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Week of February 25, 2024

HEADLINE NEWS Rotech to Pay $17 Million Settlement ORLANDO, Fla.--As part of its reorganization plan, Rotech Medical last week agreed to pay the U.S. government $17 million to resolve allegations that the company over-billed Medicare and other government health programs for respiratory equipment and services between 1995 and 2000. "We didn't admit any wrongdoing as a part of the settlement," Rotech's chief legal officer said. Rather, Rotech agreed to the settlement to expedite the company's emergence from bankruptcy, she added. In addition to the settlement, the reorganization plan requires Rotech to sign a corporate integrity agreement, designed to prevent further billing problems. "This is a valuable agreement for both parties," according to Janet Rehnquist, inspector general of the U.S. Department of Health and Human Services. "The corporate integrity agreement between the United States and Rotech is an important step toward achieving the goal of ensuring the integrity of the federally-funded health care programs." Delaware's U.S. Bankruptcy Court approved Rotech's reorganization plan on Feb. 13, and the company expects the plan to take effect at the end of March. Along with its parent company, post-acute care provider Integrated Health Services, Rotech filed for bankruptcy protection in February 2000. CMS Announces Demo to Treat Chronically Ill BALTIMORE--The Centers for Medicare and Medicaid Services last week announced a new program designed to prevent unnecessary hospital stays for beneficiaries with chronic illnesses. Responding to studies that say conditions such as diabetes, advanced-stage congestive heart failure and coronary heart disease account for a disproportionate share of Medicare spending, CMS is calling on health care professionals from all medical sectors--including home health--to submit proposals for disease management projects. The primary goal of the demonstration is to coordinate health care for chronically ill patients who often receive conflicting advice from multiple doctors at multiple sites. "If you're getting fragmented care, you're more likely to go back to the hospital, and that is bad for everyone," said a CMS spokesman. "So, if we can make a program like this work, it will make a lot of people a lot healthier for a lot longer--and it will save us money." In a Feb. 22 Federal Register notice, CMS said the agency will choose up to three disease-management organizations to conduct three-year demonstration projects designed to serve as many as 30,000 beneficiaries each. "An organization may propose one or multiple sites for any of its targeted diseases or for multiple diseases," the notice said. Under the demonstration, CMS will pay the disease-management organizations a monthly premium not only for coordinating care for chronically ill patients but also for providing prescription drugs that Medicare currently does not cover. In some ways, the demonstrations will operate like managed care plans, providing an organized approach to a wide range of care options for each participant, CMS explained. However, unlike most health maintenance organizations, these programs will not require patients to visit only certain doctors. CMS has conducted similar demonstrations targeting chronically ill beneficiaries in the past, including the 1996 National Long-Term Care Demonstration and the 1998 Medicare Alzheimer's Disease Demonstration, but "none of the demonstrations provided sufficient savings to cover the additional costs of case management," the notice said. Medicare Should Not Delay Appeals Reforms, House Members Say WASHINGTON--Despite the fact that President Bush's 2003 budget does not include funding for much-needed Medicare appeals reforms, the Department of Health and Human Services is not off the legislative hook, according to the U.S. House of Representatives' Ways and Means Committee. In a February 12 letter to HHS Secretary Tommy Thompson and Tom Scully, administrator of the Centers for Medicare and Medicaid Services, the committee urged HHS not to forget its responsibility to follow Congressional orders that require appeals reforms to take effect by Oct. 1, 2002. "We do not support extensions to the statutory deadlines because we have not lost sight of why these changes were made to the Medicare program," the committee members said. "Nor do we believe that implementation should await improvements in the administrative processes." The letter came in response to a recent report from HHS' Office of Inspector General, which stated that Medicare's appeals system is in no way ready for imminent change. "The current Medicare appeals system is backlogged, overwhelmed and untimely, and the problems could be exacerbated by [the Benefit Improvement and Protection Act of 2000] provisions," the report explained. Nonetheless, the legislators contended, HHS is bound by BIPA to establish a uniform appeals process for handling all Part A and Part B Medicare claims, and to shorten the appeals process significantly within the next nine months. "These provisions are law because, according to CMS, if an appeal goes through the Departmental Appeals Board level, the process takes, on average, 1,214 days," the letter said. "It seems no exaggeration, as beneficiary advocates state, that some beneficiaries are dead before their appeals are decided." A CMS spokesman would not respond to the letter, but he said that the agency currently is crafting a response.

