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SPONSOR MESSAGE Olympic Torch Powered by Quickie S626 Sunrise Medical announces that the Olympic Torch for the 2002 Winter Olympic Games was carried last week by Kevin Leonard of Dayton, Ohio, along Edwin Moses Blvd, as he rode in his Quickie S626. On January 24th, Tom Higgins of Spokane, Washington will carry the torch through the streets of Spokane in his new Stars and Stripes patterned Quickie S626 chair. Look for full coverage of these historic events on the Sunrise Medical web site: sunrisemedical.com. For more information on the S626 Stars and Stripes edition, call 800-333-4000. For more industry news, featured articles and highlights from our latest issue, please visit our website at www.homecaremag.com

Week of January 7, 2024

HEADLINE NEWS Consumer Groups Charge Pharmaceutical Industry With Illegal Price Manipulation BOSTON--A coalition of consumer advocacy groups last month filed a massive federal anti-trust lawsuit charging 28 of the nation's top pharmaceutical companies with scheming to defraud Medicare and health care consumers by charging inflated prices for medications. Now pending in the Massachusetts U.S. District Court, the lawsuit charges that the pharmaceutical companies have, since 1993, inflated the so-called average wholesale price of Medicare-eligible drugs, while charging physicians significantly less than the published price. The plaintiffs estimate that, during the past 12 months alone, Medicare and individual consumers overpaid pharmaceutical companies more than $800 million. "If you put all the pieces together. . .the picture that emerges is that this is an industry in serious need of reform. Anti-trust violations, false advertising, fraudulent practices--this is not a pretty picture," said Susan Sherry, a spokesperson for the lead plaintiff, Boston-based Prescription Access Litigation Project. Defendants in the case include such pharmaceutical industry giants as Abbott Laboratories, Abbott Park, Ill.; Glaxosmithkline, United Kingdom; and American Home Products, Madison, N.J. Already, the lawsuit includes more than 14 plaintiff organizations, and that number continues to grow, according to a spokeswoman for the plaintiffs' lead attorneys, San Francisco-based Lieff, Cabraser, Heimann & Bernstein. "It's a very complicated litigation," she said. "There is an enormous number of defendants, and we'll add more plaintiffs and defendants at the end of the month." Given the case's complicated nature, a final decision could take many months or more, she adds. The plaintiffs have asked the federal government to fine the alleged offenders and ultimately to stop the companies' alleged price manipulations. CMS Unveils New Beneficiary Record-Keeping System BALTIMORE--As early as March, the Centers for Medicare and Medicaid Services will implement an updated beneficiary database designed to streamline the agency's decade-old record-keeping system, according to CMS' director of information services, Gary Christoph. Using "tried-and-true technology" to organize and access the agency's 40 million beneficiary records, the new database will trim CMS' response time significantly, Christoph said. With the existing flat-file system, digging through billions of entries to predict policy changes could take three months, he explained. "Now we could answer the same questions within hours--maybe minutes." The new system will track beneficiaries' names, addresses, social security numbers, birth dates, ethnicity, eligibility, health plan types and participation dates, allowing CMS to monitor plan changes, accommodate address changes quickly, and add alternate and temporary addresses. During the database's four-year development phase, some Medicare stakeholders expressed concerns about privacy. To answer these concerns, Christoph and his team constructed a system with �finer-grain control� that allows the agency to provide access to certain information within a record while protecting other information within the same record. The existing system forces CMS to give researchers access to the entire record, Christoph said. The first in a series of database improvements, this updated beneficiary-record system already is operational and is running as a prototype, Christoph said. "It's just a matter of turning it on." CMS' announcement comes on the heels of a November 2001 U.S. General Accounting Office report calling for improvements to Medicare�s antiquated information systems.

