PACS Group Lawsuit: Medicare Fraud, SEC Probe, and Restatement

The PACS Group lawsuit is a consolidated federal securities fraud class action, Manchin v. PACS Group, Inc., filed in the U.S. District Court for the Southern District of New York, in which investors allege the Utah-based skilled nursing operator concealed a Medicare billing scheme when it sold shares to the public in 2024. As of early 2026, the defendants have moved to dismiss the amended complaint, and the case remains pending before Judge Lewis J. Liman.¹²

What Investors Say PACS Hid

The complaint’s factual core traces back to a November 4, 2024 report by the short-seller Hindenburg Research, which accused PACS of “systematically scamming taxpayers” through fraudulent Medicare billing.³ The report was built on interviews with 18 former PACS employees and more than 900 pages of facility cost reports.⁴

The central allegation involves a COVID-19 emergency waiver from the Centers for Medicare and Medicaid Services that temporarily removed the requirement for a three-day hospital stay before a patient could receive Medicare-covered skilled nursing care. According to former employees quoted in the report, PACS used the waiver to “flip” entire facility populations from Medicaid to Medicare whenever a single resident tested positive for COVID-19, without a clinical need for skilled care. That flip allegedly tripled daily per-patient revenue from roughly $300 to $350 under Medicaid to about $1,100 under Medicare. Hindenburg estimated the practice accounted for more than 100 percent of PACS’s operating and net income from 2020 through 2023, and that Medicare skilled-care revenue at 26 “mature” California facilities grew 190 percent between 2019 and 2022, from $52.2 million to $151.5 million.³

After the CMS waiver expired in May 2023, the report alleged, PACS shifted to billing Medicare Part B for unnecessary respiratory and sensory integration therapies. One administrator told Hindenburg that monthly Part B billing at individual facilities jumped from about $15,000 to $500,000, with therapies charted that were either never performed or delivered only in a bare-minimum fashion.³

The Stock Drops That Set Up the Case

PACS went public on April 11, 2024, selling roughly 21.4 million shares at $21.00 each for about $450 million in net proceeds.⁵ In September 2024, the company completed a secondary offering of more than 16.5 million shares at $36.25 each, raising about $600 million.⁶ Co-founder Mark Hancock alone sold more than 8.1 million shares in that offering for roughly $295 million.⁷

When the Hindenburg report published on November 4, 2024, PACS shares fell $11.93, or about 28 percent, closing at $31.01.⁴ Two days later, PACS postponed its quarterly earnings release and disclosed that it had received federal civil investigative demands. Shares fell another $11.45, or nearly 39 percent, to $18.09, below the IPO price.⁵ By late March 2025, the stock was trading around $11.36.

Who Is Being Sued

The first investor case was filed November 13, 2024 as Manchin v. PACS Group, Inc., No. 24-cv-08636, in the Southern District of New York.⁸ A second suit followed on behalf of the New Orleans Employees’ Retirement System. On February 11, 2025, Judge Liman consolidated the actions, appointed the 1199SEIU Health Care Employees Pension Fund as lead plaintiff, and named Labaton Keller Sucharow as lead counsel.¹

The consolidated complaint names PACS Group along with seven individual defendants: co-founder, CEO and Chairman Jason Murray; CFO Derrick Apt; co-founder, Director and Executive Vice Chairman Mark Hancock (previously CFO until January 2024); Chief Accounting Officer Michelle Lewis; and directors Jacqueline Millard, Taylor Leavitt, and Evelyn Dislaver. Nine underwriter banks, including Citigroup Global Markets, Goldman Sachs, J.P. Morgan Securities, and UBS Securities, are also named.¹⁹

The Legal Claims

The complaint brings claims under both the Securities Exchange Act and the Securities Act. The Exchange Act counts target Murray and Apt, alleging they controlled PACS’s SEC filings, press releases and investor presentations while knowing that material adverse facts were being concealed, and that both certified the accuracy of the company’s first- and second-quarter 2024 financial reports under Sarbanes-Oxley despite undisclosed billing irregularities.¹⁰

