PACS Group: How Systematic Fraud Turned a Nursing Home Roll-Up Into a Billionaire-Making Machine
PACS Group is a $6.7 billion Utah-based operator of skilled nursing facilities (SNFs) that serves approximately 29,000 patients daily across 276 facilities in 15 states.Since its initial public offering in April 2024, the company’s stock has surged 104%, making it one of the most successful IPOs of the year.The company’s remarkable ascent—from a two-facility operation founded in 2013 to the second-largest publicly traded SNF operator in the United States—has captured Wall Street’s imagination.
Investors have embraced PACS’s narrative of a sophisticated “turnaround” specialist with a proven formula for transforming underperforming custodial care facilities into high-margin, cash-generating assets.The company claims that its decentralized “local CEO” model empowers facility administrators to make autonomous decisions, driving operational excellence and profitability.With approximately 70% of its portfolio still classified as “immature” and the SNF industry remaining highly fragmented—no single operator controls more than 1.6% of the estimated 15,000 facilities nationwide—PACS presents a compelling growth story to investors.
But beneath the polished investor presentations and soaring stock price lies a far darker reality. Our five-month investigation—which included interviews with 18 former employees, competitors, and industry experts, combined with an analysis of more than 900 detailed facility-level cost reports—reveals that PACS’s “turnaround” strategy is built on a foundation of systematic fraud against taxpayer-funded healthcare programs.
Part I: The COVID Waiver Scheme That Built a Billion-Dollar Empire
The core of PACS’s profitability—and the engine that drove its explosive growth throughout the pandemic—was a company-wide scheme to defraud Medicare through the abuse of a temporary COVID-era waiver.
The Financial Incentive: Why Medicare Matters
To understand the scale of the fraud, one must first grasp the financial mechanics of the skilled nursing industry. In 2022, the SNF industry derived 72% of its revenue from government-funded programs including Medicare and Medicaid.PACS, however, derived 76.2% of its $3.1 billion in revenue from these programs—a figure that already exceeded the industry average.
The distinction between Medicare and Medicaid patients is critical to the business model. Medicare beneficiaries typically require a higher level of skilled care and generate substantially higher reimbursement rates. According to a former PACS administrator from California, a Medicare patient drives approximately three to 3.5 times more revenue per day than a Medicaid patient.“If those people were under Medi-Cal … you’re making maybe $300, $350 per day on that patient,” the former administrator explained, “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…”
Under normal circumstances, accessing these lucrative Medicare Part A skilled nursing benefits requires a patient to have spent a minimum of three consecutive inpatient days in a hospital.The coverage is also limited to 100 days per benefit period.These requirements create a natural barrier that limits how many patients can access the higher reimbursement rates.
The COVID Waiver: A Lifeline Perverted Into a Fraud Vehicle
On March 13, 2020, as part of the declaration of the COVID-19 Public Health Emergency, the Centers for Medicare and Medicaid Services (CMS) issued a waiver for healthcare providers, including SNFs.The waiver was designed to keep patients out of overwhelmed hospitals by allowing Medicare Part A beneficiaries to receive skilled nursing care at a SNF without the previously required three-day inpatient hospital stay.
CMS explicitly stated that the waiver was intended to “not increase total payments made under the Medicare program” and was designated specifically for extreme or emergency scenarios—such as beneficiaries evacuated from nursing homes, discharged from hospitals to make room for more seriously ill patients, or those who needed SNF care as a direct result of the emergency.
Crucially, 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.The American Health Care Association (AHCA) made this explicit: “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 ReNew Precedent: A $7 Million Warning
On April 26, 2024, the Department of Justice announced a $7 million civil settlement with ReNew Health Group, a small California-based operator of SNFs, 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.”
This settlement provided clear legal precedent that SNF operators should not have used possible or even confirmed COVID exposures to justify accessing Medicare benefits for their patients.
PACS’s Parallel Scheme—On a Vastly Larger Scale
Former PACS employees across California, Texas, Ohio, and South Carolina described how the company 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 made the scale clear: “[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.”
Former employees described a systematic process: as soon as a single person in a building tested positive for COVID-19, the entire patient population would be “flipped” to Medicare coverage under the waiver.A former PACS regional manager explained: “…As soon as one person tested [COVID-19] positive in our building, boom, wildfire, every single person gets flipped [to Medicare], absolutely inappropriately.”
The financial impact was staggering. Most revenue earned under the waiver scheme was booked as pure profit. One former administrator told us: “The margins are—probably 90% of that flows to the bottom line.”A former regional manager added: “It’s additional revenue with nearly zero additional cost.”
The Numbers Don’t Lie: Explosive Medicare Growth
The data from publicly available facility-level financial reports—particularly in California, where 63% of PACS’s portfolio is located—paints a damning picture.At 26 of PACS’s longest-owned “mature” facilities, which had previously seen stagnating Medicare revenue from 2017 through 2019, skilled care revenue from Medicare inexplicably grew by 190%—from $52.2 million in 2019 to $151.5 million in 2022.
