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UHS to pay $65M to settle shareholder suit against Psychiatric Solutions

Universal Health Services will pay $65 million to settle allegations that its Psychiatric Solutions subsidiary misled investors about abuse and neglect that occurred at one of its hospitals.

Psychiatric Solutions was a publicly traded company when UHS purchased it in 2010. The lawsuit (PDF), which was filed in 2009 in U.S. District Court in Nashville, charges that the behavioral-health company provided falsely upbeat financial projections to investors, even amid ongoing problems at one hospital.


The facility, Riveredge Hospital in Forest Park, Ill., became the subject of a state investigation in 2008 after a Chicago Tribune report found that violence among its juvenile patients, including incidents of sexual assault, wasn’t being reported.

The investigation led to a hold on new admissions at Riveredge and ultimately to Psychiatric Solutions missing its 2009 earnings projections. Shares fell to $17.50 after the company reported its financial results in February 2009; shares had traded above $32 for most of the previous year, according to the suit.

Investors, led by Garden City Employees’ Retirement System, sued the company seven months later, alleging that executives downplayed the problems at Riveredge and provided false assurances.

The suit also named three executives: Joey Jacobs, the company’s CEO and co-founder; Brent Turner, executive vice president of finance and administration; and Jack Polson, chief accounting officer. Jacobs and Turner are now CEO and president, respectively, of Acadia Healthcare.

UHS said it incurred $34 million in legal fees, but expects to recover $16 million from liability insurance.

Follow Beth Kutscher on Twitter: @MHbkutscher


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