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Week of February 18, 2024

HEADLINE NEWS Higher Medicare Spending Does Not Ensure Quality, Study Says HANOVER, N.H.--More Medicare money does not necessarily buy higher-quality health care, according to researchers from Dartmouth Medical School's Center for Evaluative Clinical Science. In studying Medicare's 1996 expenses, Dartmouth researchers found that the Centers for Medicare and Medicaid Services paid more than twice as much per beneficiary for health care in some U.S. regions than in others. To explain these discrepancies, the researchers examined hospital records from regions across the country and found that higher costs did not correspond to better medical outcomes. In fact, even after adjusting for illness rates from region to region, researchers found no evidence that beneficiaries in Miami--where Medicare paid an average of $8,414 per beneficiary in 1996--receive better health care than beneficiaries in Minneapolis--where Medicare paid only $3,431 per beneficiary in 1996. Furthermore, the researchers concluded, if Medicare used efficient regions as a benchmark for health care spending nationwide, the federal government could save as much as 40 billion annually, while bolstering health care quality. "It is a myth that more Medicare spending means better health or longer life expectancy, and yet our Medicare system has been operating based on this myth for a long time," said the report's lead author John Wennberg. After drawing this conclusion, Wennberg and his associates reexamined the hospital records, looking for clues to why some regions cost Medicare so much more than others. The researchers determined that: --Health care organizations in these expensive regions did not provide enough "effective care," which the researchers defined as scientifically undisputed treatments and services such as colon cancer screening and post-heart-attack drugs; --Patients in these expensive regions were not involved enough in making treatment decisions, and the patients' lack of involvement led to unwarranted variations in surgery rates among regions; and --Patients in these expensive regions used "supply-sensitive care"--which the researchers defined as everyday care such as physician visits, diagnostic testing and hospitalizations--more frequently than did patients in other regions, without gaining better health outcomes. To eliminate these variations, the researchers recommended that Medicare establish "Comprehensive Centers for Medical Excellence," that would encourage high-quality care through the development of "best practices" and through incentive programs for successful care-givers. "We propose a new structure for Medicare reforms that focuses simultaneously on increasing the use of effective care and reducing medical errors, improving the quality of medical decision making and reducing supply-sensitive care," the study said. The first step toward this goal is to conduct a demonstration project to "test the hypothesis that leading health care organizations will partner with the federal government to reduce unwarranted variations and meet six goals for medical excellence," the study concluded. To read this study go to http://www.healthaffairs.org/WebExclusives/Wennberg_Web_Excl_021302.htm. Judge Appoints Trustee, Denies Lawsuit in Coram Bankruptcy Case DENVER--On Feb. 13, Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware announced three rulings in Coram Healthcare's year-and-a-half-old case, the company said. First, at the request of the Office of the U.S. Trustee and two note holders, Walrath appointed a Chapter 11 trustee to oversee the company's reorganization process. Next, she denied permission for the Equity Committee to bring a derivative lawsuit against the Coram's chief executive officer, board of directors and a noteholder. Finally, she denied a motion for orders related to Coram's governance. "We welcome appointment of a Chapter 11 trustee and believe that, short of a consensual settlement between the Equity Committee and note holders, appointment of a trustee is the best way to complete an equitable and timely resolution of this reorganization," said Daniel Crowley, the company's chairman, president and chief executive officer. Coram filed for bankruptcy in August 2000 and has maintained patient services, business operations, and debt payments throughout the bankruptcy process, according to a company press release. Shareholders Slap Tyco with Another Lawsuit NEW YORK--Another class action lawsuit has been filed against Tyco by shareholders who purchased the company�s common stock between Feb.1, 2000, and Feb. 1, 2002, alleging the company issued a series of material misrepresentations to the market during the two-year span, thus artificially inflating Tyco�s stock price. Specifically, the lawsuit claims Tyco failed to disclose that the company would achieve its earnings targets only through undisclosed acquisitions; that the individual Tyco defendants sold more than $100 million of their individual stock holdings to the company; and that Tyco�s management procedures were to make large payments to insiders, including a $20 million payment to one director and his charity for furthering the interests of Tyco. New York City-based law firm Wechsler Harwood Halebian and Feffer filed the lawsuit in the U.S. District Court for the Southern District of New York on behalf of the shareholders. Two weeks ago, the New York City-based law firm of Lovell and Stewart filed a similar class action suit against Tyco on behalf of Tyco shareholders.

