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Week of April 1, 2024

HEADLINE NEWS CMS Publishes Key to HIPAA Deadline Extension BALTIMORE--To encourage thousands of health care industry companies to conform to a uniform electronic transaction protocol, U.S. legislators in December 2001 dangled the proverbial carrot: a deadline extension. The electronic transaction rule, which is only one provision of the massive 1996 medical privacy law, originally was slated to go into effect on Oct. 16, 2002. However, noting the costs and time required to implement this rule, the U.S. Congress in Dec. 2001 extended the compliance deadline to Oct. 16, 2003--on one condition: To receive the extension, health plans and providers must submit a comprehensive compliance plan to the Centers for Medicare and Medicaid Services on or before Oct. 15, 2002. Following this decision, CMS promised to develop guidelines to help interested entities create a suitable compliance plan. And last week, CMS delivered on that promise, publishing a "model compliance plan" that includes a budget, an assessment of compliance concerns, a discussion of whether an outside vendor is necessary to achieve compliance and a compliance schedule that ensures testing will begin no later than April 16, 2003. "This model plan will help health care businesses prepare to meet these transaction standards while giving them until Oct. 2003 to finish the job," said Tommy Thompson, secretary of the U.S. Department of Health and Human Services. "Once adopted, these national standards will make it less costly to process claims, reducing administrative costs nationwide." Small health plans with annual revenues of less than $5 million should not submit a compliance plan, however, because these plans already have until 2003 to comply, CMS said. Before creating a compliance plan, home medical equipment providers should contact their software vendors to determine whether a deadline extension is necessary, according to Cara Bachenheimer, a health law expert and partner with the Washington-based law firm Epstein, Becker & Green. To obtain a model compliance plan, go to http://www.cms.hhs.gov/hipaa. CMS Proposes Rulemaking Committee for Prosthetics, Orthotics BALTIMORE--Preparing to tackle certain provisions of the Benefits Improvement and Protection Act, which mandates the development of a special-payment rule for prosthetics and certain custom-fabricated orthotics, the Centers for Medicare and Medicaid Servcies is establishing a negotiated rulemaking committee. To staff this committee, CMS is looking for home health industry stakeholders "who are likely to be significantly affected by the proposed rule," according to a March 22 Federal Register notice. Comments on the proposed committee should arrive at CMS no later than 5 p.m. on April 22, 2002, the notice said. To read more, go to http://www.access.gpo.gov/su_docs/fedreg/a020322c.html, and scroll down to the heading entitled, Centers for Medicare and Medicaid Services.

PROVIDER NEWS Rotech Emerges from Bankruptcy ORLANDO, Fla.--Rotech Healthcare emerged from bankruptcy as an "independent, stand-alone entity," and no longer affiliated with its former parent company, Integrated Health Services of Sparks, Md., according to Rotech officials. After securing $275 million from a syndicate of financial institutions, including Goldman Sachs Credit Partners and UBS Warburg, and issuing $300 million in senior subordinated notes, Rotech was able to pay off its creditors and prepare for normal business operations, the company said. However, while the company plans to use its revolving credit for "general corporate purposes, including working capital, acquisitions and capital expenditures," a Rotech spokesman explained that acquisitions are not imminent. "It is Rotech's intention to grow the company," he said, "and acquisition certainly is one path toward growth, but the company has nothing to announce at this point." Stephen Linehan, president and chief executive officer of Rotech, said he is confident that the company's new corporate and financial structure--which places company ownership in the hands of Rotech's former creditors--"will provide a solid platform to advance our competitive position in the marketplace." Walgreen Reports Q2 and Six Months Results DEERFIELD, Ill.--For the second quarter of fiscal year 2002, Walgreen's net income rose 10 percent to $326.6 million, or 32 cents per diluted share, compared to a net income of $296.9 million, or 29 cents per diluted share, for the same quarter a year ago. The company's net earnings for the first half of 2002 increased 12.6 percent to $512.5 million, or 50 cents per diluted share, compared to $509.1 million, or 49 cents per diluted share, for the first half of 2001. Sales for the second quarter increased 16.5 percent to $7.5 billion, compared to second quarter 2001; and sales for the first half of 2002 increased 16.6 percent to $14 billion, compared to the first half of 2001. MANUFACTURER NEWS AbilityOne Acquires Smith & Nephew Division CHICAGO--AbilityOne, a portfolio company of the investment management firm One Equity Partners, has acquired London-based Smith & Nephew's rehabilitation business. As part of the agreement, Ability One paid Smith & Nephew in cash, and Smith & Nephew retained a 21.5 percent interest in the enlarged rehabilitation business. "The combination of AbilityOne and the Smith & Nephew rehabilitation business will position the company as the leading worldwide distributor of rehabilitation products, providing a large portfolio of products with considerable distribution strength," said Timothy Dugan, a partner with One Equity Partners. "With revenues of approximately $200 million, the company will be well-capitalized and well-positioned for further growth."

