After years of failed mergers, litigation and poor earnings, Coram Healthcare seems to have started down the turnaround road.
The Denver-based home infusion company recorded a $1 million operating loss in the fourth quarter ended Dec. 31, 1998. The company lost $23.4 million in 1998 compared with a $61.8 million loss in 1997, excluding nonrecurring items.
While those numbers may not seem like much of an achievement, Coram's fourth-quarter loss was its smallest in more than two years. And with the meltdown in the home health industry, Coram's shrinking losses are a bright spot.
Coram, which provides home infusion from 90 sites in 44 states, has already undertaken a major restructuring. By eliminating 50 management positions in the first quarter of 1999, the company projects annual savings of $6.3 million.
"We really streamlined areas of responsibility," said Chief Executive Officer Don Amaral.
Hit hard by changes in Medicare reimbursement, about 20% of home health agencies went out of business or withdrew from Medicare last year, according to the Washington-based National Association for Home Care.
Most of those agencies focused on home nursing, which took the deepest reimbursement cuts stemming from a 1997 federal law.
While Medicare reimbursement for home infusion has remained relatively steady, other companies have left the home infusion business.
Owings Mills, Md.-based Integrated Health Services said last month it may sell its profitable home infusion division to pay off debt (March 1, p. 2).
Apria Healthcare Group, a Costa Mesa, Calif.-based home-care company, has also been selling and closing its home infusion businesses, focusing instead on respiratory therapy. The company said home infusion was not profitable.
Reimbursement changes have not hurt Coram, but the past few years have been bumpy for other reasons. After it acquired home-care firm Caremark in 1995, Coram sued the company, claiming it had overvalued itself. The Caremark controversy scuttled a merger agreement that had been in the works at the time with Clearwater, Fla.-based Lincare Holdings. In 1997 Coram received $156.8 million in a settlement.
In 1996 Integrated agreed to buy Coram in a $655 million deal, but called it off shortly thereafter because of accounting disagreements. In October 1997 Integrated agreed to buy Coram's lithotripsy business, which allowed Coram to pay down its debt.
Although it has stemmed its losses, Coram is not out of the woods. "We won't be able to sustain the growth that we've seen in the last two quarters," Amaral said.
Analysts say more changes are needed.
"They just don't have a sizable enough revenue base to justify their corporate infrastructure," said Lori Price, an analyst with CIBC Oppenheimer, a New York investment firm.
Coram will have to pare its infrastructure further or make some strategic acquisitions soon, she said.