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Week of February 4, 2024

HEADLINE NEWS Court Throws Out HHA's Extrapolation Case NEW ORLEANS--Eastern Louisiana's federal district court recently dealt a blow to health care providers' hopes of overturning Medicare's overpayment-calculation procedures. In a Jan. 4 opinion, the court dismissed Reliable Home Health Care's lawsuit that alleged the U.S. Department of Health and Human Services violated the home health agency's Fifth Amendment rights when calculating the company's fines during an overpayment investigation. HHS used extrapolation--the process whereby the government looks at a sample of a provider's files and assumes that the percent of overpayments in the sample is equal to the percent of overall overpayments--to determine that Medicare overpaid Reliable by almost $420,000 during fiscal year 1998. In its complaint, Reliable argued that extrapolation is unconstitutional. However, the court dismissed Reliable's case, saying that the company did not fully exhaust administrative remedies before suing HHS in federal court. The dismissal is not surprising, according to Steve Azia, counsel to the Washington-based Power Mobility Coalition, who said, "Courts have been reluctant to hear [such] cases, even if these cases are not related to a specific claim." Opening the door to Medicare claims-related litigation, the courts fear, would cause an overwhelming flood of cases, Azia explained. Consequently, the courts often refuse to hear such cases until the entire Medicare appeals process has run its course. The problem with the appeals process, however, is that Medicare is entitled to collect alleged overpayments immediately upon determining that an overpayment has been made, Azia said. "You're almost pronounced guilty until proven innocent." But hope for opponents of extrapolation is on the horizon, according to the Alexandria, Va.-based American Association for Homecare. During the past two months, AAHomecare and other Medicare stakeholders have met twice with officials from the Centers for Medicare and Medicaid Services to discuss providers' concerns on a range of issues, including extrapolation. At the meetings, CMS officials were sympathetic to the industry's concerns about the fairness of extrapolation, according to Tom Connaughton, president and chief executive officer of AAHomecare. Additionally, the U.S. House of Representatives in December passed H.R. 3391, designed to simplify Medicare's reporting and appeals processes. The bill includes a measure to limit the use of extrapolation in determining overpayments.

PROVIDER NEWS PSA Announces Q1 Results, Shareholder Settlement NORCROSS, Ga.--For the first quarter of fiscal year 2002 ended Dec. 31, 2001, Pediatric Services of America reported net earnings of $2.86 million, compared to $186,000 for the same quarter a year ago. Net income per diluted share was 40 cents for the first quarter of 2002, compared to 3 cents per diluted share during the first quarter of 2001. Two days before Pediatric Services announced these numbers, the company reported settling a shareholder class action suit for $3.2 million.

MANUFACTURER NEWS ResMed Reports Second Quarter, Six Months Results SAN DIEGO--For the second quarter ended Dec. 31, 2001, ResMed has reported a net income of $8.8 million, up 27 percent from $6.9 million for the same quarter the previous year. The company's second quarter earnings per diluted share were 26 cents, compared to 21cents for the same period in 2000. Six-month earnings were $17.3 million, or 51 cents per diluted share, an increase of 45 percent over earnings of $13.5 million, or 41 cents per diluted share, for the same period in 2000. Graham-Field to Outsource Manufacturing of Some Products ATLANTA, Ga.--In an effort to "return to profitability," Graham-Field Health Products has announced it will outsource its line of bathroom safety, ambulatory, pressure management and specialty seating products. Consequently, Graham-Field will close its manufacturing operations in Bay Shore, N.Y., eliminating 189 jobs. In the future, the company will market its bath safety, ambulatory and pressure management product lines under the brand name Lumex.These results exclude special charges, the company said.

