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DoJ Investigation Remains A Key Risk To Universal Health Services

DoJ Investigation Remains A Key Risk To Universal Health Services NYSE: UHS

Following the release of an investigative article by BuzzFeed criticizing Universal Health Services, Inc. UHS 1.37%'s behavioral admissions policies, Credit Suisse revisited an ongoing Department of Justice investigation. The firm believes it remains a key risk to the shares of the company, although opining that it is hard to size any potential liability and/or financial impact.

The BuzzFeed article triggered nearly a 12 percent selloff in the company's shares on Wednesday. Leerink analysts, however, believe the stock has been oversold in response to the negative BuzzFeed article. The stock is advancing on Thursday, although reclaiming only a fraction of the lost ground. The company dismissed the report as inconsequential.

Credit Suisse's Commentary

Though not very clear if the article is related to the ongoing government investigation, analyst Scott Fidel presented some facts gleaned out of the company's recent 10-Q filing. In 2013, the company was subpoenaed by the Office of Inspector General over several behavioral health facilities in 2013.

The analyst noted that upon a referral from the DoJ Civil Division, the DoJ Criminal Fraud section investigated one of the behavioral health facilities in October 2013. The investigation has since then been expanded to include additional facilities and also the company, as a corporate entity, Fidel noted.

Credit Suisse indicated that the investigation is focused on billings submitted to government payers for services at these facilities. The firm noted that the company had said earlier it is cooperating fully with the government and that it could be a long process.

As such, Credit Suisse maintains its Neutral rating and $130 price target.

At time of writing, shares of Universal Health Services were rising 1.37 percent to $112.81.

DateFirmActionFromTo
Nov 2016Bank of AmericaDowngradesBuyNeutral
Nov 2016Avondale PartnersDowngradesMarket OutperformMarket Perform
Oct 2016Wolfe ResearchInitiates Coverage OnPeer Perform

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