Blaming shortfalls on Medicare's new prospective payment system for skilled-nursing facilities, Lenox Healthcare filed for Chapter 11 bankruptcy late last week in Wilmington, Del., with $155 million in assets and $229 million in liabilities. The filing is the second brush with bankruptcy this year for the Pittsfield, Mass.-based nursing home operator. In June, Lenox filed a Chapter 11 petition on behalf of Atlanta-based NewCare Health Corp., for which it managed 22 nursing homes. Lenox will use $15 million in debtor-in-possession financing to continue to operate the 56 nursing homes in 13 states affected by the filing.
President Clinton late last week vetoed a $313.6 billion funding bill for fiscal 2000 for HHS and the U.S. Department of Labor, saying it contained "crippling cuts" for his key health priorities. Clinton said the bill wouldn't give enough funding to HCFA and "would severely impede (the agency's) ability to ensure the quality of nursing home care." The bill included $20 million in extra graduate medical education payments to children's hospitals for training pediatricians, but Clinton and the hospitals want twice that.
HHS late last week released its final model compliance guidelines for Medicare HMOs. HCFA requires Medicare HMOs to have compliance plans, but using the guidelines is voluntary. The model plan is like a draft plan released in June but provides more specific advice about when and how to report potential fraud. The guidelines will be published sometime this week in the Federal Register.
Kaiser Permanente said late last week that it lost $29 million in the third quarter ended Sept. 30, compared with a net loss of $89 million in the year-ago period. Revenues rose 10% to $4.3 billion. The Oakland, Calif.-based HMO credited its corporate restructuring for reduced losses but said it will be challenged to reduce losses further in the fourth quarter when costs tend to increase.
Warner-Lambert, a Morris Plains, N.J.-based drugmaker, spurned an $80 billion hostile bid by Pfizer, New York, late last week, and said it would pursue plans to merge with American Home Products Corp. Earlier in the week, American Home Products, Madison, N.J., agreed to a $72 billion stock swap with Warner-Lambert, best known for Lipitor, an anti-cholesterol drug that is expected to ring up $3.3 billion in sales this year. Either combination with Warner-Lambert would create the world's largest drug company.
The General Accounting Office late last week released a report saying that career criminals and organized crime are involved in Medicare, Medicaid and private insurance fraud. Criminal groups engaged in healthcare fraud ranged in size from two to more than 20 participants and usually have one leader. Many of those participants had little or no healthcare experience and had prior criminal histories in activities other than healthcare. The report said that the full extent of the problem remains unknown. MODERN HEALTHCARE first reported on organized crime's interest in the healthcare industry two years ago (May 19, 1997, p. 32).
Eight Tenet Healthcare Corp. hospitals in South Florida filed a lawsuit against their local blood bank for breach of contract after it raised blood prices by nearly 50% to cover a change in processing. The suit seeks damages of more than $15,000. Filed in Palm Beach County Circuit Court, the suit charges that South Florida Blood Banks in Miami had broken a multiyear supply contract with the hospitals by offering only the more- expensive blood, which is filtered to remove white cells. The process, which may become commonplace, reduces the risk of some transfusion complications. The Food and Drug Administration is considering such a requirement, which could hike blood prices nationwide. John Flynn, president of the blood center, said, "It's an issue of quality vs. the bottom line."