Sun Healthcare Group's growth has been curbed by a federal investigation into the company's billing practices, the company's chairman said.
"It's unlikely in the short term that you'll see Sun Healthcare making some significant acquisitions," Andrew Turner told shareholders last week during the company's annual meeting in Albuquerque, N.M.
"Until we move through the completion of the investigation, it's unlikely our stock will rise above $20," Turner said. "That is going to continue to limit the company's ability to grow."
He said the company is cooperating with the investigation, and he is confident the government will file no charges.
Sun disclosed in June 1995 that its rehabilitation branch, Sundance Rehabilitation Corp., was the subject of a federal billing investigation (Sept. 4, 1995, p. 28). The probe has focused on Sun's practice of "concurrent billing" in which therapists treat patients in a group setting but file separate claims for each patient. Turner said there is nothing illegal about the practice.
Turner said he offered the government several million dollars "to make it go away." The offer was not a proposed settlement but was meant to cover federal expenses, he said.
"We recognize that they are probably a little embarrassed, and it's probably important to them to save some face," Turner said. "As long as we are exonerated, I am more than willing to pay $3 million or $4 million to cover their expenses."
The long-term-care provider made a move toward cutting back its operations when it closed on the sale of its ambulatory surgery unit June 12. Sun sold SunSurgery Corp. to Medical Management and Development Corporation of Delaware for $27.9 million in cash and $5.6 million in assumed debt. The buyer's principals include the surgery company's management.
The previously announced transaction stemmed from marketplace resistance to integrating Sun's subacute-care services with ambulatory surgery, the company said. For the fiscal year ended Dec. 31, 1995, the surgery unit, Sun's smallest division, contributed $26.2 million of the company's total revenues of $1.1 billion.