After reaching an all-time high price Friday, the stock of fast-growing Integrated Health Services Inc. of Owings Mills suddenly dropped yesterday after a published report raised concerns about the company's operations and future.
The Wall Street Journal's widely read Heard on the Street column reported yesterday on a Florida lawsuit brought by a former IHS official, a possible change in Medicare reimbursement rules and an analyst's skeptical comments about the company, the nation's leading provider of post-hospital medical care.
Company officials blamed the column for its stock's falling $3.375 a share to $38.625 yesterday. The company reached an all-time closing high of $42.25 a share Friday.
IHS Senior Vice President Marc B. Levin strongly disputed yesterday the allegations raised in the lawsuit, filed last year in state court in Miami.
In the lawsuit, Tony L. Gilchrist, former executive director of an IHS facility in Miami, alleged that he was fired after he discovered the company had fraudulently billed Medicare, the federal program that pays for health services for the elderly.
"The allegations are totally unfounded," Mr. Levin said. "Medicare has audited us since our inception in 1986 and never found any problems of fraud. . . . This is simply a case of a disgruntled employee using the legal system and the media for his own personal gain."
The newspaper column, and its impact on IHS' stock price, overshadowed the company's announcement yesterday that it had purchased five businesses intended to bolster expansion in key markets nationwide.
They were the latest in a series of acquisitions that have helped make IHS the leader in a rapidly expanding health care market: providing care to patients who do not require hospitalization but need more services than nursing homes offer.
IHS runs 192 facilities, with 25,000 beds, in 30 states. The new acquisitions, which provide rehabilitative, home health and hospice services, have annual revenues of about $56 million.
IHS would not disclose the terms of the purchases.
The Journal column said the government was considering a change in reimbursement rules for Medicare. But Mr. Levin said there were "no imminent changes that would have a material effect on our company."
Mr. Levin also took issue with the comments of one analyst, Krishen Sud of Needham & Co. in New York, who said the flurry of acquisitions made it difficult to assess the company's finances.
"It's hard to tell what the real underlying growth of the company is because so much of it is lost in these acquisitions," Mr. Sud said in an interview yesterday.
In response, Mr. Levin said: "There's always one or two skeptics, but the overwhelming majority of the analysts on Wall Street firmly support the company."
AKurt Funderburg of Ferris, Baker Watts Inc. in Baltimore, said he was optimistic about the company.
"I have been [recommending], and continue to recommend, that long-term investors stay in the stock," he said, adding that "continuing negative effects from the [Journal] story" could linger "for the next few weeks" and might drive the stock price down further.
"I tend to believe the company's side of the story more in this particular dispute," Mr. Funderburg said, referring to the lawsuit LTC against IHS. "With the amount of attention their facility gets from Medicare during audits, with the certifications they get, I think it would be very difficult for there to be large-scale problems of the kind" alleged in the lawsuit.