SOURCES SAY WASHINGTON--Well, it looks like someone is finally listening to the home health industry's pleas in Washington. Last week, at a White House meeting with members of the U.S. House and Senate, President Bush called the current Medicare system "old and tired." Then, in a follow-up press release on the Bush Administration's Medicare policy, the President's press office said Medicare "imposes unnecessary regulatory burdens on providers and patients." Additionally, "Medicare's regulations and administrative procedures should be updated and streamlined, while the instances of fraud and abuse should be reduced," the release said. WASHINGTON--Startling statistics that highlight the growing rate of obesity in the United States are not lost on health insurance plan providers, according to a recent survey from the Blue Cross and Blue Shield Foundation on Health Care. After surveying approximately one quarter of all U.S. health insurance plans, the Foundation concluded that "more than 90 percent of U.S. health insurance plans ... offer a wide variety of programs to promote regular physical activity, an essential component of reversing some of the nation's most troubling health trends." Designed to establish a baseline for health plans' efforts to promote physical activity among their members, the study responded to U.S. Surgeon General David Satcher's recent statement that obesity-related illnesses are one of the major causes of death in this country. ATLANTA--A group of health researchers based at the Centers for Disease Control recently reported that older women with diabetes are almost twice as likely as their peers to develop "incident disability," or the inability to perform one or more major functional tasks, such as climbing 10 steps or performing household chores. In studying a group of 8,344 women age 65 and older, the researchers found that "diabetes remained associated with a 42 percent increased risk of any incident disability and a 53 percent to 98 percent increased risk of disability for specific tasks." To read more about these results, visit the American Diabetes Association's journal, Diabetes Care, at http://care.diabetesjournals.org and search the January 2002 issue. NEW YORK--Market research firm Frost & Sullivan last week published an article entitled, "United States: Healthcare Gets Connected for Growth," which examines the forces pushing the health care industry to explore new technologies. "It's not a question of whether the health care industry will adopt emerging technologies, but rather when it is likely to do so," the article concluded. "The existence of enabling technology, combined with market forces, mandates that healthcare organizations join the connected economy ... While the disruptive nature of transformation cannot be minimized, there are significant benefits to be gained." HIPAA regulations and consumers' growing demand for health care information access are among the market pressures driving new technologies, the article added. NEW YORK--Forbes.com recently published a study that compares employment rates during the current U.S. economic recession to numbers from the country's 1990 recession. While the employment pattern generally mirrors the economy in both recessions, job losses in this recession have been concentrated in the air transportation, technology and publishing industries, the study found. By contrast, "pure services such as health and social services, private education, law and government added jobs, as they did in the previous recession," analyst Paul Maidment concluded. "Health services usually add jobs faster in recessions than expansions, which is one reason U.S. mortality rates fall in economic downturns."

INDUSTRY BRIEFS John Hammergren, president and chief executive officer of San Francisco-based McKesson, has been elected chairman of the company's board of directors. Hammergren will replace Alan Seelenfreund, who will retire as chairman of the board when his term expires on July 31. Home Care Medical, a provider of infusion therapy, respiratory care, and home medical equipment and supplies in New Berlin, Wis., has hired Nate Spielman as managed care coordinator. Spielman has more than 14 years of managed health care experience. Dawn Perez has been hired as international sales manager for Kennewick, Wash.-based TiSport, a manufacturer of ultra-lightweight, custom titanium wheelchairs. Perez has 16 years of experience in the wheelchair industry. Previously, she led the international sales department at Carlsbad, Calif.-based Sunrise Medical. The Med Group, Lubbock, Texas, has promoted Chris Cockfield to supervisor of member service management. Also, Fred Arthur has been named director of customer service. In this newly created position, Arthur will be responsible for national account management, as well as shipping, switchboard management, event coordination and Med Travel Services. Arthur has been a Med Group travel consultant for 15 years and has specialized in meeting planning and group movements for 20 years.

