Government officials are indicating they probably won't give Integrated Health Services an unusual exemption from the Medicare home health interim payment system.
Integrated's chairman is Robert Elkins, M.D, a politically connected businessman who has lavished money on both Republicans and Democrats. He gave nearly $600,000 to the Democratic Party during the 1996 presidential election.
But despite Elkins' push for the exemption, HCFA officials last week expressed deep skepticism about granting a waiver from the interim payment system to Integrated, which is based in Owings Mills, Md. However, there is a possibility the company could get another financial break by different means.
Elkins argues that Integrated deserves the break because it rescued the scandal-plagued First American Health Care, then the nation's largest privately held home health company, in October 1996. The company, previously known as ABC Home Health Services, and its founders had been convicted of Medicare fraud. The corporation had fallen into Chapter 11 bankruptcy proceedings when Integrated agreed to buy it from the federal government in a transaction valued at $313 million.
The purchase contract contained provisions protecting Integrated from losses, Elkins told Wall Street analysts during a conference call late last month. He said Integrated should be shielded from the interim system, set up as a transition to a prospective payment system for home health providers that is scheduled to take effect in October 1999. The interim plan is expected to lower payments to nearly all home health companies.
Integrated operates 525 home health agencies in 34 states. Home care accounts for about $600 million in annual revenues, or about 17% of the company's business. An estimate of its Medicare home health payments was not available.
A source at HCFA, who asked not to be identified, said the exemption was unlikely.
That comment was echoed at a hearing last week into the interim payment system by the House Ways and Means health subcommittee. Chairman William Thomas (R-Calif.) asked HCFA Deputy Administrator Michael Hash if HCFA had any plans to grant the exemption.
Hash answered that he did not believe the 1997 law creating the reimbursement system allowed HCFA to do so.
Wall Street is also discounting the possibility. "They (Integrated) view themselves as white knights, bailing out the government and helping to provide access," said one of the analysts who was part of the Elkins conference call. "I would be surprised if they got this. I mean, how do you cut a deal for one guy?"
But even if the government denies Integrated's petition, the company may still have a shot at financial relief.
The contract for Integrated's purchase of First American included a deferred payment of at least $150 million due to HCFA after 2000, and that payment is being negotiated, Elkins told the analysts. It is unclear what factors affect the balance of the final payment, and Integrated did not make executives available to discuss the issue with MODERN HEALTHCARE* last week.
A HCFA spokesman said the agency had no comment on those negotiations.
Elkins was one of the biggest contributors to the Democratic National Committee during the last presidential election. He also attended several of the White House "coffees" at which big donors met with President Clinton.
