In a historic first step towards privatization, the New York City Health and Hospitals Corp. board approved a 99-year lease of Coney Island Hospital to Primary Health Systems, a Wayne, Pa.-based management firm. In a pair of 10-3 votes, the HHC board voided the current lease and approved the long-term deal with PHS. Before the new lease becomes effective, however, the New York State Department of Health must approve the deal. The HHC board's approval came despite an overflow crowd of opponents, who heckled pro-privatization board members. Maria K. Mitchell, HHC board chairperson, opened the meeting with an apparent prediction for passage of the measure: "This is the first time in New York where a private-sector group has undertaken such great responsibility for the poor." Opponents, who claim the deal will compromise indigent care, responded with chants of "Don't sell us out."
Blue Cross of Western Pennsylvania's KeystoneBlue HMO and SelectBlue point-of-service plan failed their accreditation examinations because the dates of certain physician credentialing files were falsified, the National Committee for Quality Assurance said last week. Credential files must be verified within 180 days of an NCQA audit. Some employees at the plan had altered dates on files so they appeared to comply with the 180-day requirement when they did not, the NCQA said. Blue Cross of Western Pennsylvania plans to appeal. An NCQA spokesman said a decision on the appeal would likely be reached by year-end. If the Oct. 31 denial of accreditation holds, the Pennsylvania plan could ask for an expedited review sometime next year, the NCQA spokesman said. Pennsylvania regulators, however, are satisfied with corrective actions taken. "The plan demonstrated good faith in working with us to solve the problems," said David R. Henry, a quality-assurance official with the state health department.
PacifiCare Health Systems has established a $1.5 billion revolving line of credit with Bank of America to finance the cash portion of PacifiCare's $2.1 billion acquisition of FHP International and for other acquisition-related costs and general corporate purposes. Terms of the deal call for holders of FHP common stock to receive both cash and PacifiCare stock. The lending agreement "is a key step to closing this deal," said Alan Hoops, PacifiCare president and chief executive officer. The credit line is a five-year, unsecured facility with FHP and PacifiCare providing guarantees. PacifiCare is still preparing its response to Federal Trade Commission inquiries about the transaction, a spokeswoman said.
Health New England's board approved a reorganization in which Baystate Health Systems would become the majority owner of the managed-care company, which has 67,000 enrollees in western Massachusetts and northern Connecticut. In June, the Springfield, Mass.-based HMO announced the proposal under which Baystate, a Springfield-based regional health system and the largest single shareholder of Health New England, agreed to purchase the remaining outstanding stock (June 17, p. 36).
Coram Healthcare, a Denver-based home infusion company, reported a net loss of $12 million, or 28 cents per share, for the third quarter ended Sept. 30, compared with a net loss of $254.7 million, or $6.38 cents per share, for the year-ago period. Revenues fell 20% to $131.2 million. For the nine months, the company reported a net loss of $53.4 million, or $1.30 per share, compared with a net loss of $316.4 million, or $7.88 per share, in the year-ago period. Revenues fell 12% to $395.9 million. Richard Smith, Coram's chief financial officer, said the company's current earnings were affected by interest payments on the company's debt stemming from its April 1995 purchase of Caremark International's home infusion unit. By Oct. 31, he said, Coram had prepaid bank debt of $20.6 million, which had been due Dec. 31. Since October 1995, the company has reduced its bank debt by $68 million. Smith said the impact of the debt payments will be further mitigated by the merger agreement between Coram and Owings Mills, Md.-based Integrated Health Services (Oct. 28, p. 4).
Medaphis Corp.'s stock continued to plummet last week, following the resignation of Chairman and Chief Executive Officer Randolph G. Brown. On Nov. 6, shares of the Atlanta-based billing and accounts receivable management company dropped nearly 7% to close at $8.56 in NASDAQ trading. Late last month, the stock dropped 38% to close at $10.38 after the company posted larger restructuring charges than had been forecast in August (Oct. 28, p. 26). On Oct. 31, Medaphis announced the appointment of David E. McDowell to the post held by Brown. McDowell, who previously served as president and chief operating officer of McKesson Corp., a pharmaceutical distribution company, joined Medaphis' board this May.