AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INTEGRATED HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2428312
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
10065 RED RUN BOULEVARD
OWINGS MILLS, MARYLAND 21117
(410) 998-8400
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
INTEGRATED HEALTH SERVICES, INC.
1994 STOCK INCENTIVE PLAN
(full title of the plan)
MARSHALL A. ELKINS, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
INTEGRATED HEALTH SERVICES, INC.
10065 RED RUN BOULEVARD
OWINGS MILLS, MARYLAND 21117
(410) 998-8400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications, including all communications sent to
the agent for service, should be sent to:
CARL E. KAPLAN, ESQ. LESLIE A. GLEW, ESQ.
FULBRIGHT & JAWORSKI L.L.P. SENIOR VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL
666 FIFTH AVENUE INTEGRATED HEALTH SERVICES, INC.
NEW YORK, NEW YORK 10103 10065 RED RUN BOULEVARD
(212) 318-3000 OWINGS MILLS, MARYLAND 21117
(410) 998-8400
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of Securities Amount to be Proposed maximum Proposed maximum Amount of
to be registered registered offering price per unit aggregate offering price registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value per share
(including the Preferred Stock Purchase 382,300
Rights)(1)................................... shares $22.50(2) $8,601,750 $2,606.59
Common Stock, $.001 par value per share
(including the Preferred Stock Purchase 135,000
Rights)(1)................................... shares $21.50(2) $2,902,500 $879.55
Common Stock, $.001 par value per share
(including the Preferred Stock Purchase 382,700
Rights)(1)................................... shares $20.63(2) $7,895,101 $2,392.45
------ ---------- ---------
900,000
TOTAL........................................ shares $19,399,351 $5,878.59
====================================================================================================================================
</TABLE>
(1) The Preferred Stock Purchase Rights, which are attached to the shares
of IHS Common Stock being registered, will be issued for no additional
consideration; no additional registration fee is required.
(2) Represents the price at which the indicated options may be exercised.
<PAGE>
PROSPECTUS
2,400,000 SHARES
INTEGRATED HEALTH SERVICES, INC.
COMMON STOCK
UNDER THE INTEGRATED HEALTH SERVICES, INC.
1994 STOCK INCENTIVE PLAN
This Prospectus relates to the offer and sale of up to 2,400,000 shares
(the "Shares") of Common Stock, par value $0.001 per share (together with the
Preferred Stock Purchase Rights associated therewith, the "Common Stock"), of
Integrated Health Services, Inc. ("IHS" or the "Company"). The Shares are being
offered for sale by certain stockholders of the Company (the "Selling
Stockholders") who acquire such Shares pursuant to the Company's 1994 Stock
Incentive Plan, as amended (the "Plan"). See "Selling Stockholders." The
Company's Common Stock is traded on the New York Stock Exchange ("NYSE") under
the symbol "IHS." On May 30, 1997, the closing price of the Common Stock, as
reported in the consolidated reporting system, was $36 per share.
The Company will not receive any of the proceeds from sales of the
Shares by the Selling Stockholders. The Shares may be offered from time to time
by the Selling Stockholders (and their donees and pledgees) through ordinary
brokerage transactions, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices. See "Plan of
Distribution."
The Selling Stockholders may be deemed to be "Underwriters" as defined
in the Securities Act of 1933, as amended (the "Securities Act"). If any
broker-dealers are used to effect sales, any commissions paid to broker-dealers
and, if broker-dealers purchase any of the Shares as principals, any profits
received by such broker-dealers on the resale of the Shares, may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Stockholders may be deemed to be underwriting
commissions. All costs, expenses and fees in connection with the registration of
the Shares will be borne by the Company. Brokerage commissions, if any,
attributable to the sale of the Shares will be borne by the Selling Stockholders
(or their donees and pledgees).