SPOTLIGHT Long-Term Care for Baby Boomers to Overwhelm Federal, State Budgets WASHINGTON--This month, the U.S. General Accounting Office added its voice to the growing chorus of gloomy predictions about the effects of America's aging baby-boomer population on federal and state long-term-care budgets. Speaking before the Senate's Special Committee on Aging, U.S. Comptroller General David Walker said, "the aging of the baby-boom generation will lead to a sharp growth in federal entitlement spending that, absent of meaningful reforms, will represent an unsustainable burden on future generations." During the next three decades, as the 76 million Americans born between 1946 and 1964 age, government spending on Medicare, Medicaid and Social Security could double as a share of the economy--from 2.2 percent in 2000 to 5 percent in 2035, according to GAO predictions. And spending on long-term care--which includes home care--could grow at an even faster rate. Between now and 2050, the GAO predicts annual public and private spending on long-term care will increase as much as 64 percent, from approximately $137 billion today to as much as $379 billion during the next 40 to 50 years. While the media has focused almost exclusively on Medicare and Social Security reforms to combat these trends, Walker urged lawmakers not to ignore the fact that Medicaid currently pays for approximately 45 percent of all long-term-care expenses, which include health care and quality-of-life expenses. Because the Medicaid program relies not only on the federal government but also on state governments for funding, providing long-term care to America's aging baby boomers could strain government budgets at all levels, Walker explained. Walker suggested that the federal government take several steps toward meeting the impending challenges of long-term care costs, including: --Determining the societal responsibilities for long-term care; --Considering the potential role of social insurance in financing long-term care; --Recognizing the benefits, burdens and costs of informal caregiving; --Implementing and administeingr reforms efficiently; and --Developing financially sustainable public commitments. To read Walker's testimony, go to http://www.gao.gov, click on "Reports and Testimony," and scroll down to the heading entitled, March 21, 2002.

SOURCES SAY WASHINGTON--There are nearly 54 million Americans living with disabilities, and last week, the U.S. Department of Health and Human Services announced a plan to make it easier for these Americans to live in their communities and in their homes. After presenting President Bush with reports from nine federal agencies outlining hundreds of solutions to support community living, HHS Secretary Tommy Thompson announced that the department will provide $55 million to the "Systems Change Grants for Community Living"--a program that helps states to improve community long-term care systems for people with disabilities and chronic illnesses. "These reports represent the first time that so many federal agencies have worked together to create a comprehensive blueprint toward achieving community living for people with disabilities," Thompson said. "It's been a remarkable effort that truly demonstrates this administration's commitment to providing people with disabilities with the tools they need to participate fully in community life." WASHINGTON--Racial and ethnic minorities in America are more likely to receive lower-quality health care than Caucasian Americans, regardless of income or insurance coverage, according to a recent study from the National Academies' Institute of Medicine. "Disparities in the health care delivered to racial and ethnic minorities are real and are associated with worse outcomes in many cases, which is unacceptable," said committee chair Alan Nelson, former president of the American Medical Association. "The real challenge lies not in debating whether disparities exist, because the evidence is overwhelming, but in developing and implementing strategies to reduce and eliminate them." To reduce these racial and ethnic health care disparities, the committee recommended that government leaders work to increase awareness about these disparities and to implement "evidence-based" guidelines to help providers and health plans choose the best procedures. WASHINGTON--Diabetes-management programs can save health plans money while improving outcomes, according to a study published in the April edition of the journal Diabetes Care. Comparing health care costs for diabetes patients enrolled in a health maintenance organization-sponsored disease-management program with costs for diabetes patients not enrolled in the disease-management program, the study found that, "in this HMO, an opt-in disease management program appeared to be associated with a significant reduction in health care costs and other measures of health care use."