The Securities Act claims sweep in the broader group of individual defendants and the underwriters. Plaintiffs allege the IPO registration statement and the September 2024 secondary-offering materials were “negligently prepared and contained untrue statements of material facts,” falsely crediting growth to management expertise and clinical outcomes, touting a “robust culture of compliance” and “rigorous approach to billing integrity,” and treating regulatory and reimbursement risks as hypothetical when those risks had already materialized.¹⁰

The class period runs from April 11, 2024 through December 16, 2024. The suit seeks damages, disgorgement of profits and benefits the executives allegedly derived from the billing schemes, punitive damages, and corporate governance reforms.²

Where the Case Stands

On February 17, 2026, the defendants filed a motion to dismiss the amended complaint. The case is pending before Judge Liman and has not been decided on the merits.²

Parallel Government Investigations

The private lawsuit is running alongside federal probes. In its annual report filed in February 2026, PACS disclosed “ongoing civil and criminal government investigative demands.”¹¹¹²¹³

Restatement and Internal Findings

The PACS Board’s independent Audit Committee opened its own investigation in November 2024, hiring outside counsel and forensic accountants. By late 2025, the committee found that PACS had not been “appropriately recognizing revenue for new services” and had lacked the internal environment needed for public-company financial reporting, particularly for identifying and communicating compliance risks.¹²

In June 2025, PACS announced it would restate results for the first two quarters of 2024. The final restatement cut reported revenue by $14.9 million for the first quarter and $46.1 million for the second, a combined reduction of roughly $61 million attributed primarily to overstated Medicare Part B revenue. The company also clawed back certain executive bonuses and reclassified some leases.¹⁴¹⁵¹⁶

As remedial steps, PACS formed a new compliance committee, appointed Katherine Lauer as interim chief compliance officer, and began searching for a permanent CCO with public-company and post-acute healthcare experience. CEO Jason Murray called the steps the beginning of a “new chapter” with a stronger compliance framework.¹²

The ReNew Healthcare Comparison

The Hindenburg report pointed to a Department of Justice settlement with a smaller chain, ReNew Healthcare, as a preview of what PACS could face. In April 2024, ReNew Health Group and two executives agreed to pay roughly $7.08 million to resolve allegations that they knowingly submitted false Medicare claims by misusing the same CMS COVID-19 waiver at issue in the PACS allegations, billing for residents who lacked COVID-19 or any other acute illness and had merely been near infected individuals. The ReNew settlement covered 27 California facilities.¹⁷ Former PACS employees told Hindenburg that applying the same theory to PACS’s much larger operation could produce liability in “the hundreds of millions.”³

PACS has denied the allegations and continues to operate. The securities class action, the SEC enforcement inquiry, and the disclosed civil and criminal investigative demands are all still open.

1
Labaton Keller Sucharow. Manchin v. PACS Group, Inc.
2
Kessler Topaz Meltzer & Check. PACS Group, Inc. Securities Fraud Class Action
3
Hindenburg Research. PACS Group
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Skilled Nursing News. Investors Sue Nursing Home Giant PACS Alleging Involvement in Medicare Scheme First Detailed in Hindenburg Report
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Glancy Law. PACS Group, Inc.
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SEC. PACS Group Follow-On Offering Prospectus
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SEC Form 4. Mark Hancock Insider Trading History
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Stanford Law School Securities Class Action Clearinghouse. Manchin v. PACS Group, Inc.
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CourtListener. Manchin v. PACS Group, Inc. Docket
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PACS Group, Inc. Class Action Complaint. Manchin v. PACS Group, Inc. Complaint
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SEC. PACS Group Form 10-K for the Year Ended December 31, 2025
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Skilled Nursing News. PACS CEO: New Chapter Begins With Stronger Compliance Framework, Record Revenue
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SEC. PACS Group Form 10-Q for the Period Ended March 31, 2026
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PACS Group. PACS Group, Inc. Reports Third Quarter 2025 Results
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SEC. PACS Group Restated Financial Statements
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SEC. PACS Group Form 10-Q for the Period Ended March 31, 2024 (Restated)
17
U.S. Department of Justice. San Gabriel Valley-Based Nursing Home Chain and Executives Pay Over $7 Million To Settle