Lawyers seeking bankruptcy protection for home-care giant First American Health Care, whose owners were convicted of Medicare fraud, said last week that the company will merge with another.
Attorney Paul Bonapfel said First American, based in Brunswick, Ga., had reached agreement with Integrated Health Service of Owings Mills, Md.
Bonapfel said the merger agreement was reached before First American filed a Chapter 11 bankruptcy petition last week in federal court in Savannah, Ga. Chapter 11 would allow First American to reorganize its finances free from the threat of creditor lawsuits.
Integrated Health would pay $150 million in the merger, with another $100 million to be paid contingent on performance beginning in 1999, Bonapfel said. Integrated Health also has agreed to assume First American's debt, Bonapfel said. He made the announcement at the start of a court hearing.
First American has assets of $108 million, but owes $111 million to 12,000 creditors, Bonapfel said. The company expects to file a reorganization plan within a month and substantially complete it within four months.
U.S. Bankruptcy Judge Lamar W. Davis Jr. granted Bonapfel's request to consolidate the bankruptcy cases of First American and its 31 subsidiaries in 23 states. First American had said earlier that it needed bankruptcy protection because its Medicare reimbursements were cut off Feb. 16 after the convictions.
The Medicare payments-$21 million every two weeks-were halted by HCFA after the Feb. 4 convictions of owners Robert "Jack" Mills and his wife, Margie.
A federal jury in Savannah found Jack Mills guilty of 60 charges and his wife guilty of two. They were accused of billing Medicare for personal trips on the company's plane, among other things. According to a memo given to employees, the couple has resigned.
The country's largest privately held home health company, First American has more than 17,000 employees, including 700 at its Brunswick headquarters. Employees' paychecks have been withheld because of the Medicare suspension.