HHCA Files for Chapter 11 King of Prussia, Pa. Beleaguered provider Home Health Corp. of America filed for Chapter 11 bankruptcy protection in late February, a move that allows it to continue operations while attempting to reorganize its mounting debt.

The company recorded a net loss of $44.9 million, or a loss of $4.60 a share, for the second quarter ended December 31, 1998. That compared with a net loss of $23.9 million, or a loss of $2.60 a share, for the same period the previous year.

Revenue for the quarter was $28.7 million, down 37 percent from $45.7 million for the same quarter the previous year.

HHCA officials blamed the company's severe liquidity problems on Medicare cutbacks and the failure of several large insurers to pay their bills. In addition, they said, HHCA borrowed heavily in recent years to finance acquisitions whose values were reduced because of Medicare payment reductions that took effect last year. That resulted in a $28.2 million write-down of goodwill, according to company officials.

Chief executive officer Bruce Feldman said HHCA was not going out of business, but would downsize by releasing 300, or about 10 percent, of its employees and would no longer accept new patients from managed care companies that failed to pay their bills.

"[Managed care] is a bigger problem than Medicare," Feldman told The Philadelphia Inquirer. "They order complex services and they find every excuse not to pay the bills."

In addition, the company's independent accountant, Pricewaterhouse Coopers, resigned in early February after expressing doubt that HHCA could continue as a "going concern." HHCA officials delayed the company's second-quarter earnings announcement, citing the complexity of interpreting the write-down of acquisitions without an accountant.

In an 8-K filing with the Securities and Exchange Commission, the company also indicated that PricewaterhouseCoopers resigned over an accounting dispute stemming from the company's inability to renegotiate $85 million in long-term debt and its default of a $4.4 million debt. -Ken Grunick

IHS Sells Home Nursing Unit, Considers Selling RoTech Division Owings Mills, Md. Integrated Health Services sold its home nursing division in February to Medshares/IHS Acquisition, an affiliate of Memphis, Tenn.-based Medshares Inc. The acquisition includes 69 home health agencies with 251 locations in 22 states.

IHS' home nursing arm had about $400 million in annual revenue, about 13 percent of the company's total revenue. Poor financial performance in 1998 prompted officials to put the unit on the block last fall. Terms of the deal were not disclosed.

In addition, IHS officials said they are considering selling the RoTech division-the company's home medical equipment unit-or taking it public through an initial public offering.

The company also is exploring other strategic alternatives for RoTech. Officials confirmed that discussions with financial groups interested in a leveraged buyout are ongoing. IHS acquired RoTech in June 1997. -Kimberly Schworm

Region B DMERC Stiffens Requirements for Power Wheelchair CMNs Indianapolis Durable Medical Equipment Regional Carrier Region B providers are now required to submit a "detailed evaluation" of the patient's functional capabilities and medical necessity backup when submitting a certificate of medical necessity for a K0011 power wheelchair, according to David Williams, director of government relations for Elyria, Ohio-based Invacare Corp.

Such an evaluation is most commonly done by a physical or occupational therapist, the DMERC for Region B said. It does not need to follow a set format, the DMERC said, but should include patient condition and diagnosis, date of onset and prognosis, and information about the patient's ability to ambulate and transfer. The industry consensus is that payment for the evaluation should be handled by the referring physician, not the provider.

The policy has not been adopted by the three other DMERCs, Williams said.-K. S

Med Group Forms Alliance with PBI Lubbock, Texas Aiming to increase members' access to pharmacy contracts, The Med Group has formed an alliance with Pharmaceutical Buyers Inc., Boulder, Colo., said Bruce Allaire, Med Group director of marketing.

In addition, PBI president Bob Korenblat has joined The Med Group's 10-member board of directors, which includes seven Med Group representatives and three outside directors. Korenblat declined to comment on the deal.

"It's not a purchase. It's not an acquisition. It's not a combining of our buying powers," Allaire said. "It's a way for both groups to offer their members more flexibility in the types of contracts available."

The Med Group doesn't negotiate pharmacy contracts because most of its 193 members are not pharmacies, Allaire said. However, "there are enough that would want to take advantage of PBI's contracts," he said.

Allaire said the partnership is not leading toward PBI's purchase of The Med Group, as some industry players speculate. "Our president has the character that he would make all the staff aware of that and he hasn't at this time," Allaire said. "But you never know." -K. S.

Olsten Reports Net Income Drop for Fourth Quarter; CEO Resigns Melville, N.Y. Olsten Corp. chairman and chief executive officer Frank Liguori has stepped down, a move that coincided with a drop in net income for the company's fourth quarter ended January 3, 1999.

Citing weak home care revenue and Medicare reimbursement decreases, Olsten reported net income of $12 million, or 15 cents a share, for its fourth quarter. That was down from $23 million, or 29 cents a share, for the same period the previous year. Revenue rose 16 percent to $1.3 billion, compared with $1.1 billion for the fourth quarter the previous year.

For fiscal 1998 ended January 3, 1999, net income was $45 million, or 55 cents a share (excluding a one-time charge of $40 million), compared with net income of $93 million, or $1.15 a share, for fiscal 1997.

"Our team is not satisfied with fourth-quarter and 1998 earnings performance," said former chief operating officer Edward Blechschmidt, who is now president and CEO. "However, looking ahead, we are determined to address our profitability issues in both the health services and staffing services businesses."

In his new capacity, Blechschmidt will join the board; vice chairman Stuart Olsten will take over as chairman. The company is reportedly not seeking to fill the COO and vice chairman vacancies.

Olsten Health Services' revenue grew by 2 percent in the fourth quarter. Fewer home care visits and decreased reimbursement offset growth in home infusion and medical staffing, and growth from Florida acquisitions, officials said.-K.S.