HCA Subsidiaries Plead Guilty to Criminal Fraud Charges

The Associated Press reports two subsidiaries of The Healthcare Corp., formerly Columbia/HCA, pleaded guilty Thursday to criminal fraud charges and were fined $65.2 million, the U.S. Attorney's Office said.

      Columbia Homecare Group Inc. and Columbia Management Companies Inc. entered the pleadings in courts in Miami, Atlanta, Nashville, Tenn., and Tampa, Fla., on charges of conspiracy to defraud the federal government, soliciting and receiving kickbacks in connection with healthcare programs, and making false statements.

      U.S. District Court Judge Susan Bucklew issued the fine following the plea agreement, which stems from a 3-year investigation concerning overbilling charges against HCA.

      HCA said the guilty pleas mark the end of HCA's settlement obligations with the federal government. The embattled healthcare company signed a civil agreement with the federal government in May, agreeing to pay $745 million in fines for overbilling. The criminal pleadings finalized the civil settlement with the Justice Department.

      The federal government's Medicare fraud probe targeting Nashville-based Columbia became public in 1997 with a series of raids on several hospitals.

      In July 1999, two Columbia middle managers from its Florida operations were convicted of conspiracy and defrauding government health insurance programs. The case stemmed from reimbursements from Columbia's Fawcett Memorial Hospital in Port Charlotte that resulted in nearly $3 million in overpayments to Columbia.

      Jay Jarell, former chief executive of Columbia's southwest Florida division, was sentenced to 33 months in prison and Robert Whiteside, a senior reimbursement executive at Columbia's Nashville headquarters, was sentenced to two years. Back to TOC.

Community Health Systems Planning More Acquisitions

CHS has announced that it was buying the money-losing Brandywine Hospital in Southeastern Pennsylvania, Brentwood-based Community Health Systems continues to buck the decline in hospital merger activity.

      According to Molly Cate (of the Nashville Business Journal), when the company launched its IPO on June 9, Community Health owned, leased or operated 49 hospitals, with about 4,348 beds. Seven months later, the company owns, leases or operates 52 hospitals, with about 4,688 beds, in 20 states. That aggressive buying continued this week, when Brandywine Hospital in Chester County, Penn., announced that it was being sold to Community Health for an undisclosed sum.

      Community Health, which targets not-for-profit facilities in rural areas worth about $20 million -- $80 million in revenues, says around 400 of the nation's 2,200 rural hospitals meet its acquisition criteria.

      In fact, the rural market is attractive for several emerging hospital companies, including Nashville-based HCA-spin off LifePoint Hospitals Inc., which sold off four hospitals in 2000 and acquired two others. According to Jefferies & Co. the ideal market for a rural acquisition is one where the economy is growing, where there's no strong undercurrent between the medical and political community, and where there's little competition.

      The ideal goal is to capture volume that in the past has migrated to other markets. That's usually done by increasing the quality of operational methods, such as purchasing and physician recruitment. And, since most of the sought-after rural facilities are reasonably priced, the opportunity is big.

      When Fortsmann Little sold the company back to the public market, the initial offering price was $13 per share. Community Health raised $243.8 million from the offering. The IPO ranked ninth on The Wall Street Journal's Best Performer's list for IPOs conducted in 2000. Back to TOC.

Health Management Associates Reports First Quarter Net Revenue & Net Income up 17%

HMAssociates stated that net income for the quarter increased to $40.2 million, up from $34.3 million, or 17% from the same quarter a year ago. Net patient service revenue also saw a 17% rise to $434.2 million from $370.1 million over the same period. Net earnings per share (diluted) for the first quarter of fiscal 2001, ended December 31, 2000, increased to $.16 on 264.3 million shares from $.14 on 245.0 million shares a year ago, marking a net earnings per share increase of 14% on a share increase of approximately 8%.

      Same hospital salaries and benefits remained essentially flat as a percentage of net revenue, and were well within management's expectation. Salaries and benefits expense, in total, for the quarter represents 39.0% of net revenue compared with 36.9% for the same period a year ago. The increase is primarily due to the three acquisitions that have been completed in the past six months and the June 2000 conversion of pharmacy services from an outside vendor to in-house operations. Bad debt expense for the quarter continued to show improvement from the same period a year ago, with a 90 basis point improvement to 8.3% of net revenue.

