Healthcare Updates by Tim Meyer (MF Attila) McLEAN, VA (March 23, 1997) -- OUR POLITICAL HEALTH The nation owes a debt of gratitude to the Washington State Department of Health which released a published report this week warning that diarrheal illness may be caused by contact with chicks and baby ducks. The study found that 14 of 20 people became ill after handling chicks and concludes that "careful handwashing with soap and water after handling animals can reduce the chance of getting salmonella infection." The cost of the study was not mentioned in the press release. According to the Inspector General (IG) of the Department of Health and Human Services, many HMOs limit the ability of Medicare patients to appeal denials of care and termination and reduction of services. These concerns were first raised in a December report which concluded that HMOs were not obeying many federal rules in handling complaints and appeals. This report follows an Arizona U.S. District Judge's order that HMOs give prompt, written and clear notices to patients when care is being denied or reduced. Health Care Financing Administration (HCFA) Administrator Bruce C. Vladek, in his written response to the IG's report, said HCFA is working to improve the appeals process. There was an interesting article in The Wall Street Journal this week on a number of legislative proposals in California to define and limit the role of health plan medical directors. "This hybrid doctor-businessperson is often the one who, without ever having met you, ultimately decides whether your insurance will pay for the treatment your personal physician has recommended." The proposals range from putting medical directors under the jurisdiction of the state medical board, to requiring that before denying coverage the medical director be a qualified doctor who has physically examined the patient. The article quoted a lobbyist for the California Association of HMOs who said that medical directors make coverage decisions, not treatment decisions. "If your plan says it's not going to pay... the patient can pay or the doc can eat it, if that's what the doc wanted to do," stated the lobbyist. Maybe we can get our Industry Food Fool, MF Edible, to report on this idea. HEALTHCARE STOCKS IN THE NEWS SIERRA HEALTH SERVICES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SIE)") else Response.Write("(NYSE: SIE)") end if %> announced it was terminating its merger agreement with PHYSICIAN CORP. OF AMERICA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCAM)") else Response.Write("(Nasdaq: PCAM)") end if %>, following Physician's announcement it would take additional charges in the fourth quarter of 1996 to cover increased liabilities associated with its workers' compensation division. Sierra said the charges represented a material adverse event under the conditions of the original agreement. Physician's then filed a lawsuit against Sierra accusing the company of willfully breaching and terminating the merger agreement. Sierra said the suit is without merit. (Since HCFA is now paying New York hospitals not to train doctors, do you think someone could come up with a plan to pay law schools not to train lawyers?) For the week, Sierra finished down 1/8 closing Friday at $26 3/8, while Physician Corp. was down 1 1/4 closing at $3 7/8. A class-action lawsuit has been commenced on behalf of purchasers of UNISON HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UNHC)") else Response.Write("(Nasdaq: UNHC)") end if %> during the May 14, 1996, to March 10, 1997, time period. The complaint alleges that Unison and three of its officers and directors violated federal securities laws by issuing false and misleading statements and omitting material facts regarding the companies financial results. As reported here last week, the company expects to restate its financial results by approximately $3 to $3.6 million after-tax, resulting in a loss instead of a profit. The stock took a dive following the announcement last week. This week, Unison finished down 1/4 closing at $3 5/8. ELI LILLY & CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LLY)") else Response.Write("(NYSE: LLY)") end if %> said it would not continue to give financial support to a joint venture with SOMATOGEN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SMTG)") else Response.Write("(Nasdaq: SMTG)") end if %> to develop a blood-substitute product. The news sent Somatogen's stock down for the week 4 5/8 closing at $5 5/8, while Lilly was up 1 1/2 closing at $85. COLUMBIA/HCA HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %> had a couple of news items this week. The company signed a letter of intent with PALOMAR MEDICAL TECHNOLOGIES INC.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PMTI)") else Response.Write("(Nasdaq: PMTI)") end if %> Cosmetic Technology International unit to operate cosmetic laser centers. In addition, Blue Cross and Blue Shield of Ohio announced it would not appeal the state's rejection of its controversial sale to Columbia/HCA. The biggest news of the week for the company, however, was the announcement that its El Paso, Texas, operations had been served with search warrants requesting records and documents. The company said it had not been informed of the reason for the search warrants or the nature of the investigation. The New York Times reported that investigators from the FBI, IRS, Department of Health and Human Services and the Defense Department's Criminal Investigation Service were involved. For the week, Palomar was down 1 1/8 closing at $6 5/16, while Columbia/HCA was down 4 3/4 closing at $38 1/2. EARNINGS REPORTS PHP HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PPH)") else Response.Write("(NYSE: PPH)") end if %> reported a third quarter net loss of $9.9 million, or $0.72 a share, on revenues of $50.4 million, compared to last year's third quarter net income of $4.2 million, or $0.31 a share, on revenues of $52.9 million. The results include charges of $9.8 million from establishing a reserve for certain Medicaid receivables due from the District of Columbia (see last week's column), $2.55 million to restructure certain business activities and $2.275 million for the retirement package given to the retiring Chairman and Chief Executive. For the week, PHP was down 3 1/2 closing at $10 3/4. MEDICAL RESOURCES, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRII)") else Response.Write("(Nasdaq: MRII)") end if %> reported fourth quarter net income of $2.5 million, or $0.14 per fully diluted share meeting estimates), on revenues of $32.2 million, compared to last year's fourth quarter net income of $1.2 million, or $0.15 per fully diluted share, on revenues of $13.7 million. For the year, net income was $7.3 million, or $0.59 per fully diluted share (below estimates of $0. 61), on revenues of $93.8 million, compared to 1995's net income of $4.1 million, or $0.53 cents per fully diluted share, on revenues of $52.0 million. For the week, the company's stock was down 1 3/8 closing at $10 3/4. AMERICAN HEALTHCORP, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMHC)") else Response.Write("(Nasdaq: AMHC)") end if %> reported a second quarter net loss of $194,000, or 2 cents a share, on revenues of $7.4 million, compared to last year's second quarter net income of $705,000, or 9 cents a share, on revenues of $7.7 million. The company recently announced a decision to spin off its AmSurg Corp subsidiary and these results exclude AmSurg from the company's revenues. The company said that had AmSurg been included in revenues for the second quarter, revenues would have been $19.3 million compared to $14.4 million for the second quarter of 1995. For the week, the company's stock was down 1/2 closing at $12 3/8. That wraps it up for another week. Please share any comments/suggestions on how to improve this feature via e-mail (MF Attila). In the meantime, here is hoping your investments are healthy!

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