Investor sues UHS execs, alleging ‘unfair’ stock gains amid pandemic

The US should tax excessive CEO compensation

A Universal Health Services investor is suing several executives of the King of Prussia, Pa.-based system, alleging they unjustly enriched themselves through stock options amid the pandemic, according to Law360

The lawsuit, filed in the Delaware Chancery Court and made public July 9, accuses UHS executives and directors of taking advantage of a pandemic-related temporary hit in the company’s stock price and argues taking the stock options was “grossly unfair to the company and its stockholders.”

“The controllers and other company insiders took advantage of the temporary drop in the company’s stock price to grant and receive options to buy the company’s stock at rock bottom prices, thereby showering themselves in excessive compensation,” the lawsuit claims.

In particular, the lawsuit claims that in just 12 days after the stock options were granted, defendants made over $30 million in gains. 

Several top execs were named as defendants, including Alan Miller, UHS founder and chair and Marc Miller, CEO and president of UHS. Three other UHS execs were named, as well as Warren Nimetz, an administrative partner of law firm Norton Rose Fulbright’s New York office.

“UHS’s directors and officers deny any liability associated with the company’s routine and publicly disclosed options grant in March 2020,” attorney Matthew Madden of Robbins Russell Englert Orseck & Untereiner, representing UHS, its executives and Mr. Nimetz, told Law360. “The options grant was in line with the company’s compensation practices in prior years and took place at a board meeting scheduled months in advance.”

Mr. Madden added that UHS’ executives and officials “acted properly” and that the plaintiff’s claims are “baseless.” 

“UHS is proud of its service to patients, and stewardship of investor capital, during these unprecedented times in the healthcare industry,” Mr. Madden told Law360.

The lawsuit was filed by Robin Knight. 

Hastening the demise of independent physician practice

https://mailchi.mp/bfba3731d0e6/the-weekly-gist-july-2-2021?e=d1e747d2d8

Physician Practice Sales to Private Equity Doubled in 3 Years

A new report from consulting firm Avalere Health and the nonprofit Physicians Advocacy Institute finds that the pandemic accelerated the rise in physician employment, with nearly 70 percent of doctors now employed by a hospital, insurer or investor-owned entity.

Researchers evaluated shifts to employment in the two-year period between January 2019 and January 2021, finding that 48,400 additional doctors left independent practice to join a health system or other company, with the majority of the change occurring during the pandemic. While 38 percent chose employment by a hospital or health system, the majority of newly employed doctors are now employed by a “corporate entity”, including insurers, disruptors and investor-owned companies.

(Researchers said they were unable to accurately break down corporate employers by entity, and that the study likely undercounts the number of physician practices owned by private equity firms, given the lack of transparency in that segment.) Growth rates in the corporate sector dwarfed health system employment, increasing a whopping 38 percent over the past two years, in comparison to a 5 percent increase for hospitals.

We expect this pace will continue throughout this year and beyond, as practices seek ongoing stability and look to manage the exit of retiring partners, enticed by the outsized offers put on the table by investors and payers.