      As previously announced, on October 1, 2000 the Company closed on the transaction to acquire the Davis Regional Medical Center, a 149-bed acute care hospital in Statesville, North Carolina. This acquisition is consistent with the strategy of acquiring hospitals in non-urban communities located in the Southeast and Southwest, with populations of 40,000 to 400,000.

      Health Management Associates operates general acute care hospitals in communities situated primarily in the Southeast and Southwest with 36 facilities in 11 states with 5,024 licensed beds. Back to TOC.

Humana To Cut 500 Positions

Humana Inc. will eliminate about 500 jobs, including 90 jobs in its Louisville headquarters. The cuts will take effect over the next several weeks, according to Humana spokesman Tom Noland. The 500 jobs represent 3 percent of the company's national work force. Humana employs about 15,000 nationwide.

      Humana cited a planned reduction in its non-core markets and products with little prospect for growth as the reason for the cuts. The company has seen its health plan membership decline from 5.9 million to 5.4 million members in 15 states, Noland said.

      Last fall Humana stated that commercial membership declined 7.2 percent following a premium increase as they continued to shed its non-core businesses. Humana also lost 114,400 members from its Small Group Commercial division, which was a 7.8 percent decrease. They also previously announced that they would exit 45 high-cost Medicare counties by Jan. 1. The departure will affect about 80,000 members.

      Humana is one of the nation's largest publicly traded managed health care companies with membership primarily in 15 states and Puerto Rico. Back to TOC.

IHS reaches $55 million settlement with founder

Formerly high-flying, now bankrupt, nursing home provider Integrated Health Services reached a nearly $55 million settlement with one of its founders, Robert Elkins, M.D., to leave the company and make way for new leadership. IHS sought Chapter 11 protection last February after losing $2.6 billion in 1999. Analysts said that too rapid expansion is at least partly responsible for the troubles. IHS owns about 360 skilled-nursing facilities and 17 specialty hospitals.

      Elkins, 56, will leave his posts as chairman, chief executive officer and president of IHS once the U.S. bankruptcy court in Wilmington, Del., approves the deal.

      Under the settlement, IHS will pay Elkins $1.5 million in cash, forgive $34.5 million in loans made to him for IHS stock and cover his $18.9 million tax liability resulting from the loan forgiveness, the Associated Press reported. Elkins will provide 100 hours of consulting to IHS during the year. Back to TOC.

What's the Scoop on Using Physician Recruiters?

According to Bonnie Darves, a WebMD business writer who wrote this article, it is best to do some checking first.

      Two years ago, Hilary Almeida, MD, decided to make a career move, but not a hasty one. Sensing that physician recruiters would vary in their abilities and standards as well as their methods, he prepared well. And fared well as a result.

      Almeida started by taking control of the content of the materials recruiters would use to tell prospective employers about him and his career. Even before he began working with recruiters, the Texas cardiologist spruced up is CV, had it professionally produced in both fax-ready and e-mailable versions, and even prepared a 'condensed' version -- essentially a short biographical sketch -- to accompany the full document. Almeida's thorough, professional approach streamlined the search process and, he believes, went a long way in helping him secure his current 'ideal' position with Valley Cardiology in McAllen, Texas.

      But he credits his choice of recruiter for the ultimate success of his search -- after he first accepted a position that was a less-than-perfect fit.

      Along the way, however -- over the course of working with several physician recruiters -- Almeida came to two conclusions:

      A competent professional recruiter can be invaluable if contract negotiations hit a snag.

      All recruiters do not adhere to the same ethical and professional standards.

      At the darker end of the spectrum were recruiters who misrepresented opportunities or pushed him to consider clearly unsuitable positions. Such unprofessional behavior by physician recruiters is blessedly rare. But it happens, and unsuspecting physicians could find themselves in a difficult spot if they end up working with an unscrupulous recruiter, says one vice president for a St. Louis physician search and consulting firm.

      "If a recruiter calls and seems ill-informed about the opportunity, he may be getting just enough information to put together a bare-bones CV, which he will then broadcast-fax," to possibly dozens of organizations looking for a physician with those qualifications. "And this can happen without the physician even knowing what's going on."

      Why would a recruiter do such a thing? Because certain principles in agency law allow for the collection of a professional fee by the first recruiter who "presented" the physician candidate who ultimately accepts a job -- even if the recruiter never had another conversation with the candidate. Unfortunately, even if the unethical recruiter doesn't succeed in collecting a fee by mass-faxing physicians' CVs, the reputations of the physicians involved could be damaged by association with the recruiter's unprofessional behavior.

