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Universal Health Services Inc.

Case Details

Class Period: March 2, 2015 - July 25, 2017
Date Filed: December 23, 2016
Case Number: 2:17-cv-02817
Jurisdiction: Eastern District of Pennsylvania

Case Summary

The Complaint brings forth claims for violations of the Securities Exchange Act of 1934 against Universal Health Services, Inc. (“UHS,” or the “Company”), and certain of its senior executives.  The Complaint alleges that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired UHS common stock during the Class Period.

UHS owns and operates hospitals across the country.  Its two major lines of business are its acute care hospitals, which provide general and emergency care, and its Behavioral Division, which provides inpatient and, to a lesser degree, outpatient psychiatric care. These business segments each comprise roughly 50% of UHS’s revenues.  However, during the Class Period, the Behavioral Division dominated the Company’s earnings in order to illicitly bolster the Company’s financial results.

Specifically, the Complaint alleges the Defendants made false and/or misleading statements and/or failed to disclose that: (1) UHS admitted patients based on its own financial considerations and not upon the medical necessity of the patient; and (2) UHS would keep patients admitted until their insurance payments ran out in order to ensure the maximum payment for its services.  As a result, the Company’s revenues from inpatient care relied on unsustainable practices, and lacked effective internal control concerning these practices of admitting patients and holding thousands of patients for psychiatric treatment when such treatment was not medically necessary.  The truth regarding Defendants’ fraud was partially revealed in a December 7, 2016 investigative 30-page report published by Buzzfeed News, which informed how for years UHS had been engaging in a widespread and deliberate scheme to increase its bottom line by coaxing unwitting patients through its doors; manipulating and fabricating patient testimonials to make them appear dangerous to themselves or others, and then admitting them into the Company’s facilities – often involuntarily – for as many days as their insurance would provide reimbursement. On this news, shares of Universal Health fell $15.01 per share, or nearly 12%, from its previous closing price to close at $111.36 per share on December 7, 2016.  The federal, civil and criminal investigations are ongoing, while the full scope of the fraud has been revealed, causing the stock to suffer additional declines.

On April 17, 2017, the Court appointed Teamsters Local 456 Pension and Annuity Funds as Lead Plaintiff and Saxena White P.A. as Lead Counsel. On June 20, 2017, the action was transferred from the Central District of California to the Eastern District of Pennsylvania.

Lead Plaintiffs filed their Amended Complaint on September 29, 2017.   Defendants moved to dismiss the Amended Complaint on December 6, 2017, Lead Plaintiffs filed their Opposition to Defendants’ motion on February 7, 2018 and Defendants filed their Reply on March 26, 2018.

The Court granted Defendants Motion to Dismiss on August 14, 2019.  Lead Plaintiff filed a Motion for Leave to file Second Amended Complaint on August 26, 2019.  On April 29, 2020, the Court denied the Plaintiff’s motion.  Plaintiff filed their Initial Brief in the United States Court of Appeals for the Third Circuit to appeal the district court’s unfavorable decision.