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Week of December 10, 2023

HEADLINE NEWS House Votes to Trim Medicare's Red Tape WASHINGTON--By unanimous vote, the U.S. House of Representatives passed H.R. 3391, the Medicare Regulatory and Contracting Reform Act of 2001, a regulatory reform bill designed to simplify Medicare's reporting and appeals processes. The bill combines provisions from two similar House bills and focuses on regulatory reform, contracting reform, provider education and outreach, and appeals and recovery reform, among other provisions. Major components of the bill would require: --the Centers for Medicare and Medicaid Services publish all regulations or memoranda on one business day per month; --the U.S. Health and Human Services Department set a regular timeline for the publication of final regulations; --HHS introduce competition into its Medicare contracting process; --HHS develop a process for measuring claims payment error rates at each Medicare administrative contractor; --HHS establish an appeals process that permits access to judicial review; --CMS limit its use of extrapolation when auditing a provider's records; and --CMS wait to recoup alleged overpayments until the appeals process has begun. Health care industry representatives, such as the Alexandria, Va.-based American Association for Homecare, applauded the bill. "This is good legislation, and we hope to make it even better," said Tom Connaughton, AAHomecare's president. However, before these reforms can become law, members of the House and Senate must negotiate a compromise that combines aspects of H.R. 3391 with provisions of a Senate bill on Medicare reform--S. 1738--also introduced last week. And, considering the Senate has not yet started debating S. 1738, negotiations on Medicare reform could drag into next year, Connaughton said, adding, "I've been around here long enough to know that schedules slip." Senate staff members indicated that Medicare reform is high on the Senate's list of priorities for the new session that begins in January, but Connaughton predicts that final legislation probably will not pass both Congressional branches until sometime next summer or fall. Despite anticipated delays, however, this year's progress toward Medicare reform is not in vain, Connaughton explains. Because the 107th Congress spans 2001 and 2002, legislation currently on the table will carry through into January. When bicameral negotiations begin next year, AAHomecare will encourage negotiators to include what Connaughton calls the "best provisions" of both the House and Senate bills. For example, Connaughton hopes that a final law will include the Senate's provision to exempt non-Medicare patients from OASIS requirements and improve the House's appeals provision. Currently, the Medicare appeals process provision in the House bill would not allow providers to introduce new evidence to an administrative judge during the appeals process, thus limiting providers' ability to submit doctors' testimony, Connaughton said. Still, Connaughton remained optimistic. "We have something in the House," he said, "so we're halfway there." To learn more about this bill, visit http://thomas.loc.gov and search for number H.R. 3391. Dispute Arises over Union's Letter to NHHC Shareholders WASHINGTON and SCARSDALE, N.Y.--One of the nation's largest health care and public service workers' unions last week sent a letter to National Home Health Care's shareholders raising concern about NHHC�s lack of financial control and reporting mechanisms and its conduct toward employees. Specifically, the letter said that in addition to NHHC changing auditors and restating financial information frequently, it also delayed good-faith bargaining with 1,700 company employees and is involved in the financial mismanagement of its Heathrow, Fla.-based SunStar Healthcare health maintenance organization subsidiary. NHHC and three of its directors currently are defendants in a class-action lawsuit alleging securities fraud. The day before NHHC's annual meeting last week, Michael Zucker, corporate affairs director for the American Federation of State, County and Municipal Employees, which owns 25,000 shares of NHHC, urged company shareholders to "direct questions regarding our board's conduct to the company immediately, so that we may hold our directors to a higher level of accountability and disclosure on these issues." Responding to the letter, which he said was designed to "intimidate and harass" a NHHC subsidiary into a disadvantageous deal with the Union, NHHC Chief Executive Officer Steven Fialkow disputed each of the union's charges in a Dec. 5 statement. In his statement, Fialkow contended that the company