Wells base case remains DOJ will deliver ‘material fine’ to Pacs Group

Wells Fargo held an expert call with former DOJ fraud coordinator attorney Paul Weidenfeld following a Hindenburg short report in November that alleged both Medicare Part A and B fraud at Pacs Group (PACS), an operator of skilled nursing facilities. In the short term, the firm expects facilities with Pacs exposure to remain under pressure, especially until Pacs gives an update and reports earnings, but on a 12-month view the firm remains Overweight-rated on CareTrust REIT (CTRE) and Omega Healthcare (OHI). Following the expert call, the firm’s base case remains that eventually the DOJ will deliver a “material fine” to Pacs and require a Corporate Integrity Agreement, though Wells adds that the scope of potential outcomes “remains wide.”