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By KAREN PIHL-CAREY
HHBR Staff Writer
For months, in order to keep 70 agencies up and running, Medshares (Memphis, TN) borrowed money from its lender. When the company reached its lending limits, which are based on its amount of receivables, the well dried up, forcing the company to file for Chapter 11 bankruptcy a little more than a week ago.
The problem was this: Medshares had acquired the 70 agencies from Columbia/HCA Healthcare (Nash ville, TN) in asset purchases last year. The company had to file a Form 855 with the federal government and wait for its approval before billing Medicare, and in some cases Medicaid, for services provided through the agencies.
"It took 210 days for that filing to be approved," Medshares Senior Vice President Robert Leech told HHBR. The company has since billed the government, but has not yet received the money.
"I was asked by one reporter if we blamed the federal government for this," Leech said. "And that is absolutely not, we don’t. This is not about blame. This is about taking a necessary step to protect the company and employees and patients."
The bankruptcy and pending reorganization will affect all of the company’s 103 operations, which include 166 home health agencies. The company has 120 days to present a reorganization plan to the court, but Leech expects it will be ready long before that. "We’re working feverishly on the plan right now, and we intend to have the plan to the court in a matter of days," he said. The company is negotiating with an "alternate financing source" in order to improve its position, Leech said.
In the meantime, all agencies will continue operating as they always have. All of the 14,000 employees nationwide will continue to be paid without interruption.
"As of this point, it’s too early to say whether we would sell any agencies," Leech told HHBR. "Our intention at this point is to bring all of our agencies out of Chapter 11 and continue operating all of our companies as they are today."
Earlier this year, Medshares purchased the home nursing division of Integrated Health Services (Owings Mills, MD), which is now called Soleus Healthcare Services. Medshares did not have the same problems with that acquisition because it was a stock purchase, meaning the Form 855 had to be filed at the state level instead of the federal level. "We have been able to bill for Integrated Health patient care services all along," Leech said.
He anticipates the company will recover quickly with the reorganization. Operations from Medshares’ companies posted more than $170 million in net revenue in FY98. They are expected to post more than $400 million in FY99.