has negotiated in good faith since bargaining began four months ago, that the company has not restated its financial statements, that lawsuits connected to SunStar have been dismissed and that the company has changed accountants only twice in 13 years. "[NHHC] has never had a reportable disagreement with any of its auditors," Fialkow added. Additionally, Fialkow said that NHHC is considering taking legal action against the union for "libel as well as possible securities law violations relating to false, misleading and manipulative statements contained in the press release." Health Care Revenue Rises in 2000, Home Health Revenue Falls, Census Shows WASHINGTON--The U.S. Commerce Department's Census Bureau reported last week that revenue for the nation's health care and social assistance industries increased by 6 percent in 2000. Conversely, revenue for the category that the Bureau calls "home health care services"--which includes ambulatory services, nursing and residential care facilities, and services for children and the elderly--decreased 2 percent in 2000, from $3.065 billion in 1999 to $2.998 billion. Additionally, between 1998 and 1999, revenue for home health care services dropped 4 percent, from $3.19 billion in 1998 to $3.07 in 1999. This is not surprising, according to Michael DeCarlo, an attorney with law firm Dickstein Shapiro Morin and Oshinsky�s health law services group in Washington. "The big money is in the [home health] agencies," he explained. And, after the federal government cut reimbursement payments in 1997, home health agencies retrenched and consolidated, he added. "This is exactly what the federal government wanted to see occur," DeCarlo said. But while revenue for home health agencies shrunk, DeCarlo believes that revenue for home medical equipment providers remained steady. And, for providers who focused on specific product lines like respiratory, the numbers probably were even better, DeCarlo surmised. "The upper-level corporate side of DME probably is in as good shape as the rest of health care," he said. Revenue numbers from HomeCare magazine's upcoming "Top Companies" issue support DeCarlo's prediction. The majority of the list's top private HME providers reported revenue growth from 1999 to 2000. And many of those providers reported double-digit revenue growth for the same time-period. The Census Bureau based its estimates on data from the 2000 Service Annual Survey and administrative data, and the bureau has adjusted estimates using the results of the 1997 Economic Census. For more information on the Census Bureau's report, visit http://www.census.gov/Press-Release/www/2001/cb01-188.html PROVIDER NEWS Coram Shareholders, Creditors Vote Not to Approve Reorganization Plan DENVER--Delivering a blow to Coram Healthcare's hopes of emerging from Chapter 11, the company's shareholders and creditors recently voted not to approve Coram's second proposed reorganization plan. However, while the vote was disappointing, it did not catch the company off-guard, according Kurt Davis, Coram's director of communications and investor relations. "The plan anticipated that some or all of the different classes might not vote for it," and therefore the plan included a clause asking the bankruptcy judge to confirm without the shareholders' vote, Davis said. Coram expects Delaware's federal bankruptcy court to decide sometime this month whether to confirm the reorganization plan. Until the judge grants approval, Davis said, progressive change within the company will be hindered. "[While in bankruptcy], you can maintain the company and keep it going, but if you want to do something different--like pursue an opportunity or get rid of a significant part of the business to do something else--you have to get the court's permission," he explained. "It's a cloud we live under. Everybody wants to live in the sunshine." Pediatric Services Reports Fourth Quarter Gains, 2001 Losses NORCROSS, GA.--Pediatric Services of America posted a net income of $1.29 million, or 19 cents a share, for the fourth quarter 2001 ended Sept. 30, compared to a net income of $1.17 million, or 17 cents a share, for the same quarter a year ago. "We are extremely pleased with our results," said Joseph Sansone, the company's president. "Operating performance was strong, and we demonstrated continued progress in our core pediatric nursing services." Transworld Healthcare Announces Fourth Quarter, Year-End Losses NEW YORK--Transworld Healthcare reported a net fourth quarter 2001 loss of $23.4 million, or $1.35 per share, compared to the company's net 2000 loss of $15.86 million, or $0.90 per share. For the year, Transworld reported a net loss of $26.61 million, or $1.53 a share, compared to a net 2000 loss of $24.94 million, or $1.38 a share. MANUFACTURER NEWS Electric Mobility Restructures Dealer Division SEWELL, N.J.