HHCA restructures; announces closing of Texas operations
HHCA restructures; announces closing of Texas operations
By KAREN PIHL-CAREY
HHBR Staff Writer
Home Health Corp. of America (HHCA; King of Prussia, PA) is taking aggressive moves to restructure the company and get past bankruptcy, according to its form 10-Q filed last week with the Securities and Exchange Commission (SEC; Washington).
The company will:
• Cease to provide products and services to most managed care businesses and other non-government payors. They made up 39.2% of the company’s net revenues as of June 30.
• Eliminate certain unprofitable products and supplies.
• Close operations in Texas, where net revenues were $3.58 million in 2Q99 ended Dec. 31.
• Withdraw its bid on a contract renewal to provide nursing services to Humana’s (Louisville, KY) southeast Florida division, which has brought in about $3 million in net revenues a year.
The company, which filed for Chapter 11 bankruptcy on Feb. 18, reported its 2Q99 results last week following its Feb. 17 request for a delay because of the resignation of its independent accountants, PricewaterhouseCoopers (Atlanta). As of last week, HHCA had not hired a new accountant.
"We’re talking with other firms," President/CEO Bruce Feldman told HHBR. "We should have one in the next 30 days or so."
Net revenues for 2Q99 were $28.7 million, compared to 2Q98 revenues of $45.7 million. The 37.2% decrease is attributable to the implementation of the Medicare interim payment system, a 44% decrease in Medicare nursing visits because of a decline in physician referrals in the marketplace, a 25% reduction in Medicare oxygen reimbursement, and a $4.1 million reduction in revenues for Medicare nursing services, which Medicare withheld for retroactive adjustments to earlier cost reports. The company is appealing the adjustments.
The net loss for 2Q99 was $44.9 million within the anticipated loss of between $40 million and $60 million announced in mid-February. Net loss for 2Q98 was $23.9 million. 2Q99 loss per share was $4.60, compared to a $2.60 loss per share in 2Q98. Included in the results is a $28.2 million writedown of goodwill.
Feldman told HHBR that the company will stop doing business with certain managed care companies that are not paying their bills to HHCA.
"This will have a negative impact on the company’s net revenues," stated the SEC filing, "but is expected to eliminate payors who delay or deny payments for products and services provided by the company under contractual arrangements, which makes providing these services cost prohibitive."
The company owns 10 locations in Texas, all of which will be closed. In addition, HHCA will not renew its contract with Humana because of the "contract rates being demanded by Humana being below the company’s cost of providing services," the filing said. A total of about 300 employees will lose their jobs.
"The company cannot predict the ultimate impact of the restructuring initiatives on its operations," the form stated.
"There can be no assurance that the cost reductions being implemented will be sufficient to offset the reductions in net revenues expected from the impact of these initiatives."
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