Lincare to Pay $3.15 Million to Settle Medicare Fraud Case SACRAMENTO, Calif.--Lincare Holdings, Clearwater, Fla., announced it will pay $3.15 million to settle allegations by the U.S. Attorney's Office that the company billed Medicare illegally for home oxygen equipment, therapeutic ventilators and the respiratory drug albuterol sulfate. Charges centered on overbilling at Lincare's Chico, Calif., and Redding, Calif., centers from 1995 through 1997. According to the U.S. Attorney's Office for the Eastern District of California, Lincare allegedly billed Medicare based on blood oxygen test results conducted by Lincare employees--tests that by law must be conducted by an outside entity. As part of the settlement, the company also will enter into a corporate integrity agreement with the U.S. Health and Human Services' Office of Inspector General. The settlement did not require Lincare to admit to wrongdoing. "We believe that it was in the best interests of our employees and shareholders to put this matter behind us," said John Byrnes, the company's chief executive officer. Respironics to Acquire Novametrix PITTSBURG--Respironics announced it will acquire cardiorespiratory monitoring manufacturer Novametrix Medical Systems of Wallingford, Conn., for $90 million. The tax-free, all-stock transaction, estimated to be completed by the end of March, will augment Respironics� existing product lines, especially in the areas of infant monitoring and respiratory monitoring, according to James Liken, Respironics' president and chief executive officer. "[Novametrix's] noninvasive monitoring technologies blend well with Respironics' hospital therapeutic product offerings, positioning our company to create a total system of patient ventilation management," Liken said. Combined revenue for the two companies was approximately $490 million in 2001, and Novametrix Chairman William Lacourciere predicts the acquisition will be good for both companies' shareholders. Unlike durable medical equipment providers, Respironics focuses on acquiring technology rather than acquiring regional market presence, according to acquisitions specialist Dexter Braff of Pittsburgh-based The Braff Group. "Acquiring new and innovative technologies is one of the prime reasons that biomedical companies make acquisitions," Braff explained. "This is different than the typical mergers and acquisitions of their customers. With technology-driven companies like Respironics, there's innovation all over the place." Novametrix's Lacourciere will join Respironics' hospital division as president of cardiopulmonary monitoring.

PROVIDER NEWS Gentiva Agrees to Sell Pharmaceutical Services Business MELVILLE, N.Y.--In a move to allow the company to focus more on its home health services business, Gentiva Health Services has entered into an agreement to sell its specialty pharmaceuticals business to Memphis, Tenn.-based Accredo Health for approximately $415 million in cash and stock. "The aligning of Gentiva's specialty pharmaceutical services business with Accredo creates a specialty pharmaceutical distribution capability with tremendous future opportunities," said Edward Blechschmidt, Gentiva's chairman, president and chief executive officer. "At the same time, this transaction creates enhanced focus on our core home health business, where we maintain our industry leadership position as the only true national provider." After consummation of the transaction and following the distribution of proceeds, Gentiva will have no debt and a cash balance between $60 and $80 million. Although the deal received approval from both companies' boards, it still must be approved by both companies' shareholders. St. Pete HME Settles Medicare Fraud Case ST. PETERSBURG, Fla.--Priority Oxygen and Medical Equipment and its owner, Dennis McEleny, have agreed to pay $690,000 to the federal government to settle allegations it overbilled Medicare for durable medical equipment, The Tampa Tribune reported last week. Specifically, the Tribune reported that Priority allegedly in 1998 delivered its Medicare patients scooters but billed Medicare for high-end power wheelchairs, filing false claims for more than 100 power chairs at roughly $5,000 per claim. Walgreen Net Earnings Grow 17.4 Percent in Q1 DEERFIELD, Ill.--Walgreen posted net income for the first quarter 2002 ended Nov. 30 of $185.9 million, or 18 cents per share, compared to net earnings of $158.4 million, or 15 cents per share, for the same quarter a year ago. "The nature of our business--selling basic goods that everyone needs--gives us the chance to perform well despite the current recession and tough retail environment,'' said Dan Jorndt, Walgreen chairman, explaining the company's positive first-quarter earnings. MANUFACTURER NEWS Graham-Field Names New CEO and Board, Sells Former Headquarters ATLANTA--As part of its reorganization plan, health care product manufacturer Graham-Field Health Products has elected a new board of directors and chief executive officer. The company's chairman and CEO, Tom Opladen--along with the other existing board members--has resigned. The new board has elected Michael Joffred, the company's former chief financial officer, to take Opladen's place as CEO. Additionally, Graham-Field has sold its former corporate headquarters in Bay Shore, N.Y., for $4.4 million. The company said it plans to use this money to offset restructuring efforts. With the sale of this facility, Graham-Field has completed its relocation to Atlanta.