INDUSTRY BRIEFS President Bush has nominated Richard Carmona as U.S. Surgeon General and Elias Zerhouni as director of the Bethesda, Md.-based National Institutes of Health. Carmona is clinical professor of surgery, public health, and family and community medicine at the University of Arizona. He also is chairman of the State of Arizona Southern Regional Emergency Medical System. Zerhouni is the executive vice dean of the Johns Hopkins University School of Medicine and chairman of the Department of Radiology and Radiological Science at Johns Hopkins. David Kaysen, president and chief executive officer of New Brighton, Minn.-based Rehabilicare, has resigned. He had been with the company since 1992. John Maley, chairman of Rehabilicare's board of directors, will assume the role of acting CEO. IN OTHER NEWS The Baltimore-based Centers for Medicare and Medicaid Services has approved two agencies for deeming authority of Medicare+Choice organizations. The Joint Commission on Accreditation of Healthcare Organizations, Oakbrook Terrace, Ill., and the National Committee for Quality Assurance, Washington, have been given the authority to accredit M+C organizations that are licensed as health maintenance organizations or preferred provider organizations. Accreditation makes the M+C organizations exempt from CMS monitoring of certain requirements. The U.S. Food and Drug Administration has approved the first home kidney dialysis system. Aksys, a manufacturer of hemodialysis products in Lincolnshire, Ill., has received the FDA 510(k) clearance to market the Personal Hemodialysis, or PHD, System, which is designed to automate the hemodialysis process for short daily dialysis in the home. The product will be launched initially in the northwest and midwest regions of the United States, with shipments beginning during the third quarter of this year. The National Home Infusion Association, Alexandria, Va., has developed "The NHIA Coding Standard for Home Infusion Claims Under HIPAA." The standard, which is available for free download from the NHIA Web site, http://www.nhianet.org, includes general information about Health Insurance Portability and Accountability Act requirements, HIPAA-approved coding and home infusion services; procedures for using the HIPAA-approved billing codes; and examples of claim coding.

STOCKS Bannockburn, Ill.-based Option Care's board of directors has approved a five-for-four stock split of the company's outstanding common stock, effective May 1, 2002. On April 10, 2002, stockholders of record will receive a stock dividend of one additional share of common stock for every four shares of common stock they own. Company High Low PE Ratio 3/22/02 3/28/02* Change Allied Healthcare (AHPI) 5.23 3.00 120.00 5.00 4.76 (0.24) American HomePatient (AHOM.OB) 1.70 0.19 N/A 0.75 0.58 (0.17) AmerisourceBergen (ABC) 72.00 43.45 30.49 69.84 68.30 (1.54) Apria Healthcare (AHG) 29.85 19.50 18.57 23.17 24.51 1.34 Cardinal Health (CAH) 77.32 59.73 35.27 70.05 70.89 0.84 CareCentric (CURA) 3.00 0.46 N/A 0.90 0.75 (0.15) Chad Therapeutics (CTU) 4.35 0.69 N/A 3.40 3.35 (0.05) Coram Healthcare (CRHEQ.OB) 0.76 0.13 N/A 0.55 0.54 (0.01) Gentiva Health Services (GTIV) 25.50 15.60 29.13 23.80 24.76 0.96 Invacare (IVC) 41.25 28.50 33.87 37.30 37.60 0.30 Johnson and Johnson (JNJ) 65.89 40.25 35.30 64.85 64.95 0.10 Lincare Holdings (LNCR) 34.39 22.25 21.97 27.29 27.12 (0.17) Matria Healthcare (MATR) 40.00 12.66 28.20 22.70 24.25 1.55 McKesson (MCK) 41.50 24.85 93.57 38.39 37.43 (0.96) National Home Healthcare (NHHC) 19.85 6.10 12.63 12.27 12.07 (0.20) Option Care (OPTN) 22.15 8.37 22.62 16.55 16.51 (0.04) Pediatric Services of America (PSAI) 14.10 4.70 17.73 11.08 10.90 (0.18) Praxair (PX) 61.11 36.50 22.65 58.38 59.80 1.42 ResMed (RMD) 62.20 35.20 88.71 40.07 40.13 0.06 Respironics (RESP) 37.88 23.79 27.00 31.98 32.40 0.42 Transworld Healthcare (TWH) 4.83 2.21 N/A 3.98 3.90 (0.08) Tyco (TYC) 60.09 22.00 11.93 33.75 32.32 (1.43) Walgreen (WAG) 44.30 28.70 42.60 39.81 39.19 (0.62) *The market was closed Fri., March 29, for the Good Friday holiday.

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