Home healthcare chains reported strong revenue growth overall in 1994, but that didn't stop some companies from divesting or merging their home-care services.
MODERN HEALTHCARE's 1995 Multi-unit Providers Survey generated responses from 52 home-care companies. Combined revenues from the firms that provided financial data for the survey soared 50% in 1994 to nearly $9 billion, compared with revenues of about $6 billion in 1993. In addition, the number of home-care branch offices increased 15% to 3,551 in 1994, from 3,076 the previous year.
Expect to see more consolidation in the next 12 months among home-care chains, said John Runningen, a healthcare analyst with Robinson-Humphrey Co., an Atlanta-based investment banking firm.
"The Corams and the Abbeys and Homedcos have the size and critical mass to negotiate with HMOs and managed-care companies," he said. "It's the (smaller) mom-and-pop companies, which represent 40% of the home infusion industry, that are going to lose business."
Larger home-care providers will prosper because they're the ones that can offer managed-care organizations economies of scale, broad geographic diversification and clout with suppliers, Runningen added.
Despite the positive growth chalked up by larger home-care chains in 1994, several were involved in mergers or divestitures. Others faced external troubles, including several federal criminal investigations.
Olsten leads the way.
For the second straight year, Olsten Kimberly QualityCare maintained its rank as the nation's largest home-care provider.
The company, a wholly owned subsidiary of Olsten Corp., provides skilled-nursing services to hospital-based home healthcare agencies. Olsten Kimberly QualityCare's 1994 revenues dipped 7% to $1 billion, and the company decreased the number of its branches to 550 from 600 in 1993.
Company officials didn't provide MODERN HEALTHCARE with a breakout of net income from its home healthcare division. However, Olsten Corp. posted net income of $70 million, or $1.67 per share, for fiscal 1994, compared with a net loss of $26.6 million, or 67 cents per share, in 1993. Revenues rose 5% to $2.3 billion.
"Healthcare services' operating performance during (fiscal 1994) was marked by dynamic changes as we repositioned Olsten Kimberly QualityCare for future growth in a changing healthcare marketplace," said Frank Liguori, Olsten Corp.'s chairman and chief executive officer.
In March, Olsten signed an agreement to provide Cigna HealthCare of Southern California with nursing and caregiving services to more than 300,000 customers in Cigna's healthcare group.
The Melville, N.Y.-based home-care staffing company became a national force among staffing services companies in 1993, when it merged with rival home-care staffing company Lifetime Corp., the holding company for Kimberly QualityCare, in a stock swap valued at $600 million.
Meanwhile, the second-largest home-care company according to the Multi-unit Providers Survey, Brunswick, Ga.-based First American Health Care-formerly known as ABC Home Health Services-reported revenues of $475 million last year, up 34% from 1993.
The company increased the number of branch offices by 46% to 485 in 1994, according to survey data.
However, HHS' inspector general's office in late February disclosed plans to ban First American from Medicare and Medicaid for seven years for allegedly submitting more than $800,000 in false claims.
The sanction, if successful, could doom the company because it receives more than 90% of its revenues from Medicare. In 1993, First American received more than $300 million in Medicare payments (March 6, p. 2).
First American officials vehemently deny the allegations and said the company will appeal the proposed suspension.
Revenues up, income down.
Meanwhile, Abbey Healthcare Group, a Costa Mesa, Calif.-based provider of home infusion and respiratory services, reported a 33% increase in revenues to $439 million last year. The company's branch offices increased 15% to 235.
However, Abbey's net income dropped 14% to $12.3 million, or 95 cents per share, compared with $14.3 million, or $1.42 per share, in 1993.
Abbey's year-end results included the sale of its 51% stake in Abbey Pharmaceutical Services as well as a nonrecurring $10.4 million restructuring charge incurred during the first quarter.
Officials said Abbey's financial results reflected the company's transformation from a home medical equipment provider to an integrated home healthcare provider.
Abbey also has experienced more than its share of internal turmoil, beginning with the abrupt ouster of the company's former president and CEO, Victor Chaltiel (April 25, 1994, p. 16), and ending with the removal, reinstatement and eventual reassignment of Chaltiel's replacement, Jerilyn Asher (Dec. 19/26, 1994, p. 6).
In March 1995 the company agreed to merge with Homedco Group in a deal valued at $1.1 billion. Combined, the two companies will become the nation's largest U.S. home respiratory company.
"This merger brings together excellent clinical expertise and programs with the most comprehensive offering of home healthcare products and services in the industry," said Timothy Aitken, Abbey's chairman and CEO. "Our fully integrated delivery system will provide a single source for managed-care organizations to contract for all of their home-care needs."
Troubles loom at Caremark.
Meanwhile, Caremark International, the embattled Northbrook, Ill.-based alternate-site provider, said its net revenues increased 36% to $2.4 billion last year. However, Caremark's home infusion business only accounted for 18%-or $430 million-of that figure.
Earlier this year, Caremark sold its home infusion business to Denver-based Coram Healthcare Corp. for $310 million in cash and securities. The company's former home infusion division remains the subject of a probe by HHS' inspector general's office, the Justice Department, the U.S. attorney's office and the FBI.
At issue is whether Caremark paid illegal kickbacks to physicians in return for patient referrals to its businesses (Feb. 6, p. 3).
Caremark officials have denied any wrongdoing.
Perhaps the company to keep an eye on is Coram, which last month purchased Lincare Holdings, a Clearwater, Fla.-based home respiratory therapy services company, for $1.1 billion in stock.
Lincare, which participated in this year's survey, reported a 36% increase in net income to $38 million in 1994, compared with $28 million the previous year. Revenues climbed 30% to $201 million.
The company also increased the number of branches it operates by 29% to 174 offices in 35 states.
Coram was formed in February 1994 through the four-way merger of home infusion companies T2 Medical, Curaflex Health Services, HealthInfusion and Medisys.
Olsten Kimberly QualityCare 550 600
First American Health Care 485 330
Interim Services 372 335
Visiting Nurse Preferred Care 260 240
Abbey Healthcare Group 235 203
Lincare Holdings 174 135
American HomePatient 144 76
RoTech Medical Corp. 134 71
Staff Builders 121 93
NMC Homecare 108 99
Modern Healthcare / May 22, 1995