IN OTHER NEWS Massachusetts U.S. Attorney Michael Sullivan has created a separate health care fraud unit at his Boston-based office. In the past, health care fraud was part of Massachusetts' economic crimes unit, but the state's "continued prosecutions warranted the creation of a unit devoted solely to health care fraud," similar to units that investigate drugs and organized crime, Sullivan said. Invacare, Elyria, Ohio, has received U.S. Food and Drug Administration 510K clearance for its Xterra GT power wheelchair, its elevating seat option for the 3G Storm Series chair and its Pronto R2 power chair. Additionally, the company has received a 2002 Northeast Ohio Success Award, which recognizes northeast Ohio's top-performing companies, the company said. The U.S. Food and Drug Administration has approved Marlborough, Mass.-based Sepracor's Xopenex brand levabuterol HCI inhalation solution, designed to treat or prevent bronchospasm in children ages 6 to 11. SMT Health Systems of Detroit Lakes, Minn., has agreed to distribute the Rock 'N Go rocking wheelchair, manufactured by Wadena, Minn.-based Homecrest, a company that in the past has focused primarily on making patio furniture. Alpharetta, Ga.-based MedAssets HSCA has formed an alliance with Joint Purchasing Corporation of New York whereby the members of each group purchasing organization will gain access to both organizations' portfolios. Huntleigh Healthcare, Eatontown, N.J., has signed a two-year contract to supply therapeutic support surfaces and diagnostic dopplers to Fort Smith, Ark.-based Beverly Enterprises, a provider of post-acute health care services.

STOCKS Dennis Kozlowski, chairman and chief executive officer of Pembroke, Bermuda-based Tyco International, and Mark Swartz, the company�s chief financial officer, have announced they intend to purchase, with their own funds, 500,000 shares each of Tyco stock. Kozlowski said his intended purchase reaffirms his confidence in the long-term investment value of Tyco shares. Valley Forge, Pa.-based AmerisourceBergen has declared a cash dividend of $0.025 per share on the company�s common stock, payable March 1 to shareholders of record on Feb. 21. McKesson, San Francisco, has declared a regular dividend of six cents a share on the company�s common stock, payable April 1 to shareholders of record on March 1. Investment firm SWS Securities has downgraded Marietta, Ga.-based Matria from a "buy" to an "accumulate" rating.

Company High Low PE Ratio 1/25/02 2/1/02 Change Allied Healthcare (AHPI) 3.95 3.00 N/A 3.90 3.85 (0.05) American HomePatient (AHOM.OB) 1.70 0.16 N/A 0.82 0.56 (0.26) AmerisourceBergen (ABC) 72.00 42.00 28.90 62.54 63.78 1.28 Apria Healthcare (AHG) 29.85 19.50 19.68 24.04 24.34 0.30 Cardinal Health (CAH) 77.32 56.67 32.76 66.69 65.93 (0.76) CareCentric (CURA) 4.53 0.46 N/A 0.90 0.85 (0.05) Chad Therapeutics (CTU) 3.70 0.69 N/A 3.10 3.05 (0.05) Coram Healthcare (CRHEQ.OB) 0.76 0.13 N/A 0.68 0.60 (0.08) Gentiva Health Services (GTIV) 24.49 14.50 12.65 23.93 24.00 0.07 Horizon Pharmacies (HZP) 1.30 0.10 N/A 0.00 0.00 0.00 Invacare (IVC) 41.25 28.50 30.50 33.64 33.15 (0.49) Johnson and Johnson (JNJ) 60.97 40.25 31.26 57.65 57.60 (0.05) Lincare Holdings (LNCR) 34.39 22.25 21.80 26.74 26.61 (0.13) Matria Healthcare (MATR) 40.00 11.81 28.16 34.02 23.95 (10.07) McKesson (MCK) 41.50 23.40 96.49 39.26 38.20 (1.06) National Home Healthcare (NHHC) 19.85 5.12 12.50 10.96 10.75 (0.21) Option Care (OPTN) 22.15 5.75 24.96 18.00 16.81 (1.19) Pediatric Services of America (PSAI) 9.95 4.56 31.83 9.00 10.75 1.75 Praxair (PX) 58.05 36.50 21.99 55.88 57.25 1.37 ResMed (RMD) 62.20 36.25 95.56 43.15 39.98 (3.17) Respironics (RESP) 37.88 22.94 24.29 29.91 27.95 (1.96) Transworld Healthcare (TWH) 4.83 2.21 N/A 3.55 3.80 0.25 Tyco (TYC) 63.21 27.48 12.97 45.00 36.87 (8.13) Walgreen (WAG) 45.29 28.70 40.76 36.59 35.54 (1.05)

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