That PACS Retroactively Adds In Fake RN Hours In Another Apparent Effort To Meet Minimum Staffing Requirements And Boost Star Ratings

Former Employee: “Not Only Were They Billing For Hours That Weren’t Actually Worked, They Also Were Advertising That They Were A Higher Star Rated Building … When They Technically Weren’t, Because They Manipulated Their Staffing To Be A Higher Star”

According to CMS’s technical guides, at least 90% of the points used to determine the Staffing Star rating is dependent on the number of RN hours, reflecting the importance of RN hours.[24] [Pgs. 12, 20]

California law also mandates that SNFs must have a nurse on site, awake, and on duty 24 hours a day, 7 days a week.[25]

A former PACS employee told us that PACS retroactively adds hours for RNs to give regulators the appearance of meeting these stringent staffing requirements:

“… you have to have a minimum of 8 RN hours worked every single day. If you drop, like if you miss one RN hours days in a 30-day period, then your 5-star rating automatically drops to 1-star for staffing…

And so, if they missed hours, whether it was RN hours or other nursing hours or therapy hours they would go to the staffing agency name of people, whether they worked in that building on that date or not, and they would add their names in order to get their star rating high enough.”

We asked the former employee how widespread this practice was across the PACS network of SNFs:

“Across the board… as soon as the quarter ended, they would pull staffing numbers for every single building, and they would run kind of a mock star rating… and so then they would go back, into the time card system, and they would change hours. And these are hours that have already been paid out, so they would go in and they would change hours on whatever days that they were missing ratings. Does that make sense? So that they could bump their ratings up.”

… it also gave false ratings to these buildings which is how doctors will send you patients. It’s also how family members will choose where to send their family members… not only were they billing for hours that weren’t actually worked, they also were advertising that they were a higher star rated building when they shouldn’t, when they technically weren’t, because they manipulated their staffing in order to be a higher star.”

We again asked if the former employee remembered any specific PACS facilities where staffing and star rating manipulations occurred.

“I mean, this happens everywhere. Everywhere… because everyone was bonused off of it.”

A former administrator corroborated the practice of utilizing “consultant” nurses to “beef up” hours in facilities that fell under the minimum staffing requirements:

“And that’s another thing if you bring up staffing, is, you know, the California requirement is 3.5 nursing hours per patient day, right? Or direct care hours per patient day. They [PACS] were advising us to run below 3.5 and then we would just use consultants and different PACS people to beef up the hours to make sure that we hit the 3.5 so that we wouldn’t get fined…

So, for example, we have a bunch of nurse consultants in every region, right? … If I was short on a day, I would just say, ‘ok, Mark, Paul, Nancy and Ryan’ the 4 consultant nurses, they were all working on my building that day’. So I’m gonna have them sign a form and I’m gonna count 8 hours a piece for each of them for that day that I’m low, or multiple days, or the whole week, because, see, these audits just go building by building. But if they actually did a cross-section of all the buildings counting ‘Ryan the consultant nurses’ hours, they would see a ton of overlap, right? Like 5 different buildings are counting Ryan’s hours on March 1^st.”

We asked the former employee if this practice was prevalent across PACS’ network, and he said, “Oh yeah, all the way” and went on to describe how the scheme works at the SNF level:

“… at the facility level, the administrator would have like the payroll person edit hours. Because, they only look, when they do the audit, they look at like 21 days out of an entire year, right? So you might be good on some days, but on some days you’re low, you go talk to your HR AP/payroll coordinator and say, ‘hey, can you add in 8 hours for Mary that day? You know, even though she didn’t work, just put it in, cause or else we’re going to fail this audit, and we’re going to be fined, you’re probably going to be let go, because you didn’t keep track or whatever’”.

Part V: Cashing In — Since COVID, PACS Founders Have Extracted ~$1 Billion In Dividends, Stock Sales, And Margin Loans, Fueling An Extravagant Spending Spree

Since The Covid Waiver Became Available And Before Going Public, PACS Pre-IPO Shareholders Extracted 90% Of The Company’s Cash Flow From Operations, Equivalent To $194.5 Million, In The Form Of Dividends

PACS Founders Then Sold $67.5 Million In Shares During The IPO, With The Rest Locked Up

Despite aggressively growing through acquisitions, PACS co-founders and sole pre-IPO shareholders Jason Murray and Mark Hancock cashed out $194.5 million in dividends from 2021 to 2023. The company today doesn’t pay dividends.

The $194.5 million dividend represents 62% of the reported net income and 91% of the cash flow from operations reported by PACS from 2021 to 2023.

During the company’s IPO in April 2024, Murray and Hancock collectively sold $67.5 million worth of shares, equivalent to 15% of the shares sold by the company during its IPO.

Following the IPO, Murray and Hancock were subject to a 180-day lockup agreement for future sales of PACS’ shares that was supposed to end on October 7^th, 2024.