------------------
SEE "RISK FACTORS", WHICH BEGINS ON PAGE 6 OF THIS
PROSPECTUS, FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is June 2, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York, New
York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also may be obtained by mail from the
Public Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy
materials and other information concerning the Company may be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005. Additionally,
the Commission maintains a Web site on the Internet that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission and that is located at http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on Form
S-8 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement. Statements contained herein
concerning the provisions of any contract, agreement or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract, agreement or other document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference. Copies of the Registration
Statement together with exhibits may be inspected at the offices of the
Commission as indicated above without charge and copies thereof may be obtained
therefrom upon payment of a prescribed fee.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT. This
Prospectus (including the documents incorporated by reference herein) contains
certain forwardlooking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) and information relating to IHS that
are based on the beliefs of the management of IHS, as well as assumptions made
by and information currently available to the management of IHS. When used in
this Prospectus, the words "estimate", "project", "believe", "anticipate",
"intend", "expect" and similar expressions are intended to identify
forward-looking statements. Such statements reflect the current views of IHS
with respect to future events and are subject to risks and uncertainties that
could cause actual results to differ materially from those contemplated in such
forward-looking statements, including those discussed under "Risk Factors."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. IHS does not undertake any
obligation to publicly
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<PAGE>
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The information in the following documents filed by IHS with the
Commission (File No. 1-12306) pursuant to the Exchange Act is incorporated by
reference in this Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
(c) Current Report on Form 8-K dated October 17, 1996 reporting the
acquisition of First American Health Care of Georgia, Inc., as amended by Form
8-K/A filed November 26, 1996;
(d) Current Report on Form 8-K dated October 19, 1996 reporting the
execution of the Agreement and Plan of Merger among the Company, IHS Acquisition
XIX, Inc. and Coram Healthcare Corporation (the "Merger Agreement"), as amended
by Form 8-K/A filed April 11, 1997, reporting the termination of the Merger
Agreement;
(e) Current Report on Form 8-K dated May 23, 1997 reporting the
Company's agreement to issue privately an aggregate of $450 million principal
amount of 9 1/2% Senior Subordinated Notes due 2007;
(f) Current Report on Form 8-K dated May 30, 1997 reporting (i) the
Company's issuance of an aggregate of $450 million principal amount of 9 1/2%
Senior Subordinated Notes due 2007 and (ii) the Company's acceptance for payment
of an aggregate of $114,975,000 principal amount of its 95/8% Senior
Subordinated Notes due 2002, Series A and an aggregate of $99,893,000 principal
amount of its 10 3/4% Senior Subordinated Notes due 2004 pursuant to cash tender
offers;
(g) The description of the Company's Common Stock contained in Item 1
of the Company's Registration Statement on Form 8-A dated September 1, 1993; and
(h) The description of the Company's Preferred Stock Purchase Rights
contained in Item 1 of the Company's Registration Statement on Form 8-A dated
September 28, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all Shares offered
have been sold or which deregisters all Shares then remaining unsold shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in a previously filed document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or was deemed to be incorporated by
reference herein modifies or supersedes such statement.
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<PAGE>
Any such statements so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The information relating to IHS contained in this Prospectus should be
read together with the information in the documents incorporated by reference.
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED,
UPON WRITTEN OR ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECT TO
INTEGRATED HEALTH SERVICES, INC., 10065 RED RUN BOULEVARD, OWINGS MILLS,
MARYLAND 21117, ATTENTION: MARC B. LEVIN, EXECUTIVE VICE PRESIDENT-INVESTOR
RELATIONS, TELEPHONE: (410) 998-8400.
THE COMPANY
Integrated Health Services, Inc. is one of the nation's leading
providers of postacute healthcare services. Post-acute care is the provision of
a continuum of care to patients following discharge from an acute care hospital.
IHS' post-acute care services include subacute care, home care and inpatient and
outpatient rehabilitation, hospice and diagnostic services. The Company's
post-acute care network is designed to address the fact that the cost
containment measures implemented by private insurers and managed care
organizations and limitations on government reimbursement of hospital costs have
resulted in the discharge from hospitals of many patients who continue to
require medical and rehabilitative care. The Company's post-acute healthcare
system is intended to provide cost-effective continuity of care for its patients
in multiple settings and enable payors to contract with one provider to provide
all of a patient's needs following discharge from acute care hospitals. The
Company believes that its post-acute care network can be extended beyond
post-acute care to also provide "preacute" care, I.E., services to patients
which reduce the likelihood of a need for a hospital stay. IHS' post-acute care
network currently consists of approximately 1,100 service locations in 41
states.
