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Universal Health Services Fraudulent Insurance Claims Securities Class Action

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The complaint for this securities class action alleges that Universal Health Services, Inc. (UHS) “manipulated and fabricated” patient intake assessments, including labeling some patients as suicidal when they were not, in order to make money from their insurance policies. The complaint claims that the company inflated its stock price by this scheme and did not disclose it to investors, in violation of the Securities Exchange Act of 1934.

The class for this action is all investors who acquired UHS publicly-traded common stock between March 2, 2015 and July 25, 2017.

UHS is the largest US provider of behavioral health services, operating over 200 facilities around the country. Its Behavioral Division brought in approximately 70% of the company’s earnings, or more than $4 billion per year. UHS gave investors the impression it was operating at peak capacity, the complaint says, and reported figures for how many patients it admitted, the number of days they spent in facilities, and net revenues per patient per day.

The complaint claims the company gave the impression that its booming business came from demand and said it was “turning away a measurable number of patients” who wanted its services.

But according to the complaint, the opposite was true and the company was admitting and holding patients when it was not medically necessary. Since most insurance companies paid for treatment according to the number of days spent in a facility, the complaint says, employees were told, “Don’t leave days on the table,” meaning they shouldn’t discharge patients if their insurers were still willing to pay for treatment.

The complaint points out signs that all was not well during the class period:

  • Patients, employees, and doctors were suing the company for admitting and holding patients when it was not medically necessary.
  • Shareholders had written to the company’s board about the abnormally high number of patients labeled as suicidal.
  • The Office of the Inspector General had issued subpoenas to fifteen facilities, and its false claims investigation expanded into a civil and criminal Department of Justice investigation.

A December 2016 BuzzFeed article reported on the company’s admission and holding practices, demonstrating that these were not isolated incidents. At this, the company’s share price fell by 12%. In May 2017, a second BuzzFeed article claimed that the investigations had expanded to include the FBI and Department of Defense because of allegations of false claims to TriCare, the military insurance plan.

Along with these reports, on July 26, 2017, the company announced that its average length of stay was down because of increased scrutiny by insurers and the government. Again, the company’s stock price fell.

The complaint reports that at the time of filing, the investigations were ongoing. 

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