A Month Before The Expiration Of Its Lock-Up Agreement, CEO Murray And Executive Vice Chairman Hancock Sold $589 Million Worth Of PACS Shares

On September 3^rd, 2024, PACS filed an S-1 disclosing certain waivers to the lock-up agreements allowing co-founders Murray and Hancock to sell shares early.

Overall, PACS’ co-founders sold 8.1 million shares each at $36.25, resulting in combined proceeds of $589 million, according to SEC form 4s. [1,2]

Following this offering, Murray and Hancock agreed not to dispose of more PACS shares for another 90 days.

The Latest Offering Filings Also Disclosed That PACS Founders Pledged 19 Million Shares, Worth Approximately $816 Million, For A Margin Loan From UBS

UBS Was An Underwriter For PACS’ September Offering And Has Held The Highest Price Target For PACS’ Shares, Which Are The Collateral For Its Loan To PACS’ Founders

The S-1 filing from September 3^rd, 2024, also disclosed that co-founders Murray and Hancock had entered into a margin loan by pledging 9,500,000 million shares each to UBS. The total shares pledged are currently worth $816 million.

The margin loans were obtained under another exemption of the lock-up agreement that permits PACS’ co-founders to pledge a portion of their shares as collateral, according to the draft registration statement.

Margin loans enable shareholders to extract cash from their shares without selling. They are a risky form of debt because if the collateral (shares) drop in value, it could trigger a margin call from creditors, creating the risk of a forced sale of shares, which could lead to more downward pressure on a stock price.

Typically, margin loans are offered at a 20%+ loan to value. Consequently, we estimate that this margin loan allowed Murray and Hancock to obtain at least $150+ million in cash, surpassing the $1 billion mark in total cash extracted from PACS since the COVID-19 waiver was enacted.

UBS Securities LLC was one of the underwriters of PACS’ latest offering. On October 9^th, 2024, UBS initiated coverage of PACS shares, which are the collateral for its loan to PACS’ founders, with a rating of ‘Buy’ and a $50 price target—the highest target we could find.

Fueled By The Proceeds From PACS, Co-Founders Jason Murray And Mark Hancock Have Gone On A Spending Spree

Purchases Include Luxury And Commercial Real Estate, 2 Gulfstream Jets, And A $20-Million Side Business In High-End Bicycle Parts

In a March 2024 interview, PACS co-founder Jason Murray said that money isn’t a “big factor” in his life, saying: “the best way I feel like I can spend my money is to give it away, honestly.”

Murray and his co-founder Mark Hancock have been on a spending spree since extracting an estimated $1 billion out of PACS, which has included luxury property and 2 Gulfstream jets.

In August 2020, Jason Murray acquired a beachfront property in Laguna Beach, California, for $9.5 million, according to homes.com, a website part of CoStar group.[26]

Galloping Goose, LLC is a corporation, that as of this writing is managed by Jason Murray and Mark Hancock, according to Utah’s corporate records.

On May 11^th, 2021, Galloping Goose acquired a Gulfstream G450, according to the aircraft bill of sale. Similar pre-owned models, like this Gulfstream G-450, are available “for between $10,995,000 and $19,950,000,” according to Air Charter Advisors.[27]

On December 1^st, 2023, 83RE, LLC, a company associated with Mark Hancock, acquired a property in a suburb of Phoenix for $11.1 million, according to Maricopa County’s assessor. It is expected that a retail center will be developed on the property, according to local media.[28]

On December 4^th, 2023, Galloping Goose II, a company organized in Utah months earlier, with Jason Murray and Mark Hancock as managers, acquired a Gulfstream G550, tail number N446VG, according to the aircraft bill of sale. Similar pre-owned models, like this Gulfstream G550, are available “for between $15,000,000 and $28,000,000,” according to Air Charter Advisors.

On May 1^st, 2024, PV3 Investments, an entity led by Mark Hancock and described as his family office, acquired ENVE Composites, LLC, a manufacturer of high-end bicycle components, for $20 million. ENVE described Mark Hancock as an “avid cyclist” and a customer.

Despite Having No PACS Facilities In Utah, The Company Sponsored The Utah Jazz, The Brigham Young University Football Team And Utah’s New NHL Hockey Club

This Marketing Push Seems To Be Driven By PACS’ Co-Founders’ Sporting Taste

Normally, companies target their marketing campaigns to attract clients in their main markets. Oddly, despite having no facilities in Utah, after the COVID waiver was enacted, PACS began sponsoring sports teams in Utah.

Since at least the 2022-2023 season, PACS has been one of the Utah Jazz’s official sponsors, with an initial campaign saying, “Discover your healthcare career at PACS.com.”

