PACS Group (NYSE: PACS) announced in a Securities and Exchange Commission (SEC) filing Monday that it overstated revenue related to Medicare Part B billings, and will restate its previously issued financial statements for the first and second quarters of 2024.

The company now estimates it overstated revenue by approximately $15 million to $17 million in Q1 of 2024 and $46 million to $48 million in Q2 of 2024. 

These figures are preliminary and may change, the filing states.

Moreover, PACS stated in the SEC filing that it expects “to report one or more material weaknesses in its internal control over financial reporting related to the restatements.”

The impacted filings include its Q1 and Q2 2024 10-Q reports submitted to the SEC in May and August 2024. As a result, these financial statements and related communications should no longer be relied upon, the company said in the 8-K filing.

The restatement stems from an ongoing independent investigation by the company’s audit committee – assisted by external legal counsel – into allegations made by an institutional short seller, the now-defunct Hindenburg Research, into the nursing home giant’s referral and reimbursement practices.

Based on findings from the investigation and additional internal reviews, PACS management concluded that revenue from certain respiratory and other therapy services billed under Medicare Part B was incorrectly recognized.

“[T]he Company believes that the revenue associated with the provision of respiratory services and certain other therapy services billed under Medicare Part B should not have been recognized as revenue in the Impacted Periods,” the company said.

And while the investigation is nearing completion, the committee has not found any evidence questioning the integrity of PACS’ executive leadership.

“To date, the Audit Committee has found no basis to question the integrity of the Company’s Executive Vice Chairman, Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer,” the filing states. 

Due to these issues, PACS has not yet filed its Q3 2024, FY 2024, or Q1 2025 reports. The New York Stock Exchange has granted PACS an extension until September 2, 2025 to become current with its filings, subject to reassessment.

In response, PACS has launched a broader review of its regulatory compliance practices and has begun implementing enhanced internal controls.

The company has appointed an Interim chief compliance officer to oversee these efforts and ensure more robust regulatory oversight moving forward, the filing states.

“[The company] has begun to implement additional measures designed to enhance processes and controls surrounding regulatory compliance,” the 8-K filing states. “In addition, management continues to assess the effect of any restatements on the Company’s internal controls over financial reporting and its disclosure controls and procedures.”