PROVIDER NEWS American Homepatient Out of the Red in Q4 BRENTWOOD, Tenn.--For the fourth quarter ended Dec. 31, 2001, American Homepatient reported a net income of $0.4 million, or 18 cents per diluted share, compared to a loss of $4.4 million, or 74 cents per diluted share, for the same quarter a year ago. All totaled, the company lost $11.5 million, or 68 cents per diluted share, in 2001, compared to a net loss of $24.2 million, or $2.01 per diluted share, in 2000. Option Care Reports Q4, Year-End Earnings BANNOCKBURN, Ill.--For the fourth quarter ended Dec. 31, 2001, Option Care reported a net income of $3 million, or 19 cents per diluted share, compared to a net income of $2.1 million, or 17 cents per diluted share, for the same period in 2000. The company also reported a 2001 net income of $10 million, or 73 cents per diluted share, compared to a net income of $7.5 million, or 60 cents per diluted share, in 2000. Matria Announces Fourth Quarter, 2001 Income MARIETTA, Ga.--For the fourth quarter ended Dec. 31, 2001, Matria announced a net loss of $630,000, or a loss of 7 cents per share, compared to a net income of $1.9 million, or 11 cents per share for the same period in 2000. Additionally, the company reported a net 2001 income of $6.7 million, or 64 cents per diluted share, compared to $13.7 million, or $1.10 per diluted share 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 Sharps Reports Q2, Six Months Results HOUSTON--For the second quarter of fiscal year 2002 ended Dec. 31, 2001, Sharps Compliance reported a net loss of $433,622, or 4 cents per diluted share, compared to a net loss of $407,815, or 5 cents per diluted share for the same period in 2000. Additionally, for the six-month period ended Dec. 31, 2001, the company reported a net loss of $593,907, or 6 cents per diluted share, compared to a net loss of $686,642, or 8 cents per diluted share, for the same period in 2000. Despite these losses, Burt Kunik, Sharps' chief executive officer, said he is pleased with the company's 29 percent revenue increase for the quarter, and he attributed the increase to the strength of the company's core home health care products and services. "We are planning to further revenue growth rates as we continue to penetrate the residential market," he added. Midwest Medical Acquires Perigon Locations ST. LOUIS--On February 13, Midwest Medical Supply acquired six distribution centers from Foothill Ranch, Calif.-based Perigon Medical Distribution, including locations in Indiana, Utah, Wyoming, Connecticut and Wisconsin. The combined revenues of Midwest and Perigon will exceed $100 million, according to a Midwest press release. Leisure-Lift Announces Death of Company Founder KANSAS CITY, Kan.--Leisure-Lift recently announced the January 15 death of one of its founders, Zella Burke. "Zella, along with her husband, Wilbur 'Bill' Burke, who died in 1992, was a pioneer in the mobility products industry," the company said in a press release. In the 1960s, the couple invented the first pneumatic seat lift chair and the first toilet seat lift, the release said.

