Home Health & Hospice Week

For-profit chain faces shareholder lawsuit over earnings.

The consolidation of the booming hospice market has only just begun.

The hospice industry is primed for mergers & acquisitions activity, said M&A and industry experts at the Strategic Research Institute's 2004 "Healthcare M&A & Corporate Development" conference recently held in Chicago.

"There's a lot of big guys buying up smaller guys, a lot of consolidators. That's created a lot of excitement," David Yates, a managing director in the healthcare finance group of BNP Paribas, told the Mergers & Acquisitions Report.

In addition to using multiples of revenues to value hospices, buyers and sellers are using per-patient multiples, John Cline, CEO of privately held Community Hospices of America, told the Report.

One example of an excited hospice market is Florida. Just in the last few weeks, numerous hospice activities have made the local papers.

In Citrus County, two hospices are waging a pitched battle for the hospice market in the certificate-of-need state. Hernando-Pasco Hospice Inc. already secured a CON for Citrus County last year. But the sole hospice provider in the county, Hospice of Citrus County, has challenged the CON and a hearing on the matter is set for July, reports the St. Petersburg Times.

Hernando-Pasco hospice has submitted another application for a CON in hopes of getting the process jump-started in the county that's about 90 minutes north of Tampa, the paper reports.

In Lakeland, FL, competing proposals are on the table for non-profit Good Shepherd Hospice, owned by Mid-Florida Medical Services, reports The Ledger.

Good Shepherd trustees would like the hospice to go to fellow Florida-based non-profit LifePath Hospice and Palliative Care, for $22 million, according to the paper. But Miami-based for-profit VITAS Healthcare Corp. has put forth an offer of $30 million.

LifePath, Hospice of Citrus County and other Florida hospices are following the trend of building inpatient units for their programs. LifePath has broken ground on a $4.5 million, 24-bed inpatient hospice facility in Temple Terrace and has asked approval for another 24-bed facility in Sun City, reports the Tampa Bay Business Journal.

Hospice of Citrus County has a 10-bed facility in the works, the St. Petersburg Times says. Hospice of Southwest Florida Inc. and Hospice of the Florida Suncoast Inc. plan to convert residence beds into more lucrative inpatient beds, the Business Journal reports.

Odyssey Faces Quality of Care Charges

But all that growth could have its downsides. For-profit chain Odyssey HealthCare Inc. is facing numerous shareholder lawsuits over its earnings reported for the fourth quarter and year of 2003.

The suits, filed in Dallas federal court, allege Odyssey's "rapid growth had come at a steep price," according to a release from New York law firm Milberg Weiss Bershad & Schulman. They charge the Dallas-based company with securities fraud and misleading shareholders.

The suits accuse Odyssey of admitting patients ineligible for the Medicare hospice program, providing below-standard care due to heavy workloads, exceeding Medicare caps in six programs, and hiding high labor and drug costs and negative cash flow.

Exceeding the cap is "highly unusual in the industry and considered a breach of accepted practices by the Centers for Medicare & Medicaid Services," the law firm maintains.

"We believe that the plaintiffs' claims are without merit, we deny the allegations in the complaints, and we intend to vigorously defend the lawsuits," Odyssey officials said in the company's latest quarterly filing with the Securities and Exchange Commission.