Dr. Robert H. Elkins, who founded Integrated Health Services and built the Baltimore County company into a Fortune 500 company, will step down as IHS' boss, the company said yesterday.
IHS, one of the country's largest nursing home chains, filed for bankruptcy reorganization in February.
Joseph A. Bondi, of the New York turnaround consulting firm Alvarez & Marsal Inc., will step in as "chief restructuring officer," and Dr. Elkins will resign as chairman, chief executive officer and president, according to an IHS announcement late yesterday.
Bondi is no stranger to large-scale turnarounds. Last year, he was named "chief turnaround officer" for Iridium, a bankrupt global satellite telephone company. In 1997, he was brought into the bankrupt MobileMedia Corp., negotiating a deal to sell the company and pay $649 million in claims.
Elkins will step down on approval of the U.S. Bankruptcy Court in Wilmington, Del., which is overseeing the company's reorganization.
IHS, founded in 1986, grew rapidly by acquisition, but piled up $3 billion in debts in the process, then couldn't keep up the payments when the federal government cut Medicare reimbursements.
As the company grew, Elkins received multimillion-dollar bonuses and perks such as an executive jet - leased from a company he owned.
He also became one of the country's biggest political contributors. He and IHS gave more than a half-million dollars to the Democratic Party in the 1996 election. That got Elkins invited to three White House coffees - but didn't deter the 1997 Balanced Budget Act that was a major factor in bringing down his company.
The company said it will continue normal operations. "Joe Bondi, the creditors and IHS realize that their first commitment is to the continued maintenance of high-quality patient care," Dr. Elkins said in a statement released by the company yesterday.
IHS had about 1,500 employees at its Sparks headquarters when it began reorganization. It does not operate nursing homes in Maryland. Elkins, other company officials, representatives of creditors and Bondi could not be reached last night for comment.
Elkins, a psychiatrist, and IHS were pioneers in "subacute" services - care that is less intense, and less expensive, than in a hospital.
He began buying nursing homes, converting some of the rooms to the higher subacute level. He also snapped up businesses in such related fields as contract therapy, home care and pharmacy. By 1998, IHS pulled in slightly less than $3 billion in revenue - double the revenue of two years earlier. It operated at 1,500 locations in 47 states.
Elkins held stock worth more than $60 million at the peak share price of $42.25 in 1995. He received a $3.25 million bonus in 1997, on top of his $752,277 salary. As performance began to weaken, he received no bonus in 1998 - the most recent year for which IHS filed a proxy form - but did get $800,000 in salary and forgiveness of $4 million in loans. IHS set aside $18 million to finance his retirement, as part of a "key employee" plan. He was the only member.
As the impact of Medicare cuts hit, IHS lost $2.2 billion last year, including all one-time charges. It filed for bankruptcy in February, joining other nursing home chains.
One in four for-profit, Medicare-participating nursing homes is in bankruptcy reorganization, said the American Health Care Association, a trade group. In general, the chains have continued to operate while developing reorganization plans, with only a handful of nursing homes sold or shut.