King of Prussia, Pa.-based Universal Health Services has agreed to pay $65 million to resolve a 2009 shareholder class-action lawsuit against Psychiatric Solutions — a UHA subsidiary — over allegedly misleading investors by failing to disclose information about violence at one of its psychiatric hospitals.
The shareholder complaint was filed in the U.S. District Court for the Middle District of Tennessee against Psychiatric Solutions and some of its former officers. The allegations contained in the complaint concerned Riveredge Hospital in Forest Park, Ill., one of Psychiatric Solutions' facilities.
After a Chicago Tribune report revealed violence among juveniles at Riveredge Hospital, including reports of sexual assault, were going unreported, the state began an investigation into the facility in 2008.
There was a hold put on new admissions at Riveredge Hospital due to the investigation, which led to Psychiatric Solutions missing its 2009 earnings projection.
The shareholders alleged executives from Psychiatric Solutions misled investors by reporting positive statements regarding the quality of care offered at Riveredge Hospital, while the hospital was experiencing extensive patient safety issues. The complaint further alleged Psychiatric Solutions violated federal securities law by providing false assurances it was in compliance with all federal regulations.
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