This was not an industry-wide trend. PACS’s primary competitor, the Ensign Group, grew Medicare revenue by just 23% during the same period.Another competitor, Plum Healthcare, grew its skilled care revenue from Medicare by only 8% during the first two years of the pandemic, despite having full access to the COVID waiver.
The contrast becomes even more stark when comparing PACS and Ensign on a per-bed basis. In 2022 alone, PACS booked 188% more Medicare skilled care revenue than Ensign on a per-bed basis, according to facility financial reports.
The Plum Healthcare Acquisition: A Case Study in Fraud Acceleration
In November 2021, PACS acquired Plum Healthcare.Prior to the acquisition, Plum had grown its skilled care Medicare revenue by just 8% during the first two years of the pandemic.But after PACS took over, Medicare skilled care revenue at Plum’s facilities skyrocketed by 173%—from $112 million in 2021 to $306 million in 2022.
A former Plum Healthcare employee described the transformation: “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.”
The Waiver’s Expiration and the Immediate Impact
The COVID waiver expired on May 11, 2023, though patients who had already accessed Medicare benefits under the waiver could continue doing so until their 100-day benefit period ended, meaning SNFs could benefit financially from the waiver as late as August 2023.
The impact on PACS was immediate and dramatic. The company’s quarterly Medicare revenue declined by an estimated $90 million in each of the two quarters after the expiration of the COVID waiver, according to PACS’s financial statements.This sharp decline indicates that PACS generated hundreds of millions of high-margin Medicare dollars from the waiver scheme leading up to its IPO.
One former administrator captured the sentiment among employees who understood the truth: “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.”
Part II: The New Tricks—Medicare Part B Billing Fraud
Following the expiration of the COVID waiver, PACS’s Medicare skilled care revenue declined sharply in the second half of 2023.But according to PACS’s financial statements, it rebounded in the first half of 2024.Former employees described a “new trick” to get back to “COVID level profitability”—one that involves billing thousands of unnecessary respiratory and sensory integration therapies to Medicare Part B, regardless of clinical need or outcomes.
One former California-based administrator explained: “…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 detailed how the scheme works: “…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’…”
A former clinical director described how PACS would “basically falsify documentation” by charting that they had performed various therapies when they hadn’t: “…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.”
Part III: License Renting and Regulatory Evasion
Beyond the billing fraud, former employees detailed another scheme whereby PACS attempts to fool regulators by “renting” licenses from third parties to “hang” on buildings.The company 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.”
The scale of this practice is significant. Regional Vice Presidents generally oversee approximately 15 facilities per company disclosures.Despite this, we found an example of a Regional Vice President who was simultaneously 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.
Part IV: Misleading Shareholders About Quality Ratings
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 three ratings that comprise an overall rating.
The motive for this misleading disclosure seems obvious: only 29% of PACS’s facilities have 4- or 5-star overall ratings, while 46% are 2-star or lower, according to CMS records.
Part V: Staffing Fraud—Cheating on Ratios and Falsifying 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.
Part VI: The Administrator Training Program—Creating Compliant Puppets
PACS 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’s 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 particularly egregious 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 roughly $1 million loss to a $6.8 million profit in one year during COVID, earning $1.6 million in his second year as an administrator—more than nine times the state average compensation, according to the facility’s financial reports.
Part VII: The Billionaire Founders—Cashing Out While the Scheming Continues
PACS’s 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, they have cashed 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.”Yet since COVID, Murray and Hancock have embarked on a spending spree that has included purchasing two private jets, luxury and commercial real estate, and sponsorships of Utah’s most popular sports teams—despite PACS not operating facilities in the state.
Conclusion: A House of Cards Built on Fraud
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.
Despite operating in a highly competitive and highly regulated industry, PACS claimed to have discovered a winning “turnaround” formula for transforming poorly performing SNFs into cash spigots.Our investigation reveals that this “turnaround” strategy largely boils down to systematically scamming taxpayer-funded healthcare programs.
We estimate the COVID waiver scheme alone drove more than 100% of PACS’s operating and net income from 2020 through 2023, enabling PACS to IPO in early 2024 with the illusion of legitimate growth and profitability.
PACS’s board of directors includes prominent names such as Taylor Leavitt, the son of three-time Utah Governor Mike Leavitt, who oversaw CMS during his tenure as Secretary of Health and Human Services under the Bush administration.This connection underscores the company’s deep entrenchment in the political and regulatory establishment—yet it has not prevented the systematic fraud we have documented.
The company’s investors have been sold a story of sophisticated operational excellence. The reality is far more troubling: a business built on fraudulent billing, regulatory evasion, and the exploitation of a public health emergency, all designed to enrich its founders at the expense of American taxpayers.
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 conduct their own due diligence.
