In recent months, downgrades of credit ratings on publicly held long-term-care companies have become almost routine. But when Standard & Poor's cut NovaCare's corporate credit rating to CCC from B- earlier this month, the King of Prussia, Pa.-based company didn't take it lightly. It took the unusual step of issuing a rebuttal.
"We strongly disagree with Standard and Poor's decision and their comments," Chief Executive Officer Tim Foster said in a written statement. In issuing the downgrade, S&P warned that the company, which has posted $130 million in losses in the two most recent quarters, could default on $175 million in debt due in January 2000. "We remain confident of our ability to redeem the company's convertible debentures," Foster said.
Michael Kaplan, a 25-year S&P veteran responsible for issuing the downgrade, called NovaCare's statement "highly unusual." Given that NovaCare may be trying to sell its employee services division, the timing of the downgrade could have led to the company's quick retort.
However, Susan Campbell, NovaCare's director of investor relations, says the outpatient rehabilitation therapy company was more concerned about the reaction from employees and referral sources than from the investment community.
NovaCare recently exited the long-term-care business through the sale of its contract rehabilitation business.
Alternative philosophy. Not every doctor group is getting into the union game. The American Osteopathic Association's House of Delegates passed a resolution at its annual business meeting July 17 declaring that physician unionization is "not a viable solution to the problems that physicians face today."
The vote, which was passed unanimously by the 340-member house, followed the American Medical Association's historic decision in June to create a union for doctors.
AOA Executive Director John Crosby says the association believes physicians and managed-care organizations "can work together to create an open and constructive dialogue."
But only, apparently, if physicians are given special antitrust exemptions. The 29,757-member AOA sides with the AMA when it comes to backing state and federal legislation that would provide antitrust relief for physicians who want to negotiate collectively with health plans.
Adverse findings. Once you get into the swing of this accreditation thing, you want to issue recommendations for improvement all over the place, report two doctors from South America who attended a conference on hospital quality improvement and accreditation in Barcelona, Spain, earlier this month.
"There ought to be a Joint Commission for airlines," says Cindy Shughrue, D.O., a quality adviser to Albert Einstein Hospital in Sao Paolo, Brazil, after her luggage was lost by Iberia airlines. "And for hotels," added her colleague Luci Hidal, M.D., who was unhappy with the service at the Fira Palace Hotel, where the conference took place.
But what can only be regarded as a sentinel event happened to the Grand Accreditor himself, Dennis O'Leary, M.D., president and chief executive officer of the Joint Commission on Accreditation of Healthcare Organizations, which sponsored the conference, during his stay at the Fira Palace.
O'Leary was scheduled to deliver the keynote speech at 9: 30 a.m. the first day of the conference. He never appeared.
The hotel forgot to make his wake-up call.
"I was going to make a stink about it, but I was advised not to, so I didn't," says O'Leary.
Would that be a Type I recommendation for improvement?
"That's preliminary nonaccreditation. I'm a vindictive kind of guy," he says.
No sugarcoating here. Wall Street hath no fury like an analyst scorned.
McKesson HBOC's massive financial restatement has enraged investors and analysts, who think the company betrayed their trust. The price of McKesson shares has been cut nearly in half since April, when the first hints of problems emerged. As of early July, more than 53 shareholder lawsuits had been filed against the San Francisco-based company.
Among McKesson's most strident and articulate critics is Michael Krensavage, an analyst with Brown Brothers Harriman, a blue-blooded investment bank in New York. Unfortunately, Krensavage's most acerbic and, to Outliers, most insightful remarks are unprintable.
Returning to language more suitable for children, he says, "Listening to the company has been very perilous to investors. The problem I had with this company was that I did listen." Having learned his lesson, Krensavage skipped the July 14 briefing at which McKesson came clean.
"There are so many accounting issues involved here," he says, "even now I wonder how indicative the results are of the quality of McKesson's earnings."
At the root of Krensavage's gripes is McKesson's failure to uncover the pervasive contracting problems at HBO & Co. during the due diligence any purchaser should make before pulling the trigger on a $12.4 billion deal."They bragged about the extensive audit" to calculate the restatements, Krensavage says. "Why didn't they do that 10 months ago?"
For McKesson, the financial results now show the HBO acquisition wasn't the promised "diversification," he concludes, but "diworseification." Come on, Mike, tell us how you really feel.
Quotable. "The more the public believes that, the more inclined they are to accept that there's an easier solution than there really is and the less willing they are to face up to the real, hard decisions about controlling healthcare costs."-Drew Altman, president of the Henry J. Kaiser Family Foundation, on the danger of the public's believing that healthcare fraud is responsible for the rise in healthcare costs.