(Utah Jazz home game on October 24^th, 2024. Source: NBA)

Based on social media posts, it seems that PACS co-founders are Utah Jazz fans, which may be driving this use of shareholder resources. [1, 2, 3, 4]

(PACS co-founders showing their support to Utah Jazz. Source: LinkedIn and Facebook)

Similarly, during the 2023 and 2024 seasons, PACS sponsored Brigham Young University (BYU) Football, a school the company recruits from. [1, 2]

(BYU Football home game in October 2024. Source: X)

Jason Murray, PACS’ co-founder and CEO, seems like an avid fan of the BYU football team. Social media posts show him using one of the private jets he controls to attend a BYU game against the Arkansas Razorbacks.[29]

The 2024-25 NHL season marks the inaugural season for the Utah Hockey Club. During preseason games, the PACS logo was visible in the middle of the ice rink at the Delta Center, home of the Utah Hockey Club.

It appears that PACS’ marketing strategy is driven by its founders’ sporting tastes rather than by a clear strategic rationale. A former administrator shared their opinion about the PACS’ sponsorship of sports teams:

“It’s hubris. You would never see Ensign do that. Within the industry, there’s kind of a running inside joke. What are they thinking? It’s such a huge risk. If you get sued in Sacramento and they make that connection, you have someone who ends up getting hurt or injured at a facility because… they didn’t have enough staff, or they didn’t have enough product, or they have the wrong machine… well you have enough money to sponsor to the Utah Jazz and the BYU Cougars but you don’t have enough money to pay for an extra CNA [Certified Nursing Assistant]?… That is a huge, I don’t care how big I got, I would never do that. But it’s who they are. It’s hubris. It’s just they want everyone to know who they are.”

Conclusion

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. Instead, it seems to have been built on a systematic abuse of taxpayer-funded healthcare programs, creating the appearance of growth and success while its founders have cashed out an estimated $1+ billion to fuel their extravagant lifestyles.

Without rampantly defrauding 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.

PACS co-founder and CEO Jason Murray said in an interview that “money is a magnifier” and that “if you are a good person, it will magnify the good that you do, and if you’re a bad person, it will magnify the bad that you do.” We tend to agree.

Disclosure: We are short shares of PACS Group, Inc. (NYSE:PACS)

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[1] Murray and Hancock each owned 50% of the company before taking the company public on April 11^th, 2024. [Pg. 149]

[2] SNF administrators need to be licensed in every state they practice.

[3] On October 29^th, 2024, the company announced a pending acquisition of 12 new facilities in Tennessee. On November 1^st, 2024, PACS announced the acquisition of 8 facilities in Pennsylvania.

[4] Skilled care is typically covered by Medicare Part A, which is government-backed insurance designed to cover hospital care but which also covers short-term transitional care at qualifying SNFs.

[5] After the 100-day Medicare benefit period, a patient must go 60 days without being admitted to a hospital to access another 100 days of coverage.

[6] The waiver also removed the requirement that patients experience a 60-day period of wellness before accessing a new 100-day block of benefits, meaning an SNF resident could theoretically access 200 days of Medicare benefits without a hospital stay or break, roughly tripling the facility’s maximum potential revenue per patient for that period. [Pg. 1]

[7] As of July 2023, The Ensign Group was the largest operator of skilled nursing facilities when measured by net patient revenue, according to Definitive Healthcare, a healthcare intelligence platform. PACS ranked third.

[8] The annual reports detail each facility’s revenue from Medicare due to routine services such as skilled nursing care — the type of revenue generated by submitting claims under the COVID-19 waiver.

[9] The annual reports also provide the number of licensed beds for each facility. Our analysis of these reports shows that the PACS facilities did not increase beds in the analyzed periods. This indicates that the revenue growth cannot be explained by a facility expansion.

[10] As of December 31, 2016, The Ensign Group operated 149 skilled nursing facilities in the United States. Based on The Ensign Group’s list of facilities available on their website, the NPPES NPI Registry and the list of subsidiaries of The Ensign Group as of December 31^st, 2016, we were able to identify 39 facilities in California owned by the company by the end of 2016. These 39 facilities should have been considered “mature,” according to PACS definition, by the time the COVID-19 pandemic was declared. As we did with the PACS facilities, we analyzed the financials of these 39 facilities.

[11] Adjusting by the total number of licensed beds each company owned for at least 3 years before COVID-19 PHE, we found that by 2022, PACS’ Medicare skilled nursing care revenue per bed was 2.8x higher than that of The Ensign Group. This ratio retracted to 2.5x by 2023.

[12] As part of the transaction, PACS also acquired 8 real estate entities. Out of the 58 facilities, one of them was an assisted living facility, according to Skilled Nursing News.

