Just how popular is Integrated Health Services these days?
Popular enough to be considered the subject of several merger rumors over the past few months. Last year, IHS was believed to have targeted Beverly Enterprises in a hostile takeover offer. So far this year, the company's name has been linked to possible mergers involving Hillhaven Corp. and Columbia/HCA Healthcare Corp.
Although IHS executives aren't commenting on any of the alleged scenarios, the reports illustrate the increased attention the Owings Mills, Md.-based provider has been receiving over the past several months.
It stands to reason. The company has flourished over the years as a pioneer in the subacute-care industry.
Subacute care is the highly touted yet still unproved level of medical care designed for patients who aren't sick enough to remain in acute-care hospitals but are too sick to be discharged or transferred to traditional nursing facilities.
While the federal government spent much of last year debating whether subacute care should receive its own level of Medicare reimbursement, IHS added 77 new facilities and 10,000 new beds to its so-called "post acute-care network."
IHS now provides subacute care and long-term care through 192 facilities with 25,000 beds in 30 states.
"We're thinking in terms of building networks, not converting nursing home beds into subacute-care beds," IHS Vice President Mark Levin said.
The result: IHS' net income doubled last year to $31 million, or $1.73 per share, compared with $15.5 million, or $1.18 per share, in 1993. Revenues jumped 142% to $684 million.
Healthcare analysts attribute IHS' success to a strategy in which "the focus wasn't on the Medicare population but on the insurance patient," said Sheryl Skolnick, a healthcare analyst with Robertson Stephens & Co. in New York.
The company's payer mix includes 45% managed care, a higher percentage than the rest of the subacute-care industry, which is usually 20% to 30%.
However, IHS' record growth also begets increased attention from the industry and news organizations-not all of it positive.
For example, an IHS-owned X-ray services company was hit with a temporary restraining order last month after a Florida judge ruled that the company, MobileX, infringed on the trademark of a rival Florida company, Mobile X-Ray Specialists.
Also, the Equal Employment Opportunity Commission and a former IHS regional manager filed a lawsuit against the company in U.S. District Court in Baltimore in February, accusing the company of religious discrimination.
However, the most damaging litigation has come from former IHS nursing home administrator Tony Gilchrist, who filed a wrongful discharge lawsuit against IHS last October, alleging the company fired him after he discovered it had falsely billed Medicare for services and violated federal securities laws (Oct. 24, 1994, p. 12).
IHS officials strongly denied any wrongdoing in all of the cases.
IHS' chairman and chief executive officer, Robert Elkins, M.D., responded to the allegations in Gilchrist's suit by writing a four-page letter to IHS shareholders, characterizing Gilchrist as a disgruntled former employee with a chronic history of filing bogus lawsuits, as well as a "fugitive of the courts" who was jailed for failing to pay child support.
"Sometimes when you get big, you become a target," Levin said.
Despite the legal distractions, IHS continues to expand by acquiring ancillary companies that complement its current assortment of long-term-care and subacute-care services.
In February, the company added to its network by purchasing two therapy companies, two home-care companies and a hospice-care provider for an undisclosed amount.