Integrated Health gets out of home care

Money-losing unit sold to Medshares of Tenn.

Medical industry

February 03, 1999|By M. William Salganik | M. William Salganik,SUN STAFF

Integrated Health Services Inc. of Owings Mills has completed the sale of its money-losing home health division to Medshares Inc.

IHS announced in October that it was planning to sell the division. Lower federal reimbursement was the main driver of the decision to get out of home health, Marc B. Levin, IHS executive vice president, said yesterday.

Terms of the sale to the privately held Memphis, Tenn., firm were not disclosed.

IHS stock slipped yesterday by $1.50, or 11.8 percent, to close at $11.1875 a share. However, that was not a reaction to the home health deal but based on "industry considerations" -- poor earnings by other nursing home companies and a new Medicare payment system, said Charles W. Lynch, an analyst for Schroder & Co.

He said the home health sale was "a positive" but, based on the industry problems, Lynch lowered his rating on IHS stock to "outper- form" from "outperform significantly."

The new Medicare payments made it difficult to project earnings in the industry with any confidence, Lynch said, and "any news we've had has been negative."

IHS may fare somewhat better than some of its competitors, he said, because it has diversified into related businesses, such as home respiratory services and durable medical equipment.

Other long-term-care companies were hit yesterday as well. Sun Healthcare Group Inc. shares lost more than half their value, dropping by $2.6875, to $2.0625, after the company reported Monday that it expected a quarterly loss. Genesis Health Ventures Inc. shares shed $1.125, or 13.8 percent of their value, to $7, after the company reported disappointing earnings. Their bad news helped drive other nursing home stocks down. HCR Manor Care Inc. lost 81.25 cents a share, to $25.25.

The problems of the home health industry have been an opportunity for Medshares, which has been using depressed prices for home health agencies to grow exponentially through acquisitions.

With about $175 million in revenue in 1998, it is projecting $550 million in 1999, Robert Leech, senior vice president of Medshares, said yesterday.

With the Integrated deal, the 15-year-old company roughly doubles in size, adding 69 agencies to its 97, and going from 6,500 employees to 14,000.

"We know that demographics and time are on our side," Leech said. He said the company is hoping to "ride out the storm" now until aging baby boomers increase the need for home nursing services.

Pub Date: 2/03/99

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