      "It's OK, actually advisable, for physicians to ask recruiters to share information about their firm and who they are," Dorothy Billingsly, president of Billingsly Henry International and a 15-year veteran of the physician recruiting industry, tells WebMD. "The first question, if a physician receives a call, should be: 'Are you working on retainer or contingency?'"

      There are good contingency firms and there are good retainer firms, but physicians should know that the contingency firm works more as the candidate's advocate, and the retainer firm will be more the facility's advocate.

      At some point, the physician needs to stress that unless permission is given, the recruiter is not to share his CV or information without permission. Physicians should also specify that the CV be sent only to the hiring entity the recruiter has called about. Drkoop.com Cancels Reverse Stock Split, Moves to Sunny California

      Beleaguered, Online health company drkoop.com Inc. said it no longer plans to hold a shareholders' vote on a reverse stock split. The company had originally intended to undertake the maneuver to boost its stock price after the Nasdaq stock market notified it that the stock could be delisted because it was trading for less than $1.00 per share.

      However, several of the company's significant stockholders have contacted the company and advised it that they would oppose the reverse stock split, drkoop.com said.

      The company is closing its Austin headquarters and moving to Santa Monica, Calif., to cut costs. Back to TOC.

Magellan Health Services Sells National MENTOR

Magellan Health Services, Inc., announced it has signed a definitive agreement for the sale of National MENTOR (MENTOR), its human services segment, to an entity formed by the management of MENTOR and Madison Dearborn Partners, a private equity investment firm. The company expects the transaction to close in its third fiscal quarter.

      Under the terms of the agreement, Magellan will receive $121 million, of which up to $15 million will be in the form of interest-bearing promissory notes.

      Of the approximately $92 million in anticipated net cash proceeds to be received by Magellan at closing, approximately half will be used for term loan reduction and half will be used for general corporate purposes and to reduce outstanding borrowings, if any, on Magellan's revolving credit facility.

      The transaction is subject to approvals under the Hart-Scott-Rodino Act, other regulatory approvals, receipt by the buyer of funding under its commitment from FleetBoston Financial and other customary closing conditions. UBS Warburg LLC advised Magellan on the transaction.

      Headquartered in Columbia, Md., Magellan Health Services, Inc. (NYSE:MGL -- news), is the country's leading behavioral managed care organization, serving over 68 million individuals nationwide -- nearly one in three insured Americans. Its customers include health plans, government agencies, unions, and corporations, including more than 20 percent of all Fortune 500 companies. Back to TOC.

Quorum Health (Triad Hospitals) 2nd Quarter Net Rises Before Charges

Quorum Health Group Inc., stated its second-quarter earnings before litigation and merger costs rose 13 percent and met Wall Street's expectations even as hospital admissions dropped slightly.

      For the second quarter ended Dec. 31, Quorum, which has agreed to be acquired by Triad Hospitals Inc. TRIH.O , posted net income of $15.6 million, or 20 cents a diluted share, before special charges. This compared with net income of $13.7 million, or 18 cents a diluted share, in the year-ago period. Analysts were expecting the Brentwood, Tennessee-based company to earn 20 cents a share for the latest second quarter, according to First Call/Thomson Financial, which tracks earnings data. After litigation and stock compensation costs, net income fell 13 percent to $10.9 million or 14 cents a diluted share from $12.6 million or 17 cents a share. Net operating revenues rose almost 6 percent to $458.6 million from $432.9 million.

      Triad Hospitals Inc. agreed to acquire Quorum Health in October for $3.50 a share in cash and 0.4107 of a Triad share for each of Quorum's 71.5 million shares. The deal also includes the assumption of more than $1.2 billion of Quorum debt. Based on a $29 share price for Triad, Quorum's stock is valued at $15.41 a share or $1.10 billion. The acquisition is expected to close in the first half of this calendar year.

Diffenbaugh & Associates, Inc. is a consulting firm specializing in the recruitment and placement of physicians throughout the United States. All day, every day of the year we recruit for our clients’ organizations throughout the United States. We serve the needs of academic and group practices, single and multi-system hospitals, specialty hospitals and community-based programs in more than 40 states. Over the years we have recruited and placed hundreds of physicians for our clients. We attribute our success to our experience, our values and our methods. Visit with one of our 6 associates to learn more about these opportunities.