PROVIDER NEWS Transworld Announces Q1 Income NEW YORK--For the first quarter ended Dec. 31, 2001, Transworld Healthcare announced a net income of $1,457,000, or 8 cents per diluted share, compared to a net loss of $2,796,000, or a loss of 16 cents per share, for the same period in 2000. The company's chairman and chief executive officer, Timothy Aitken, attributes this quarter's improvement to expansion in Transworld's United Kingdom-based staffing business, Allied Healthcare. Lincare Reports Q4, 2001 Results CLEARWATER, Fla.--Lincare Holdings reported a net income of $33.3 million, or 30 cents per diluted share for the fourth quarter ended Dec. 31, 2001, compared to a net income of $31.8 million, or 30 cents per diluted share for the same period in 2000. The company's 2001 net earnings were $134.9 million, or $1.23 per diluted share, compared to $116.9 million, or $1.08 per diluted share, in 2000. John Byrnes, Lincare's chief executive officer, attributes these earnings to the company's aggressive acquisition strategy that based on "opening denovo locations in contiguous and new geographic markets." All totaled, Lincare acquired 18 companies during 2001, adding 39 locations in twelve states. Gentiva Reports Fourth Quarter and Year-End Earnings MELVILLE, N.Y.--For the fourth quarter ended Dec. 31, 2001, Gentiva Health Services reported net earnings of $6.3 million, or 24 cents per diluted share, compared to $3.6 million, or 16 cents per diluted share in 2000. Additionally, the company reported a 2001 net income of $21 million, or 95 cents per diluted share, compared to a loss of $104.2 million, or a loss of 43 cents per share in 2000. These numbers do not include special charges related to the sale of Gentiva's staffing business. Apria Announces Q4, 2001 Income LAKE FOREST, Calif.--For the fourth quarter ended Dec. 31, 2001, Apria Healthcare Group announced a net income of $20 million, or 36 cents per diluted share, compared to a net income of $15.3 million, or 28 cents per diluted share for the same period in 2000. The company also reported a 2001 net income of$71.9 million, or $1.29 per diluted share, compared to a net income of $57 million, or $1.06 per diluted share in 2000.

MANUFACTURER NEWS McKesson Acquires VitaRx, Expands Division SAN FRANCISCO--In an effort to expand services in its patient-relationship management and disease management businesses, McKesson has acquired Harahan, La.-based injectable drug therapy supplier VitaRx. The new business unit will be called McKesson Specialty Pharmaceuticals and will operate within McKesson's Health Solutions division. Terms of the acquisition were undisclosed. AHP Back in the Black in Q2 ST. LOUIS--Allied Healthcare Products reported a net income of $96,547, or 1 cent per share, for the second quarter 2002 ended Dec. 31, 2001, compared to a net loss of $90,699, or 1 cent per share, for the same quarter a year ago. "With a few exceptions, Allied continued to see slow sales across its product lines during the second quarter," said Earl Refsland, Allied's chief executive officer. "This reflects both soft market conditions and the fact that we continue to address operational challenges as we work to get the business back on track."

