Olsten settles suit for $70M
Olsten settles suit for $70M
By KAREN PIHL-CAREY
HHBR Staff Writer
Olsten Corp. (Melville, NY) expects to pay more than $70 million to settle two federal investigations into its home health division’s practice of Medicare billing.
Investigators charged that the company sold several Florida home health agencies to Columbia/HCA Healthcare Corp. (Nashville, TN) for an amount far below their worth, then charged Columbia "inflated fees" to manage the agencies. The fees were billed to Medicare.
As part of the settlement agreement, the details of which are being negotiated, Olsten will pay $61 million to the Department of Justice, plus another $10 million in fines and penalties. Its Kimberly Home Health Care unit will plead guilty to violating certain federal criminal statutes.
Olsten spokesman John Fidler stressed that it is a proposed settlement, and that it could change. Beyond a press release, the company would make no further comments, he said.
"We really can’t at this point," he told HHBR.
In a statement, President/CEO Edward Blechschmidt said: "After almost two years of investigations, we are pleased to have positioned ourselves to put these government inquiries behind us. In a company that has had an exemplary record of both ethical conduct and service excellence spanning nearly 50 years, we remain committed to the highest ethical and medical standards in the conduct of our business."
He also noted that neither the investigations nor the settlement negatively affected the quality of patient care or the company’s future ability to care for its home health patients.
"There are no plans whatsoever of getting out of that particular business," Fidler said of the home health unit.
As a result of the settlement, Olsten expects to post a $70 million, 86 cents per share, charge in 1Q99, to cover the costs and to realign its businesses. The company may report earnings per share of 10 cents, 50% below Wall Street expectations.
Following news of the settlement, Standard & Poor’s revised its outlook of Olsten and subsidiary, Quantum Health Resources, from stable to negative. "The company will be challenged to improve its currently sub-par financial profile," S&P’s said. "Additional borrowing for settlement of federal government investigations and a payment for an acquisition in France will test Olsten’s financial capacity if operations do not improve."
With the realignment, the company will exit the hospice business and several home medical markets, Fidler said. It will rely on outsourcing those services to qualified vendors.
The company will also "be closing or consolidating 15 additional nursing services branches around the country," Fidler told HHBR. And the company will continue "streamlining operations in billing and collection which we started last year."
The company’s North American Staffing Services division will also see a realignment, with an 8% reduction of its 400-branch network.
Despite the proposed settlement, the company still expects double-digit revenue growth for each of its businesses in 1Q99.
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