In This Issue--Also See Archive

HCA Subs Plead Guilty to Fraud

The Associated Press reports two subsidiaries of The Healthcare Corp., formerly Columbia/HCA, pleaded guilty Thurs...

CHS Bailout of Brandywine Hospital

CHS has announced that it was buying the money-losing Brandywine Hospital in Southeastern Penn...

HMA Sees 17% Rise for Q1

HMAssociates stated that net income for the quarter increased to $40.2 million, up from $34.3 mil...

Humana Cuts 500

Humana Inc. will eliminate about 500 jobs, including 90 jobs in its Louisville headquarters. The cuts will...

IHS Agrees to Settlement

Formerly high-flying, now bankrupt, nursing home provider Integrated Health Services reached a nearly $55 mil...

Physicians Recuriters--Caveat Emptor

According to Bonnie Darves, a WebMD business writer who wrote this article, it is best to do some checking...

Magellan Sells National MENTOR

Magellan Health Services, Inc., announced it has signed a definitive agreement for the sale of National MENTOR...

Quorum's Q2 Net Up 13%

Quorum Health Group Inc., stated its second-quarter earnings before litigation and merger costs rose...

UHS Predicts Healthy 4th Quarter

Universal Health Services, Inc. is expected to report strong earnings of approximately $.77 per share...

US Oncology CEO Buys Shares

US Oncology announced the completion of a cashless exercise of options to purchase approximately 1.6 million...

Province Healthcare Sells CA Hospital

Province Healthcare Company completed the sale of General Hospital in Eureka, California to St. Joseph...

UHS Completes 2 Acquisition

Universal Health Services, Inc. announced that it has completed two previously announced acquisitions. ...

HHC Announces Q1 Results

Horizon Health Corporation announced earnings of $0.26 per share for the quarter ended November 30, 2000

UHS Expects Strong 4th Quarter, 25% Increase in Earnings Per Share

Universal Health Services, Inc. is expected to report strong earnings of approximately $.77 per share (diluted) for its fourth quarter ended December 31, 2000 before a non-recurring charge of approximately $.15 per share (diluted) as explained below. These earnings represent a growth of 40% from the earnings per share reported in the same period in 1999, excluding the effect of a $.10 per share (diluted) non-recurring charge recorded in the prior year quarter. On a full year basis, excluding the non-recurring charges recorded in each year, UHS expects to report earnings per share of $3.16 (diluted), a 25% increase from the earnings recorded in the full year of 1999.

      UHS completed three acquisitions in the third quarter of 2000 and has announced the acquisition of four additional hospitals, which should be completed on or before January 31, 2001. The combined annual revenues of these acquisitions are approximately $310 million and the combined earnings before interest, tax, depreciation and amortization (EBITDA) is approximately $47 million. Total purchase price for these acquisitions, including working capital, is approximately $215 million.

      Admissions to the Company's acute care hospitals owned for more than one year increased 3% and admissions to the Company's behavioral health facilities declined 1% in the three-month period ended December 31, 2000 as compared to the comparable prior year quarter. On a full-year basis, admissions to the Company's acute and behavioral health hospitals owned for more than a year increased 3% and 4%, respectively.

      Universal Health Services, Inc. is the a hospital management company and operates facilities nationwide including medical, surgical and behavioral health hospitals and ambulatory surgery and radiation therapy centers. Back to TOC.

US Oncology Announces Stock Purchase by CEO Through Option Exercise

US Oncology announced the completion of a cashless exercise of options to purchase approximately 1.6 million shares issued to Dale Ross, Chairman and Chief Executive Officer, between 1992 and 1995. The options were due to expire on December 16, 2000. To consummate the exercise, Mr. Ross surrendered approximately 1.3 million shares having an average strike price of $3.44 to cover exercise price and tax liability with respect to all the options. The exercise resulted in Mr. Ross owning outright approximately 300,000 shares of US Oncology stock.

      The company stated that it expects to realize a cash tax benefit of approximately $1.0 million related to this exercise. The Company will also record a one-time, non-cash charge of $2.5 million in the fourth quarter ended December 31, 2000 in accordance with FASB Interpretation Number 44, which requires any cashless exercise of options directly administered by a company to result in a current period expense equal to the intrinsic value of the shares. The Compensation Committee also granted to Mr. Ross a new option to purchase approximately 1.3 million shares at the current market price.

