Fraud Allegations Highlight Shareholders' Exposure to Risk at Nation’s Largest Mental Health Provider

Fraud Allegations Highlight Shareholders' Exposure to Risk at Nation’s Largest Mental Health Provider

Contact:
Tracy Honhart, Tracy.Honhart@seiu.org, 510-343-8625

Issued May 16, 2016

On May 18th, Universal Health Services, Inc. (UHS), the largest provider of behavioral healthcare services with 1 out of every 5 psychiatric beds nationally, will be holding its annual meeting for shareholders. Shareholders should be aware of their exposure to risk from an expanding federal investigation and abundance of patient care breakdowns at UHS facilities across the country.

Specifically, UHS finds itself under a Department of Justice (DOJ) criminal and civil fraud investigation involving the corporation and 25 of its facilities, plus a separate DOJ Stark Law investigation at a facility in El Paso, TX and another separate federal investigation of UHS physician contracts at its South Texas Health System. However, previous efforts by shareholders and patient advocates to improve accountability have been blocked, by an insular board of directors controlled by CEO Alan Miller. Miller controls over 80% of the voting power and elects five of the seven directors on the board despite owning less than 15% of the shares.

UHS’s board and management recently pushed to limit accountability even further when they escalated one of its patient death cases, Universal Health Services v. United States ex rel. Escobar (“Escobar”), to the U.S. Supreme Court. Escobar highlights an especially troubling example of UHS’s poor patient care on a national stage. The Escobar family’s teenage daughter tragically passed away while under the care of unlicensed and unsupervised staff at a UHS facility in Massachusetts, in violation of state law. The family seeks to hold UHS accountable under the False Claims Act (FCA) for claiming Medicaid payments even though UHS’s care failed to meet minimum licensure and supervision requirements.

As UHS argues for significant whistleblower restrictions, many of its facilities have violated state and federal laws designed to protect behavioral health patients and caregivers while the company reaps millions of dollars in profit. In fact, it was recently disclosed that in the last three years, 44 of UHS’s facilities had findings of “substantial non-compliance” due to serious deficiencies in quality and faced possible termination from Medicaid and Medicare. During oral arguments in this case, Justices Sotomayor and Kagan grilled UHS about their conduct, with Justice Sotomayor stating that, “I’m having a hard time understanding how you have not committed a fraud if you knew what you were doing.”

In addition to the U.S. government, large institutional investors have taken serious notice of UHS’ careless lack of board accountability and have proposed a resolution aimed at giving shareholders a meaningful voice in board elections by enabling shareholders to place their nominees for director on a company’s proxy card. The New York City Pension Fund and the California Public Employees’ Retirement System, two of the largest public pension funds in the country, have already publicly voiced support for the proposal and note that access is a “fundamental shareholder right” and would provide “accountability in the boardroom.”

UHS’s board and management have made decision after decision that have exposed this company, shareholders, and communities to tremendous risk. Improving shareholders’ voice by allowing access to the proxy will be essential to increasing boardroom accountability over this tightly controlled company.

UHSBehindClosedDoors.org is bringing to light serious problems in care at Universal Health Services, the nation’s largest provider of behavioral health care. It is an online resource for mental health advocates and caregivers supported by the Service Employees International Union.