SOURCES SAY WASHINGTON--While most doctors are familiar with their patients� plans of care, the same can't be said about physicians� knowledge about Medicare home health rules and regulations, according to a survey by the Department of Health and Human Services� Office of Inspector General. The OIG surveyed 600 doctors, 38 percent of whom said they were unfamiliar with �key Medicare rules,including the criteria to classify someone as �homebound.� �For example, while 83 percent of physicians believe that Medicare expects them to ensure that only medically necessary services are on the plan of care, only 48 percent say they are able to ensure that this is the case.� The survey also found that many physicians didn�t bill Medicare for �care plan oversight� because the Medicare reimbursement rate for such services didn�t compensate physicians adequately for their time spent filling out the paperwork. NEW YORK--Although heart attack and stroke are the leading causes of death and disability among diabetes patients, a national survey shows diabetes patients are four times more afraid of losing their sight than suffering a heart attack or stroke, and twice so of losing a limb. �This survey is a wake up call to physicians,� said Alan Garber, M.D., and Ph.D., a professor of medicine at Baylor College of Medicine and chief of endocrinology, diabetes and metabolism at The Methodist Hospital in Houston. �[Doctors] need to understand the profound link between diabetes and heart attack and stroke, and recognize that these consequences of diabetes are far more likely to lead to disability and death than other diabetic complications,� Garber added. According to the survey, nearly 77,000 diabetes patients die from heart disease each year, while 24,000 patients suffer from complete vision loss and 56,200 lose a foot or leg each year. WASHINGTON--Passage of the Bush tax cut package, deep interest-rate cuts and sharply lower energy prices are the top three events that best affected small businesses in 2001, according to the Small Business Survival Committee�s �Best and Worst Developments for Small Businesses in 2001.� So what are the top three worst developments? Not surprisingly, they include the events of Sept. 11, the U.S. recession and the blackouts in California. Other events on the �Best� list include the Microsoft lawsuit settlement and the repeal of proposed ergonomic regulations. Other events on the �Worst� list include resurrection of the "death tax" and the change of Senate leadership in Congress.

INDUSTRY BRIEFS Citing personal reasons, Neil Dimick, executive vice president and chief financial officer for Valley Forge, Pa.-based AmerisourceBergen, has resigned his position. Dimick will remain with AmerisourceBergen until the company names a successor. Pfizer, New York, has named Jeffrey Kindler a senior vice president and its general counsel. Kindler previously was employed by McDonald�s as president of partner brands, executive vice president for corporate relations and general counsel. Pfizer also named Chuck Hardwick and Robert Mallett to vice president posts. Hardwick will oversee various aspects of government affairs, while Mallett will oversee media and corporate relations. Kindler, Hardwick and Mallett also were named corporate officers for Pfizer. Andover, Mass.-based Med Diversified has named Dale Sherratt to its board of directors. A former senior executive for The Kendall Company, Colgate-Palmolive�s health care subsidiary, Sherratt has more than 30 years experience in the health care industry. Med Diversified stockholders also have approved the election of Frank Magliochetti, John Andrews, Sam Romeo and Donald Ayers to the company's board of directors. Stuart Altman has been elected to the board of directors for Clearwater, Fla.-based Lincare Holdings. Altman is a professor of national health policy at Brandeis University and co-chairman of the Governor/Legislative Health Care Task Force for Massachusetts. He is a nationally recognized economist, specializing in federal and state health care policy. Pamela Pure has been appointed chief operating officer for the McKesson Information Solutions business unit of San Francisco-based McKesson. Pure will be responsible for research, development and customer support for software products and services, as well as for domestic sales, marketing, implementation and consulting organizations of McKesson Information Solutions. Pure has more than 17 years operating and executive experience in the health care information technology industry. St. Paul, Minn.-based 3M has named Michael McQuade division vice president of the company�s newly formed medical division. Previously, McQuade was president of Health Imaging and a senior vice president for Eastman Kodak.