SPOTLIGHT WASHINGTON--For the second year in a row, the rate of improper Medicare payments continued to decline in 2001. According to a report released Thursday by the Department of Health and Human Services Office of Inspector General, the improper payment rate, which estimates the portion of Medicare fee-for-service payments that do not comply with Medicare laws and regulations, dropped to 6.3 percent last year from 6.8 percent in 2000. Improper Medicare benefit payments made up $12.1 billion out of a total of $191.8 billion in processed fee-for-service claims reported for 2001 by the Centers for Medicare and Medicaid Services, the OIG estimated. And, the current 6.3 percent estimate is the lowest since the OIG began analyzing payment error rates in 1996. In fact, the 2001 estimate is less than half the 13.8 percent error rate reported for 1996. "We are continuing to make significant improvements to assure that payments for Medicare services are accurate and correctly documented," said HHS Secretary Tommy Thompson. "We also are working to make our procedures and rules more understandable through our regulatory reform efforts, which will help physicians and other providers avoid unintended errors." The OIG credits the reduction in improper payments to CMS's continuing corrective actions, efforts by health care providers to comply with Medicare reimbursement regulations, and fraud and abuse initiatives conducted by CMS, Congress, the Department of Justice and the OIG. For 2001, the OIG reviewed the medical records behind 6,594 fee-for-service claims filed on behalf of 600 randomly selected beneficiaries nationwide. Of the claims, 954 did not comply with Medicare regulations. The OIG identified three major categories of improper payments: documentation errors, medically unnecessary services and coding errors. Documentation errors, which include insufficient or no documentation to support the claims, represented the largest error category in three of the last six years, according to the OIG. "There still is important work to be done," said CMS Administrator Tom Scully. "At Secretary Thompson's direction, we are developing a financial system that will enable us to better manage our programs. Providers are [becoming] more accurate, and as a result, taxpayer dollars are more focused on good patient care."

SOURCES SAY NEW YORK--The Century Foundation, a nonprofit organization whose mission is to connect political theory to political practice, this month released a report examining the future of Medicare. Noting that Medicare is one of the United States' most popular federally funded programs, supported by 95 percent of all Americans, the foundation said that Medicare should not be compromised in any way to deal with the impending onslaught of retirement-age baby boomers. In fact, the foundation insisted, even the current program is inadequate. To ensure Medicare's future, the foundation continued, "Medicare should continue to be financed in part through general revenues and in part by contributions from workers, employers and the covered population, but as Medicare's financial needs grow, older and disabled Americans should not shoulder a significantly higher proportion of program expenditures or medical costs." WASHINGTON--At a U.S. Senate hearing this month on issues pertaining to women and aging, Mary Ousley, chair of the American Health Care Association, said, "AHCA believes the most essential element of the economic stimulus bill, not just for women but for all vulnerable and frail seniors, is the Medicaid relief component. States are battling budget deficits made increasingly worse by the economic recession, and are slashing necessary funding for programs protecting seniors . . . As a matter of principle, it ought to be the policy of this nation that we invest more per hour to take care of our mothers than we do to pay a teenage babysitter." AHCA is a nonprofit federation of affiliated state health organizations that represents assisted living, nursing facility and developmentally-disabled care providers. WASHINGTON--People with diabetes often know too little about their greatest health risks, according to a recent survey from the American Diabetes Association. In polling more than 2,000 people diagnosed with diabetes, the ADA found that, even though heart disease and stroke are the leading causes of death among people with diabetes, two out of three people with diabetes do not consider cardiovascular disease to be a significant risk. "It is very alarming to learn that 68 percent of people with diabetes are unaware of the link between diabetes, and heart disease and stroke," said Christopher D. Saudek, president of ADA. "Consequently, they are unlikely to be doing what they need to save their lives."

INDUSTRY BRIEFS Pittsburgh-based Respironics has appointed John Miles to its board of directors. Miles is chairman and chief executive officer of Dentsply, a York, Pa.-based manufacturer of dental products. Med Diversified, Andover, Mass., has named Mark MacLennan to its board of directors. MacLennan is managing director of Century Capital Management, an investment firm based in Boston. Amy Nastis has been hired as a regional sales manager for Roscoe Medical in Strongsville, Ohio. Randy Schluter has been named president and chief operating officer of Dragonfly Technologies, a newly formed software-development subsidiary of Melbourne, Fla.-based The Weeks Group. Schluter formerly served as vice president of the National Association for Medical Equipment Services, now known as the American Association for Homecare. Also, Dragonfly Technologies named five health care professionals to its advisory board. Advisory board members are Cara Bachenheimer, a partner with Washington-based Epstein, Becker and Green; John Durkee, national sales manager for Rainville, Ala.-based American Breathing Care Plus; Mike Hamilton, executive director of the Georgia Association of Medical Equipment Services; Maureen Hanna, a consultant with Fountain Hills, Ariz.-based Healthcare Reimbursement Consultants; and Mario LaCute, president of Andover, Ohio-based Seeley Medical.

