IHS earnings to fall short; Expected 35-45 cents a share about half of analysts' projections


Struggling to cope with a new Medicare payment system, Integrated Health Services Inc. said yesterday that its earnings for the quarter that ended Dec. 31 would be about half of what analysts had been projecting.

Joel Ray, an analyst for Wheat First Union in Richmond, Va., said he and others had been expecting Owings Mills-based IHS to earn 75 to 80 cents for the quarter, rather than the 35 to 45 cents the company says it expects.

In its announcement, IHS said it was on track for the quarter in its nursing homes and its RoTech division, which offers home respiratory services and durable medical equipment. But the company said it had experienced a drop-off in rehabilitation therapy patients.

The company said it had eliminated 1,000 positions and "expects further reductions."

It had 86,000 employees last spring, according to its last annual filing with the Securities and Exchange Commission. Of those, about 1,900 were corporate staff, with the rest at more than 1,500 nursing homes and other "service locations" in 47 states.

IHS said it planned to take a $15 million charge in the quarter for "one-time severance and transition costs related to the new Medicare reimbursement system."

Company officials were not available for comment.

The announcement, which came shortly before the close of stock markets, halted trading in IHS stock for the day. The stock was trading at $8.0625, an all-time low for the company, which went public in 1991.

Most other long-term care stocks are also at or near 52-week lows, as the new reimbursement system knocks down revenues.

"The whole industry is in total disarray," Ray said. "Revenue per patient is coming down, and it's tough to make money."

Instead of paying according to cost reports from nursing homes, Medicare is shifting to predetermined rates. Ray said problems in the industry could last three or four years as the new payment system is phased in.

He said IHS' proportion of revenue from Medicare is larger than that of many other long-term-care companies.

Pub Date: 2/12/99

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