      US Oncology manages an extensive oncology network, including cancer research, diagnostic and radiation centers, outpatient blood and marrow stem cell transplant, and pharmaceutical management services in 26 states with over 850 affiliated physicians in 450 locations, including 70 integrated cancer centers.

      Now Section 245(i) Provisions Now Law
On December 21, 2000, President Clinton signed major immigration legislation, called the LIFE Act, into law. The new Section 245(i) provisions allow certain eligible people to become permanent residents without leaving the U.S. Eligible people have until April 30, 2001 to file an immigrant visa petition (an I-130, I-140, or I-360) with the Immigration and Naturalization Service (INS) or a labor certification application with the Department of Labor (DOL) in order to take advantage of this new provision. Filing an immigrant visa petition is the first step in a two-step process. The second step is acquiring permanent residency (the "green card") by filing an adjustment of status application (Form I-485). Even if a person does not apply to adjust status until after April 30, 2001, as long as the petition or labor certification is filed before that date, if he/she is qualified, their eligibility will not expire. Below we offer brief answers to frequently asked questions concerning this new law.

      Why is this new Section 245(i) needed?
Because Congress phased out the original Section 245(i) on January 14, 1998. (The original Section 245(i), authorized in 1994, allowed eligible people who were out of status to adjust their status in the U.S. upon payment of a fine of $1,000.) People who filed an immigrant visa petition with INS or a labor certification application with DOL prior to January 14, 1998 have already qualified as of January 14, 1998 and were "grandfathered" to receive the benefits of Section 245(i). However, many qualified people missed the January 14 deadline and others since have fallen out of status. The extension of Section 245(i) until April 30, 2001 provides a four-month window of opportunity for people to protect their ability to adjust their status in this country.

      Who is eligible to qualify for the new Section 245(i) provisions?
A person who is eligible for permanent residence based on a family relationship or job offer, and who wishes to adjust status to permanent residence without leaving the U.S., could benefit from the new Section 245(i). Most people who entered the U.S. without inspection, overstayed an admission, acted in violation of the terms of their status, worked without authorization, entered as a crewman, or were admitted in transit without a visa, are considered out of status and would be unable to complete the process to become a permanent resident in the U.S. without Section 245(i).

      Why is it so important to become a permanent resident without leaving the United states?
Without Section 245(i), out of status people needed to return to their home countries and there complete the process for an immigrant visa at the U.S. consulate. However, if people have been out of status in the U.S. for more than 180 days, they would be barred from reentering the U.S. for at least 3 years, and perhaps as long as 10 years. Under Section 245(i), an eligible individual can remain in the U.S. to obtain permanent residence through adjustment of status, and thus never trigger these entry bars. (Once permanent residence is obtained, these entry bars no longer apply.) Thus, it is particularly important that people subject to the bars not leave the U.S. at all until they become permanent residents.

      What does the new physical presence requirement mean and how do you prove compliance with it?
Under the new law, beneficiaries of an immigrant petition or labor certification that is filed after the old deadline of January 14, 1998, but before the new deadline of April 30, 2001, must prove that they were physically present in the United States on the date that LIFE Act is signed into law, December 21, 2000. People can prove compliance by submitting evidence of physical presence in the U.S. This evidence could include any receipts for December 21 that include the beneficiary’s name.

      How does a person take advantage of the new Section 245(i)?
To take advantage of the new Section 245(i), a relative must submit a visa petition to the INS on behalf of the person seeking Section 245(i) benefits. The U.S. citizen or legal permanent resident who is sponsoring the Section 245(i) eligible person must file (and sign) the petition. In addition, an employer can submit a labor certification to the DOL on behalf of the person seeking Section 245(i) relief. Both petitions and applications must be submitted on or before April 30, 2001. The INS or DOL does not have to approve the petition or application by that date. It just needs to be filed by April 30, 2001. Legal permanent residents can petition for their spouses and unmarried sons and daughters (of any age). U.S. citizens can petition for their spouses, married and unmarried sons and daughters of any age, parents, and brothers and sisters.

      Do people have to adjust status using the same category in which they petitioned?
No. It is important that people eligible to use Section 245(i) file their petitions and applications before April 30, 2001 using the eligibility they have at the time they file the petition. This initial filing preserves the ability to adjust! People can switch to another category when they become eligible for that category if that switch allows them, for example, to more quickly adjust their status.

