Integrated Health surprises with loss of 13 a share

Medicare-payment change is blamed

Health care

May 01, 1999|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

Integrated Health Services Inc. said yesterday that it had a net loss of $6.6 million, or 13 cents a share, in its first quarter, a result the company attributed to the adverse impact of a new Medicare payment system. For the first quarter of 1998, the Owings Mills-based company posted net earnings of $37.6 million, or 73 cents a share.

Net revenue in the quarter that ended March 31 totaled $620.4 million, or 19 percent less than in the 1998 quarter.

Estimates had been for earnings of 6 cents a share, according to eight analysts surveyed by Zacks Investment Research.

IHS shares fell 68.75 cents to $4.8125 yesterday.

"The earnings this quarter reflect the impact of the new" prospective payment system, said Marc B. Levin, IHS' executive vice president. IHS is a provider of post-hospital services, including nursing and rehabilitation.

"The new reimbursement system is having a dramatic change on the way care is delivered in nursing homes," Levin said. "It's not a short-term phenomenon."

As have other companies operating nursing homes and rehabilitation facilities, IHS has been buffeted by the new Medicare "prospective payment system," or PPS, which is designed to save $9.2 billion over five years.

Under the reduced payment system, nursing homes that contract with IHS have been ordering fewer therapy sessions per patient, and admitting fewer Medicare patients.

"I think investors are a little disappointed," said Murray Innes, an analyst with Credit Lyonnais Securities in New York. "We knew it would not be a good quarter, but it's worse then we expected."

"Most analysts expected the company to make a little more than break even; I was looking for a nickel in earnings," Innes said. "But there are some bright spots. IHS' cash flow was surprisingly strong."

As are others in the industry, IHS is wrestling with what is perhaps the biggest change in reimbursement to nursing home companies in the history of the industry, Innes said. "Most people, myself included, believe it would take nursing homes at least two, and possibly three, quarters before they can get a grip," he said.

Also, yesterday, IHS released the proxy statement it filed with the U.S. Securities and Exchange Commission that showed Robert N. Elkins, the chairman and chief executive officer, was paid $809,935 in 1998.

Pub Date: 5/01/99

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