Copyright 2009 ProQuest Information and LearningAll Rights ReservedCopyright 2009 CBJ, L. P. Orange County Business Journal
September 21, 2009 - September 27, 2009
SECTION: Pg. 3 Vol. 32 No. 38 ISSN: 1051-7480
ACC-NO: 12879
LENGTH: 802 words
HEADLINE: Billing Issue Spurs Health Company Bankruptcy
BYLINE: Reed, Vita
ABSTRACT
The company, which is financed by venture and corporate investors, doesn't have any significant secured creditors. Besides the government, other unsecured creditors include Aetna Health Management LLC, a Blue Bell, Pa.-based unit of Aetna Inc. that's owed an estimated $2 million, according to the filing. FULL TEXT
HEALTHCARE: LifeMasters plans to settle federal debt in court
LifeMasters Supported SelfCare Inc., an Irvine-based disease management company, has filed for bankruptcy as a way to solve a dispute with the federal government.
The company, which helps people with chronic diseases manage their conditions, filed for reorganization in the Santa Ana division of U.S. Bankruptcy Court last week.
LifeMasters, which is privately held, said the filing would be "the most efficient path to restructure liabilities" stemming from use of its services by the Centers for Medicare and Medicaid Services.
The centers, which manage federal healthcare programs for the elderly and poor, are owed an estimated $125 million by LifeMasters and are the company's largest unsecured creditor, according to the filing.
In 2004 and 2005, LifeMasters landed contracts with the centers for trials of LifeMasters' Web site and other services.
The government ended the contracts in 2006 and this year saying LifeMasters' services didn't meet expectations.
The government contends LifeMasters is required to repay some fees.
LifeMasters disagrees and "rather than endure a costly and time-consuming legal path," chose to restructure through a bankruptcy filing, the company said in a statement.
The filing "gives everybody a better negotiating environment," said George Pillari, LifeMasters' new president, saying that the company realized that Chapter 1 1 was the only way it could handle the government's claim.
LifeMasters had $80 million in revenue last year. The company had received about 30% of its revenue from the Centers for Medicare and Medicaid Services.
The company's restructured operations are expected to be profitable, according to the filing. It has enough cash to complete reorganization, it said.
The process is set to take place over several months. The company's operations aren't expected to be disrupted by the reorganization.
LifeMasters listed assets of $10 million to $50 million and liabilities of $100 million to $500 million.
The company, which is financed by venture and corporate investors, doesn't have any significant secured creditors.
Besides the government, other unsecured creditors include Aetna Health Management LLC, a Blue Bell, Pa.-based unit of Aetna Inc. that's owed an estimated $2 million, according to the filing.
As part of the filing, Pillali, a managing director with turnaround consultant Alvarez & Marsal Healthcare Industry Group in San Francisco, became president.
Pillari had been working with LifeMasters' board as a restructuring adviser.
He replaced cofounder Christobel Selecky, who remains a LifeMasters director and will serve as a senior consulting adviser.
Brian Buchanan, another Alvarez & Marsal executive, was named chief financial officer.
LifeMasters sells its services to health plans, including Medicare and Medicaid, employers, pension systems and healthcare trusts run by labor unions. Its programs are aimed at helping insurers and others control healthcare costs.
Its services include allowing patients with conditions such as diabetes, congestive heart failure and chronic obstructive pulmonary disease to track their medical records, appointments and prescriptions, as well as interact with nurses and other healthcare providers.
The company has what it called several "significant equity holders" in its filing, including technology companies Cisco Systems Inc. and Intel Corp.
Growing Pains
LifeMasters has gone through several oscillations in the past few years.
It was poised for major growth in 2006, having scored several contracts from the federal government to manage Medicare beneficiaries' diseases.
A big part of that planned growth was a $307.5 million sale to Healthways Inc., a larger competitor from Nashville.
A deal was announced in 2006, but it was called off several months later after a thirdparty company provided incorrect data about LifeMasters' revenue to Healthways.
That error affected financial projections that Healthways was relying on and "was material enough that it killed the deal," Selecky said in 2008.
After the Healthways deal fell through, LifeMasters raised a round of venture funding from a group that included VantagePoint Venture Partners of San Bruno, San Franciscobased Saints Capital and Opus Capital in Menlo Park.
The company now has 250 workers, fewer than 10 of whom are at the Irvine office. Pillari splits his time between Irvine and South San Francisco.
SIDEBAR
LifeMasters' Web site: company had $80 million in 2008 revenue
LOAD-DATE: November 11, 2009
|
