Financially troubled Community Care of America is seeking help from a familiar source, Integrated Health Services.
Most industry analysts view CCA as a sister company to IHS and note that the two have had similar financial backers and executives. Robert Elkins, M.D., president and chief executive officer of Owings Mills, Md.-based IHS, is the principal CCA shareholder and a member of the Naples, Fla.-based company's board.
"The management agreement (with IHS) will provide us access to more sophisticated and responsive systems at a lower cost, which should enable us to reduce overhead," said Gary Singleton, CCA's president and CEO who came to the company last year from IHS.
Singleton had been senior vice president of strategic planning and development at IHS.
A spokesman said CCA continues to evaluate options such as a possible sale of its properties, which include two rural hospitals and 54 long-term-care facilities in eight states. CCA hired investment firm Smith Barney last year to evaluate the troubled company's strategic alternatives that include sale or merger possibilities (Oct. 14, 1996, p. 17).
Last week, CCA said it hired IHS for a five-year management agreement that began Jan. 1. The agreement calls for IHS to provide "certain financial, accounting, (management information systems), reimbursement and ancillary services." CCA also has access to a new $15 million, three-year line of credit with Daiwa Securities, which replaces a prior credit line with NationsBank.
CCA went public with an offering in August 1995. Last year, then-CCA President and CEO Kenneth Creasman resigned within weeks of canceling a second offering. The company also ran into difficulties when HCFA decertified one of its nursing homes in Iowa after it was cited by the state for several healthcare violations.
Elkins owned about 60% of CCA at the time of the initial public offering, but analysts say he likely owns less than 30% of the current company. CCA had 1995 revenues of $94 million. Its 1996 financial data and earnings information is expected out later this month.