Ihs

Integrated Health Services Inc., the Sparks-based health care giant that flourished by undercutting higher-cost hospitals, finds itself on the critical list, thanks in part to the same cost-cutting pressures that fueled its spectacular growth.Weighed down by staggering debt and shrinking revenue, the once-pioneering IHS warned this month of growing losses and a squeeze on cash flow. It hired the investment house Warburg Dillon Reed LLC and business consultant KPMG LLP to assist in talks with lenders and to develop strategies.

Integrated Health Services Inc. said yesterday that it had a net loss of $4.6 million, or 10 cents a share, in its second quarter, a result the company attributed to the continuing adverse impact of a new Medicare payment system.Owings Mills-based IHS, a provider of post-hospital services, including nursing and rehabilitation, lost 3 cents more per share than was projected by eight analysts surveyed by Zacks Investment Research.For the second quarter, the company posted net earnings of $43.7 million, or 80 cents a share.

Integrated Health Services Inc. of Owings Mills said yesterday that it will take over the long-term rehabilitation services of NovaCare Inc. of King of Prussia, Pa., for an undisclosed amount.The sale comes in spite of industry concerns about the profitability of long-term physical and occupational rehabilitation, a sector of the health care business that has been squeezed by Medicare cutbacks."Although there's been a dramatic reduction in revenues and earnings in contract rehabilitation businesses throughout the country, we believe it is still a viable business," said Marc B. Levin, executive vice president of IHS.IHS is betting that by becoming a bigger player in contract rehabilitation, it will develop enough of a market presence to make money.

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.

As it had warned a month ago, Integrated Health Services Inc. posted lower fourth-quarter earnings yesterday that were dragged down by a new Medicare payment system.Earnings for the quarter that ended Dec. 31 were $10.8 million, or 21 cents a share. That reflects $15 million in severance and other costs as IHS adjusted to new Medicare payments, particularly to a sharp drop in demand for its contract therapy services.Without the effects of the severance and transition costs, earnings were $19.6 million, or 37 cents a share, compared with $27.54 million, or 61 cents a share, from continuing operations and before one-time charges for the same period a year ago.The 1997 fourth quarter, however, also included a $82.1 million one-time charge related to acquisitions, for a net loss of $61.9 million, or $1.59 a share.

Integrated Health Services Inc. has hit an atypical bad patch.The Owings Mills nursing home chain has grown spectacularly since it went public in 1991.Through the purchase of nursing homes and related businesses, IHS' revenue increased from less than $150 million in 1991 to more than $3 billion in 1998.But recently:The stock lost more than 80 percent of its value, plummeting from a 52-week high of $39.375 in April to an all-time low of $7.0625 on Friday.IHS warned Feb. 11 that earnings for the last quarter of 1998 are likely to be 35 to 45 cents a share, not the 75 cents expected by analysts.

Trying to boost its stock price, Integrated Health Services Inc. will sell or spin off its RoTech division, which analysts said might be worth more than the current market value of the entire company.IHS, with headquarters in Owings Mills, said it will explore strategic options to get cash out of RoTech, which provides home respiratory services and durable medical equipment.Robert M. Wasserman, vice president for research at Southeast Research Partners in Boca Raton, Fla., said the two most likely options are to sell RoTech in its entirety, most likely to a company specializing in leveraged buyouts, or to do an initial public offering of a minority interest in RoTech, allowing IHS to raise cash while retaining majority ownership.

Struggling to cope with a new Medicare payment system, Integrated Health Services Inc. said yesterday that its earnings for the quarter that ended Dec. 31 would be about half of what analysts had been projecting.Joel Ray, an analyst for Wheat First Union in Richmond, Va., said he and others had been expecting Owings Mills-based IHS to earn 75 to 80 cents for the quarter, rather than the 35 to 45 cents the company says it expects.In its announcement, IHS said it was on track for the quarter in its nursing homes and its RoTech division, which offers home respiratory services and durable medical equipment.

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.

Continuing a series of transactions to raise money to reduce debt, Integrated Health Services Inc. of Owings Mills announced yesterday that it has sold 32 nursing homes for $135 million in cash, but will continue to operate the facilities under a management contract.The deal involves two companies with ties to IHS. Monarch Properties L.P., a real estate investment trust founded by Dr. Robert N. Elkins, bought the facilities.Elkins is chairman and chief executive officer of IHS.Monarch, in turn, will lease the facilities to Lyric Health Care LLC. IHS owns half of Lyric; the other half is owned by Timothy Nicholson, a member of the IHS board.