[13] Former Plum facilities now operated by PACS have November 5^th, 2021, as the date the facilities have been “With PACS Since” on PACS’ website. Note that Plum Healthcare operated 54 facilities in California, per Skilled Nursing News. One was an assisted facility without financials and one was apparently not on the website, resulting in 52 facilities we were able to analyze.

[14] PACS did not provide Q3 and Q4 Medicare revenue for FY2023. To estimate Medicare revenue in Q3 and Q4, we took total 2023 Medicare revenue of $1,200,801,000, subtracted Q1 and Q2 Medicare revenue of $340,410,000 and $316,877,000 to get $543,514,000 in 2H 2023 Medicare revenue, which we divided evenly to estimate Q3 and Q4 2023 Medicare revenue.

[15] PACS acquired ~20 new facilities during this period, which obscures the precise decline in Medicare revenue from the COVID-era portfolio. However, publicly available California cost reports show these new facilities contributed an estimated ~$71 million to PACS’ Medicare revenue throughout 2023, with most of that being concentrated in Q3 and Q4. In the state of California, SNFs are required to file cost reports which detail revenue by payor, such as Medicare or Medicaid, among others. When a facility is acquired mid-year, two cost reports will be filed, one from the old owner and one from the new owner, allowing the public to see exactly how much Medicare revenue was generated by the new owner even if the facility was acquired mid-year. We analyzed the 2023 cost reports for all 20 California facilities that PACS acquired in 2023 to find the exact Medicare revenue contribution for the year, and applied that figure evenly across quarters based on acquisition date.

[16] Q3 and Q4 Medicare revenue estimated by subtracting Q1 and Q2 Medicare revenue from total 2023 Medicare revenue and dividing by 2.

[17] Q3 and Q4 Medicare revenue estimated by subtracting Q1 and Q2 Medicare revenue from total 2023 Medicare revenue and dividing by 2.

[18] PACS’ website shows that Stoney Point was acquired on 11/5/2021, the same date that the Plum acquisition closed.

[19] Administrator compensation for California SNFs can be viewed by visiting the HCAI website and searching by facility, and then clicking on “detailed” annual reports. [2022, 2023]

[20] We searched the California Department Public Health database for nursing homes administrators with the name of Matthew McLane, and we could only find one match.

[21] PACS’ latest prospectus from September 5^th, 2024 only twice mentions an “overall Five‑Star Quality Rating”, only to explain how an acquired facility or facility without recent inspection may have a stale rating. The same prospectus has 31 mentions of Quality Measures star ratings— 28 matches for a search of “QM star ratings” and 2 matches for a search for “(QM) star ratings.”

[22] We were not able to obtain the CMS Overall Quality star rating for all the 220 facilities. PACS also operates assisted living facilities which don’t receive CMS star ratings. Other facilities didn’t have ratings available. Also, we were not able to find several facilities in Care Compare or the CDPH Database.

[23] Two facilities, Artesia Palms Care Center and Atlas Post Acute, acquired in March 2023 and July 2023, respectively, have no ratings due to “a history of serious quality issues,” according to Care Compare.

[24] A maximum possible score from 6 measures is 380 points. Case-mix adjusted total nurse staffing and case-mix adjusted RN staffing measures receive a maximum of 100 points each. Case-mix adjusted total nurse staffing on the weekends, total nurse turnover, and RN turnover measures receives a maximum of 50 points each. [Pg. 20] These 5 measures are a function of RN hours per patient per day. [Pg. 12]

[25] At facilities with more than 100 beds, a Director of Nursing Services (DON) must also be awake and on duty at all times and must not have the same responsibilities as a nurse.

[26] The property address is 31945 Coast Hwy, Laguna Beach, CA 92651. It is currently registered to Thirtysix LLC, per the City of Laguna Beach’s records. The property was transferred from Jason H Murray to Thirtysix LLC on March 2023, according to homes.com. Jason H Murray is a manager of Thirtysix LLC, according to OpenCorporates.

[27] The Gulfstream G450 with the serial number 4041, changed its tail number from N121GZ to N113PG. [Pg. 2] N113PG currently has Galloping Goose LLC as its registered owner, according to FAA records.

[28] 83RE, LLC, is a company with PV3 Enterprises LLC as a member, according to Arizona corporate records. Mark Hancock is a registered agent for PV3 Enterprises LLC, according to OpenCorporates. PV3 Enterprises LLC is also the registered agent of Galloping Goose, LLC. The property is located in Peoria, Arizona.

[29] The social media posts were published on September 17^th, 2023. On September 16^th, 2023, the day BYU played the Razorbacks, N113PG, one of the Gulfstream jets controlled by Murray and Hancock, flew from Salt Lake City, Utah, to Fayetteville, Arkansas. The Arkansas Razorbacks stadium is located in Fayetteville. Jason Murray was inside the Arkansas Razorbacks stadium, according to the social media posts. The aircraft flew back to Salt Lake City on the next day.

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