Chapter 11 protection may be temporary relief for Medshares

By MEREDITH BONNER

HHBR Editor

Medshares (Memphis, TN) will likely find only temporary relief from its woes with its recent Chapter 11 bankruptcy protection filing, analysts say, as the company is facing a slew of lawsuits and debts.

Although the company had 120 days from its filing date to restructure, analysts say that might not be enough time. The company filed for Chapter 11 in late July, and it is now fighting lawsuits in five states. But Medshares officials say the pending lawsuits were not an issue in the filing. Instead, they site two main factors leading to the filing. The company told the Memphis Business Journal that it had reached its lending limits of about $140 million. It also said regulatory delays following the purchase of a portion of Columbia/HCA Healthcare’s (Nashville, TN) home health division have kept Medshares from billing Medicare for 210 days. The bankruptcy protection filing came just six months after Medshares made its largest acquisition ever, which was the purchase of the home health nursing division of Integrated Health Services (Owings Mills, MD).

According to Davidson County Chancery Court documents, Columbia, after selling 71 home health agencies to Medshares last October, filed a lawsuit seeking up to $12 million from Medshares company because it has not abided by terms of the acquisition, the Journal reported.

Columbia claims that Medshares has failed to pay the cash portion of the acquisition price as well as rent on some leases it assumed. In addition, Columbia says the company has not fulfilled certain contracts, reported the Journal.

That lawsuit is just one of many that have been filed against Medshares, according to the Journal. In North Carolina and Kentucky, where other lawsuits are pending, the company is accused of fraud and racketeering. The cases involve Hospital and Home Care Management or its subsidiaries, to which Medshares Management Services contracted to provide management services. Cases are also pending in South Carolina and Virginia, the Journal reported.

In Nashville, TN, Medshares is a defendant in federal court case in which the U.S Attorney’s office alleges that Medshares Management submitted fraudulent reports to Medicare.

The other plaintiff in that case is A+ Homecare, which sold an agency to a company under common ownership with Medshares Management Group in 1993. Medshares and A+ are still in litigation about money owed for that acquisition.

Medshares Chairman/CEO Stephen Winters denied the validity of these claims to the Journal.