--Citing aggressive discounting in the power mobility market, Electric Mobility announced in a letter to its dealer network last week that the company is restructuring its dealer division. As part of the restructuring, Electric Mobility said it will discontinue all trade advertising and related marketing expenses, streamline its power product line to ensure providers of product availability and eliminate its field sales force and related expenses, as of Dec. 31. Additionally, beginning Jan. 1, 2002, Electric Mobility will offer only specified power chair products through its dealer division; no longer provide Rascal scooters and accessories through its dealer division; continue to provide parts for all previously sold products through its dealer division; issue rebates only to providers in good credit standing with the company; and issue rebates in the form of a check or credit applied to the account. "It is important that you understand that this decision is purely based upon a financial consideration and in no way is a reflection upon [field sales personnel's] performance," said Michael Flowers, president of Electric Mobility. SOURCES SAY WASHINGTON--Ever wonder what the over-age-65 crowd does on the Internet? According to a study released by the Pew Internet and Wired Life Project, titled "Wired Seniors: A Fervent Few, Inspired by Family Ties," only 15 percent of Americans age 65 and over have access to the Internet, and the majority of those with access use it for e-mailing and playing online games. Online retailers take note, though: "Pre-retirement" Americans, those ages 50 to 64, are among the most well-connected to the Internet and will likely keep Internet access after they retire, say Pew researchers. "This �silver tsunami� may be the generation that takes advantage of all the Internet has to offer as they get older," say report analysts. For a copy of the study, go to http://www.pewinternet.org. WASHINGTON--Health care providers should consider including e-mail content-management software in their Health Insurance Accountability and Portability Act compliance plans, according to Bruce Fried, an attorney with Washington-based Shaw Pittman. "Using secure e-mail content tools is a best technology practice for avoiding legal liability from the accidental--or purposeful--release of protected patient records or other kinds of confidential health data," Fried wrote in a white paper commissioned by SurfControl, a Scotts Valley, Calif.-based Internet filtering company. "Rules enforced by filtering technology can prevent e-mails containing [patient health information] from being sent by unauthorized employees to unintended recipients," he wrote. INDUSTRY BRIEFS David Byrnes has joined San Francisco-based McKesson as vice president, employee relations. Byrnes was a shareholder in San Francisco-based Littler Mendelson, where he advised and represented private sector employees in labor and unemployment law and specialized in union-employer relations. The Waterloo, Iowa-based VGM Group has named Patricia Suda vice president of U.S. sales effective Jan. 1, 2002. In the newly created position, Suda, formerly a member-service representative at VGM, will be responsible for VGM�s outside sales force and for developing marketing programs with VGM Group participating manufacturers. Suda served as vice president of sales for Atlanta-based Graham-Field Health Products Canada before joining VGM in 1998. William Konopisos has been named vice president, sales, for I-Flow, Lake Forest, Calif. Konopisos will lead I-Flow�s new surgical pain sales force. Konopisos has more than 10 years executive sales experience with major health care companies, including Mallinckrodt and subsidiaries of Pfizer, Sorin Biomedical and Johnson and Johnson. Paula Carlo has been named director of sales and business development for Home Care Medical of New Berlin, Wis. Carlo has six years health care-related management and sales experience, most recently working for two years as statewide sales manager for VCM/Gateway. The Med Group, Lubbock, Texas, has named Kevin Davenport its contracting specialist responsible for contract development and procurement with manufacturers. Davenport has more than 17 years employment experience in home medical equipment, serving as director of purchasing for The Med Group and Brentwood, Tenn.