SOURCES SAY WASHINGTON--At a hearing on next year�s budget request for the U.S. Department of Health and Human Services, Senate Budget Committee Chairman Kent Conrad, D-N.D., said the department�s estimates are short-sighted because they do not provide for the addition of a prescription drug benefit, increased provider payments and expected growth in the program. "Last night, as I examined the budget submission . . . I came to the conclusion that someone in the administration has cooked the books and cooked them big time with respect to Medicare," Conrad said to HHS Secretary Tommy Thompson at the hearing. Major components of the HHS budget calls for $190 billion over 10 years for a Medicare prescription drug benefit, $89 billion to help expand coverage to the uninsured through tax credits and $4.3 billion to respond to bioterrorism. ALEXANDRIA, Va.--The issue of competitive bidding has resurfaced of late, due in no small part by the mention in the Bush Administration�s 2003 budget of a national competitive bidding program for home medical equipment. Although it could simply be for show, with no real expectations of implementing the program, according to Tom Connaughton, president and chief executive officer of the American Association for Homecare, Connaughton cautioned that Bush's proposal still must be taken seriously by the home care industry. �Besides the fact that the numbers cited and the extrapolations from those numbers are extremely questionable, the Administration has failed to recognize that administering a competitive bidding program on a national basis is not possible if it truly wants to ensure a choice of providers for beneficiaries,� Connaughton said. �In addition, competitive bidding systems, if administered as in the pilot programs in Polk County and San Antonio, fail to recognize the importance of services that HME suppliers pride themselves in providing their patients. Indeed, these services are recognized and required by private insurance companies, but the pilot projects not only fail to recognize them, they also threaten to squeeze service out of the system.� BALTIMORE--The Centers for Medicare and Medicaid Services issued eight fraud alerts to its contractors regarding certain vulnerabilities that CMS has discovered during Medicare-related audits from 2001. Among other warnings, CMS warned about individuals posing as Health Insurance Portability and Accountability Act compliance auditors requesting access to provider data and other records, and the theft of two Medicare beneficiary numbers being used to file fraudulent claims on behalf of the beneficiary. Other warnings included improper billing for pulmonary stress tests, non-covered X-ray services and the non-covered drug Procuren.

INDUSTRY BRIEFS Respironics, Pittsburgh, has named William Post senior vice president of the company's home care division. A 25-year veteran of the medical equipment manufacturing industry, Post most recently served as president and chief executive officer of Opticon Medical of Dublin, Ohio. Joe Lewarski, national respiratory director for Lubbock, Texas-based The Med Group, received the Invacare Excellence in Home Respiratory Care award from the Dallas-based American Association for Respiratory Care. The award recognizes remarkable individual achievement in home respiratory care. Also, Norcross, Ga.-based Reliant Care is The Med Group's newest independent purchasing network member. HCR Manor Care's HCR Manor Care Foundation has added three new board members. New members include Karen Bell, assistant vice president of professional services for HCR Manor Care's home health and hospice business; Larry Lester, vice president and general manager of HCR Manor Care's midwest division.The Accreditation Commission for Health Care, based in Raleigh, N.C., has appointed Alan Lassiter as executive medical director. Lassiter is the former chief executive officer of Cook Children's Physician Network, a multi-specialty pediatric group in Texas.

IN OTHER NEWS Melville, N.Y.-based Gentiva Health Services has extended its national contract with Boise, Idaho-based Cigna Healthcare to provide Cigna members with home health, home infusion, durable medical equipment and respiratory services. The contract runs through Dec. 31, 2003. The Washington-based U.S. Department of Health and Human Services awarded $128 million in grants for states to run programs supporting family caregivers. Services earmarked for the grants include information and assistance, counseling, support groups and training, and respite services. Medtrade Spring is expanding its educational sessions for this year's show, to be held April 22-24 at the Sands Expo in Las Vegas. Medtrade Spring now boasts more than 60 educational seminars ranging in topic from industry and government issues to business and technological advancements in home health care.

STOCKS Invacare, Elyria, Ohio, declared a cash dividend of 1.25 cents per common share, payable April 15, 2002. Lake Forest, Calif.-based Apria Healthcare Group announced plans to repurchase up to $35 million in outstanding common stock during the first two quarters of 2002. Johnson & Johnson, based in New Brunswick, N.J., said it will buy back $5 billion of the company's common stock, but placed no time limits on the repurchase plan. Investment firm Jefferies & Company last week downgraded Clearwater, Fla.-based Lincare Holdings from "buy" to "accumulate." Cardinal Health, located in Dublin, Ohio, declared a quarterly dividend of 2.5 cents per common share, payable April 15, 2002.

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