IN OTHER NEWS Mundelein, Ill.-based Medline Industries has entered into a multi-source agreement for advanced wound care products with Rolling Meadows, Ill.-based Consorta Catholic Resource Partners that will give Consorta�s membership access to products and services from Medline, 3M Healthcare, Convatec, and Smith & Nephew. Effective through June 2006, the agreement is worth approximately $13 million in products and encompasses Medline�s full line of advanced wound care products. Effective immediately, Amerinet has signed a two-year agreement with Dukane, a provider of nurse call and related communications systems, by which Amerinet members will have access to Dukane's communications systems. Those planning on attending Medtrade Spring April 22-24 at the Sands Expo in Las Vegas can now register online at http://ww4.expocard.com/shows/mth022. Those who register online before Feb. 25 may be eligible for a discounted conference or exposition fee. Branford, Conn.-based CAS Medical Systems is voluntarily recalling all Ami and Ami Plus apnea monitors manufactured since 1997 by Nellcor Puritan Bennett, Mallinckrodt and CAS Medical Systems. Users have reported the monitors shutting down without emitting an alarm when exposed to high levels of static electricity. No deaths or injuries have been associated with these complaints, but the failure of the monitor to alarm could put the user at risk. The recall plan requires all monitors to be returned to CAS for modification. For more information, contact Tracy Blanusa, CAS recall coordinator, at 800-227-4414 Brentwood, Tenn.-based American HomePatient and Schenectady, N.Y.-based Trac Medical Solutions, a subsidiary of AuthentiDate Holding, have entered into an agreement whereby American HomePatient will evaluate CareCert, Trac Medical�s secure, Internet-based system for processing Certificates of Medical Necessity and other medical forms online. The agreement is the first step in a plan for American HomePatient to initiate full deployment of the CareCert system later this year. Terms of the agreement were undisclosed. Department of Health and Human Services Secretary Tommy Thompson has appointed 27 people--representing consumers, doctors and other health care professionals--to the Secretary's Advisory Committee on Regulatory Reform, which will provide advice and make recommendations for reforming and streamlining the regulatory requirements at HHS agencies, including the Centers for Medicare and Medicaid Services. The committee�s first meeting was held Jan.7. In addition, the committee will accept comments until March 5 from all interested parties about how to reduce regulatory burdens in four general areas: health care delivery, health care operations, development of pharmaceuticals and other medical products, and biomedical and health services research. For more information, go to http://www.regreform.hhs.gov. STOCKS Investment firm Raymond James has downgraded Gentiva Health Services, Melville, N.Y., from a "strong buy" to a "market perform" rating. Also, investment firm CSFB has downgraded Apria Healthcare, Costa Mesa, Calif., from a "strong buy" to a "buy" rating.

Company High Low PE Ratio 12/28/01 1/4/02 Change Allied Healthcare (AHPI) 3.95 2.97 N/A --- 3.75 --- American HomePatient (AHOM.OB) 1.70 0.16 N/A --- 0.79 --- AmerisourceBergen (ABC) 72.00 40.12 29.38 --- 60.15 --- Apria Healthcare (AHG) 30.00 19.50 18.48 --- 23.09 --- CareCentric (CURA) 4.53 0.46 N/A --- 0.79 --- Chad Therapeutics (CTU) 3.70 0.50 N/A --- 2.70 --- Coram Healthcare (CRHEQ.OB) 0.80 0.13 N/A --- 0.60 --- Gentiva Health Services (GTIV) 23.84 13.06 12.47 --- 23.60 --- Horizon Pharmacies (HZP) 1.30 0.10 N/A --- 0.00 --- Invacare (IVC) 41.25 28.50 15.80 --- 32.65 --- Johnson and Johnson (JNJ) 60.97 40.25 31.41 --- 58.14 --- Lincare Holdings (LNCR) 34.39 22.25 23.20 --- 28.25 --- Matria Healthcare (MATR) 37.67 9.25 40.79 --- 35.25 --- McKesson (MCK) 41.50 23.40 957.69 --- 36.60 --- National Home Healthcare (NHHC) 19.85 4.82 13.64 --- 11.22 --- Option Care (OPTN) 22.15 4.87 27.58 --- 19.47 --- Pediatric Service of America (PSAI) 8.90 4.37 28.43 --- 8.54 --- Praxair (PX) 55.92 36.50 28.03 --- 55.54 --- ResMed (RMD) 62.20 36.25 130.50 --- 51.67 --- Respironics (RESP) 37.05 22.94 31.06 --- 35.59 --- Transworld Healthcare (TWH) 4.83 0.94 N/A --- 3.05 --- Tyco (TYC) 63.21 39.24 19.57 --- 54.55 --- Walgreen (WAG) 45.29 28.70 38.66 --- 34.56 ---

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