      What is the amount of the fine and when must it be paid?
The Section 245(i) fine is $1,000, and is in addition to any other filing fees the INS and DOL charge. In most cases, this fine does not have to be paid when relatives or employers submit the visa petition or labor certification on or before April 30, 2001. Rather, it is usually due later, when people adjust their status and become permanent residents. Thus, the $1,000 fine usually needs to be paid at the time of filing the Form I-485A, which is submitted along with the standard application for adjustment of status (Form I-485).

      Does the new Section 245(i) grant work authorization, protection from deportation, or travel permission?
NO! Section 245(i) only allows people who illegally entered the United States or are out of status for various reasons to adjust their status in the U.S. if they are otherwise eligible. It offers no other protections or rights

      Employers or employees seeking more information should contact their immigration attorney. For More Information, please contact Valerie Brodsky, Esq. at (757) 446-8600, via e-mail at vbrodsky@vanblk.com or visit her law firm website at www.vanblk.com Back to TOC.

Province Healthcare Completes Hospital Sale

Province Healthcare Company completed the sale of General Hospital in Eureka, California to St. Joseph Health Systems. The effective date of the sale is December 22, 2000 and the sales price is approximately $26.5 million plus approximately $5.0 million of working capital.

      Province Healthcare Company will record an after tax gain of approximately $3.4 million on the sale of General Hospital in the fourth quarter of 2000. The Company does not expect future earnings to be impacted as a result of this sale and the sale of Ojai Valley Community Hospital which closed on October 1, 2000. Annually, the two hospitals had revenues of approximately $48.5 million, EBITDA of approximately $5.5 million, and depreciation and amortization of $3.2 million. Interest expense will decrease by approximately $2.3 million as a result of reducing outstanding debt from the proceeds of the sales.

      Province Healthcare is a provider of health care services in attractive non-urban markets in the United States that operates 14 general acute care hospitals in nine states with a total of 1,326 licensed beds. The Company also provides management services to 40 primarily non-urban hospitals in 16 states with a total of 3,166 licensed beds. Back to TOC.

Universal Health Services, Inc. Completes Two Acquisitions

Universal Health Services, Inc. announced that it has completed two previously announced acquisitions. Effective January 12, the company acquired the 96-bed Rancho Springs acute care hospital in Murrieta, California. UHS currently owns the 80-bed Inland Valley Regional Medical Center in Wildomar, California, approximately four miles from Rancho Springs in this rapidly growing area of southern Riverside County California. Effective January 22, the Company acquired two behavioral health hospitals in Boston, the Pembroke Hospital and Westwood Lodge Hospital. The two hospitals operate 215 beds and an outpatient clinic. UHS currently operates, through subsidiaries, three behavioral health hospitals and fifteen outpatient clinics in Eastern Massachusetts. The revenues of these three hospitals are approximately $65 million. These acquired hospitals produce approximately $6 million of earnings before depreciation, interest, tax, and amortization (EBITDA). UHS's total in vestment, including working capital, for these acquisitions is approximately $36 million. Back to TOC.

Horizon Health Corporation Announces First Quarter Results

Horizon Health Corporation announced earnings of $0.26 per share for the quarter ended November 30, 2000, unchanged as compared with earnings of $0.26 per share for the quarter ended November 30, 1999.

      Revenues for the three months ended November 30, 2000, were $30.8 million versus revenues of $35.3 million for the same period in the previous fiscal year, a 12.7% decrease. For the three months ended November 30, 2000, net income was $1.67 million, a 6.7% decrease compared with net income of $1.79 million for the comparable period in fiscal 2000.

      During the quarter, Horizon announced a renewed stock repurchase program and acquired 545,300 shares at an average price of $4.57 per share. Considering the reduction in outstanding shares as a result of the stock repurchases, the Company anticipates that earnings per share for the full fiscal year will be at or near last year's $1.07 per share even if significant growth in revenue does not occur.

      The Company was informed by the Northern California office of the U.S. Department of Justice in early December that it is the subject of an investigation relating to its management of geropsychiatric programs, which the Company believes originated as a result of a sealed qui tam suit. Although the Company has no reason to believe it will become a target of the investigation, and while it has not been advised of any particular allegations, it has received a subpoena to supply certain documents.

      Horizon Health Corporation is a provider, through its four subsidiaries, of employee assistance plans (EAP) and mental health services to businesses and managed care organizations as well as a leading contract manager of clinical programs offered by general acute care hospitals in the United States.