IHS misses third debt payment

Another blow befalls one of premier names in institutional care

$4.1 million was due

Firm hopes to sell stock again, but analysts say turnaround is unlikely

Health care

January 04, 2000|By Robert Little | Robert Little,SUN STAFF

Integrated Health Services Inc.'s financial troubles mounted yesterday as the Sparks-based health care provider skipped a $4.1 million interest payment on its $143.8 million debt. It was the third time in just over a month that the company has missed a multimillion-dollar payment.

Since reporting a $1.83 billion net loss for the first nine months of 1999, Integrated Health has missed at last $28 million in debt payments.

The New York Stock Exchange suspended trading in the company's shares Dec. 23. Shares trading for $40 in the summer of 1998 were worth about 17 cents at the end of November.

Company officials would not comment yesterday, except to say that they continue to talk with lenders about restructuring the company's debt.

And Executive Vice President Marc B. Levin said the company is working to have its shares traded on the OTC Bulletin Board.

But industry analysts say Integrated Health's financial troubles become more difficult to surmount each day, particularly since the company has said its common stock will likely have little or no value even if its debt troubles are resolved.

"I think at this juncture it's not particularly likely that there's going to be a turnaround," said Robert M. Mains, an analyst with Advest Inc.

Integrated Health's announcement that it would not make the $4.1 million interest payment was the latest blow for a company once considered one of Maryland's success stories.

The company ranked 492nd on the Fortune 500 last year, claiming 1998 revenue of more than $3 billion.

From its founding in 1986, when it operated one nursing home, Integrated Health grew into an industry giant, overseeing 1,500 locations and employing 84,000 people. The company became publicly traded in 1991.

And most observers agree that the company's troubles started in 1997 on Capitol Hill, when Congress passed an amendment that balanced the federal budget and reformulated the way the Medicare payments are disbursed.

Prices once based on a health care provider's costs became fixed, based on a patient's condition. Integrated Health -- burdened with $3.4 billion in debt after a series of acquisitions -- could not cut expenses fast enough to compensate for the change.

Integrated Health was not the only nursing home or subacute-care provider affected. At least two other large providers have filed for bankruptcy protection in recent months.

Levin would not speculate on the company's chances of recovering. Nor would he say if the company is considering bankruptcy protection.

But Mains, the analyst, said he thinks bankruptcy is the likely outcome, and that Congress is to blame.

"We wouldn't be talking about any of this if they hadn't changed the Medicare reimbursement structure," said Mains. "This would be a very profitable company."

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