IN OTHER NEWS The Oakbrook, Ill-based Joint Commission on Accreditation of Healthcare Organizations has approved standards for its new Disease-Specific Care Certification program, which certifies disease-specific programs provided in a variety of organizational settings. Effective Feb. 8, the DSC Certification standards focus on the delivery or facilitation of clinical care, clinical information systems performance measurement and improvement, and self-management. The first DSC certification review was scheduled for Feb. 14. Akron, Ohio-based Cambridge Home Health Care has received a 2002 NEO Success Award, sponsored by Inside Business, a business journal that covers the Northeast Ohio area. The award recognizes top-performing companies in the 18 counties of Northeast Ohio. The Centers for Medicare and Medicaid Services in Baltimore has extended for another year the statistical sampling guidelines used by carriers for post-payment audits in the Medicare program. The present guidelines will continue to be in effect until Feb. 9, 2003. Pittsburgh-based Respironics has received 510(k) clearance from the U.S. Food and Drug Administration for its REMstar Auto CPAP system. The REMstar Auto features a proactive algorithm that adjusts pressure to find the optimal CPAP level for a patient's needs, and features integrated humidification options. And, another class action lawsuit has been filed on behalf of Tyco International shareholders against the Pembroke, Bermuda-based company, its chief executive officer, Dennis Kozlowski and its chief financial officer, Mark Swartz. The complaint was filed by the law offices of Marc Henzel in the U.S. District Court for the Southern District of New York on behalf of holders of Tyco common stock between Feb. 5, 1999, and Feb. 4, 2002. It alleges Tyco and the company's top officers failed to disclose hundreds of acquisitions during the class period, improperly inflating the company's reported revenue and earnings.

STOCKS Company High Low PE Ratio 2/15/02 2/22/02 Change Allied Healthcare (AHPI) 3.95 3.00 96.25 N/A 3.76 N/A American HomePatient (AHOM.OB) 1.70 0.16 N/A N/A 0.46 N/A AmerisourceBergen (ABC) 72.00 42.00 28.79 N/A 64.45 N/A Apria Healthcare (AHG) 29.85 19.50 16.58 N/A 21.94 N/A Cardinal Health (CAH) 77.32 56.67 32.29 N/A 65.54 N/A CareCentric (CURA) 4.00 0.46 N/A N/A 0.91 N/A Chad Therapeutics (CTU) 3.75 0.69 N/A N/A 3.25 N/A Coram Healthcare (CRHEQ.OB) 0.76 0.13 N/A N/A 0.55 N/A Gentiva Health Services (GTIV) 25.50 15.60 28.22 N/A 24.16 N/A Invacare (IVC) 41.25 28.50 31.09 N/A 34.87 N/A Johnson and Johnson (JNJ) 60.97 40.25 31.52 N/A 59.40 N/A Lincare Holdings (LNCR) 34.39 22.25 20.30 N/A 25.27 N/A Matria Healthcare (MATR) 40.00 11.81 19.94 N/A 17.34 N/A McKesson (MCK) 41.50 23.40 90.15 N/A 35.38 N/A National Home Healthcare (NHHC) 19.85 5.48 13.30 N/A 11.39 N/A Option Care (OPTN) 22.15 6.00 19.18 N/A 14.00 N/A Pediatric Services of America (PSAI) 12.77 4.56 19.47 N/A 12.00 N/A Praxair (PX) 58.21 36.50 21.67 N/A 57.55 N/A ResMed (RMD) 62.20 36.25 81.11 N/A 37.53 N/A Respironics (RESP) 37.88 22.94 24.19 N/A 29.03 N/A Transworld Healthcare (TWH) 4.83 2.21 N/A N/A 4.00 N/A Tyco (TYC) 60.09 22.00 10.33 N/A 27.50 N/A Walgreen (WAG) 45.29 28.70 43.26 N/A 38.07 N/A

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