-based American HomePatient. Also, the company has added Honolulu, Hawaii-based Ace Medical; Oakwood Village, Ohio-based Medical Services Companies; and Mentor, Ohio-based Hytech Homecare to the Med Group network. IN OTHER NEWS ResMed, San Diego, has purchased Labhart AG, its Swiss distributor based in Basel, Switzerland. According to ResMed, the purchase will further strengthen the company�s representation in the European market, according to Peter Farrell, chairman and chief executive officer. Terms of the deal were not disclosed. Bethlehem, Pa.-based B. Braun Medical has entered into an agreement with Huntington Beach, Calif.-based Curlin Medical to distribute the Curlin 2000 Plus Ambulatory Electronic Infusion Pump in the United States. B. Braun�s Continuing Care, Hospital Infusion System and Critical Care Specialist sales groups will market the Curlin pump. High Point, N.C.-based TransTech Pharma and Princeton, N.J.-based Novo Nordisk are entering into a three-year strategic collaboration to focus on the discovery and development of new targets for the treatment of diabetes. Under the terms of the agreement, Novo Nordisk will get an exclusive worldwide license to certain products resulting from the research, while TTP will receive an upfront payment, research support, milestone and royalty payments. Financial terms of the agreement were not disclosed. HomMed, Brookfield, Wis., has formed HomMed Focused Care, a new division that will work with insurance companies to monitor, manage and treat their most chronically ill and expensive patients. According to HomMed President Herschel Peddicord, these patients represent 10 percent of the total patient population and 50 percent of total costs to insurers. Robert Crockett, vice president for program development, will lead the new division, which will utilize the company�s HomMed Home Monitoring System. St. Paul, Minn.-based 3M Health Care has launched a new Web site for skin health professionals at http://www.3M.com/skinhealth. The site provides skin health-related clinical conditions and solutions, latex and reimbursement information, clinical practice tips and links to professional Web sites of interest to clinicians. Altimate Medical, Morton, Minn., has launched its new Web site, http://www.altimatemedical.com. The new site provides product information, online ordering for providers, a frequently-asked-questions section, funding guidelines for standing technology and articles written by clinical professionals. A new project launched by the American Society on Aging will lend a helping hand to family caregivers. As part of the National Family Caregiver Support Program, AoA plans to use the Internet to provide to nurses, occupational therapists and social workers training that will enable them to serve as resources to family caregivers. The project is being coordinated in cooperation with the American Nurses Association, the American Occupational Therapy Association and the National Association of Social Workers. The Paralyzed Veterans of America has made a gift of $250,000 to the PVA/EPVA Center for Neuroscience and Regeneration at Yale University. The gift will fund research for spinal cord dysfunction and its cures at the center, which was formed by a special collaboration among PVA, the Eastern Paralyzed Veterans Association, the U.S. Department of Veterans Affairs and the Yale University School of Medicine.

STOCK WATCH Investment firm Raymond James has initiated coverage on San Francisco-based McKesson at a "buy" rating.

Company High Low PE Ratio 11/30/01 12/7/01 Change Allied Healthcare (AHPI) 3.95 2.69 N/A 3.45 3.25 (0.20) American HomePatient (AHOM) 1.70 0.12 N/A 0.80 0.70 (0.10) Amerisource Bergen (ABC) 72.00 40.06 27.85 59.50 58.47 (1.03) Apria Healthcare (AHG) 30.50 19.50 19.20 24.06 23.95 (0.11) CareCentric (CURA) 4.53 0.51 N/A 1.00 0.60 (0.40) Chad Therapeutics (CTU) 3.70 0.44 N/A 3.01 2.96 (0.05) Coram Healthcare (CRHEQ.OB) 0.80 0.06 N/A 0.24 0.21 (0.03) Gentiva Health Services (GTIV) 23.50 11.75 10.92 20.43 20.70 0.27 Horizon Pharmacies (HZP) 1.62 0.10 N/A 0.00 0.00 0.00 Invacare Corp. (IVC) 41.25 27.56 16.88 35.40 35.15 (0.25) Johnson and Johnson (JNJ) 60.97 40.25 29.80 58.25 56.65 (1.60) Lincare Holdings (LNCR) 34.39 22.25 22.70 29.72 27.12 (2.50) Matria Healthcare (MATR) 34.35 7.25 38.33 26.00 32.15 6.15 McKesson (MCK) 41.50 23.40 923.08 37.27 36.23 (1.04) National Home Healthcare Corp. (NHHC) 19.85 4.82 18.23 16.30 14.44 (1.86) Option Care (OPTN) 22.15 4.87 23.34 17.00 16.91 (0.09) Pediatric Service of America (PSAI) 8.90 4.00 26.70 7.96 7.95 (0.01) Praxair (PX) 54.31 36.50 27.65 52.92 53.72 0.80 ResMed (RMD) 62.20 35.12 146.00 58.50 56.61 (1.89) Respironics (RESP) 37.05 21.56 29.07 31.59 32.46 0.87 Transworld Healthcare (TWH) 4.83 0.75 N/A 2.84 2.50 (0.34) Tyco (TYC) 63.21 39.24 21.07 58.80 58.84 0.04 Walgreen Co. (WAG) 45.29 28.70 38.31 33.00 33.06 0.06

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