The Company's post-acute care network strategy is to provide
cost-effective continuity of care for its patients in multiple settings,
including using geriatric care facilities as platforms to provide a wide variety
of subacute medical and rehabilitative services more typically delivered in the
acute care hospital setting and using home healthcare to provide those medical
and rehabilitative services which do not require 24- hour monitoring. To
implement its post-acute care network strategy, the Company has focused on (i)
expanding the range of home healthcare and related services it offers to
patients directly in order to provide patients with a continuum of care
throughout their recovery, to better control costs and to meet the growing
desire by payors for one-stop shopping; (ii) developing market concentration for
its post-acute care services in targeted states due to increasing payor
consolidation and the increased preference of payors, physicians and patients
for dealing with only one service provider; (iii) developing subacute care
units; and (iv) forming strategic alliances with health maintenance
organizations, hospital groups and physicians. Given the increasing importance
of managed care in the healthcare marketplace and the continued cost
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<PAGE>
containment pressures from Medicare, Medicaid and private payors, IHS has been
restructuring its operations to enable IHS to focus on obtaining contracts with
managed care organizations and to provide capitated services. IHS' strategy is
to become a preferred or exclusive provider of post-acute care services to
managed care organizations.
In implementing its post-acute care network strategy, the Company has
recently focused on expanding its home healthcare services to take advantage of
healthcare payors' increasing focus on having healthcare provided in the
lowest-cost setting possible, recent advances in medical technology which have
facilitated the delivery of medical services in alternative sites and patients'
desires to be treated at home. Consistent with the Company's strategy, the
Company in October 1996 acquired First American Health Care of Georgia, Inc.
("First American"), a provider of home health services, principally home
nursing, in 21 states, primarily Alabama, California, Florida, Georgia,
Michigan, Pennsylvania and Tennessee. IHS intends to use the home healthcare
setting and the delivery franchise of the home healthcare branch and agency
network to (i) deliver sophisticated care, such as skilled nursing care, home
infusion therapy and rehabilitation, outside the hospital or nursing home; (ii)
serve as a referral base for IHS' other services and healthcare capabilities;
and (iii) provide a cost-effective site for case management and patient
direction.
The Company provides subacute care through medical specialty units
("MSUs"), which are typically 20 to 75 bed specialty units with physical
identities, specialized medical technology and staffs separate from the
geriatric care facilities in which they are located. MSUs are designed to
provide comprehensive medical services to patients who have been discharged from
acute care hospitals but who still require subacute or complex medical
treatment. The levels and quality of care provided in the Company's MSUs are
similar to those provided in the hospital but at per diem treatment costs which
the Company believes are generally 30% to 60% below the cost of such care in
acute care hospitals. Because of the high level of specialized care provided,
the Company's MSUs generate substantially higher net revenue and operating
profit per patient day than traditional geriatric care services.
The Company presently operates 174 geriatric care facilities (118 owned
or leased and 56 managed) and 158 MSUs located within 84 of these facilities.
Specialty medical services revenues, which include all MSU charges, all revenue
from providing rehabilitative therapies, pharmaceuticals, medical supplies and
durable medical equipment to all its patients, all revenue from its Alzheimer's
programs and all revenue from its provision of pharmacy, rehabilitation therapy,
home healthcare, hospice care and similar services to third-parties, constituted
approximately 57%, 65% and 70% of net revenues during the years ended December
31, 1994, 1995 and 1996, respectively. The Company also offers a wide range of
basic medical services as well as a comprehensive array of respiratory,
physical, speech, occupational and physiatric therapy in all its geriatric care
facilities. For the year ended December 31, 1996, approximately 17% of IHS'
revenues were derived from home health and hospice care, approximately 53% were
derived from subacute and other ancillary services, approximately 27% were
derived from traditional basic nursing services, and approximately 3% were
derived from management and other services. On a pro forma basis after giving
effect to the acquisition of First American, for the year ended
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<PAGE>
December 31, 1996, approximately 35% of IHS' revenues were derived from home
health and hospice care, approximately 41% were derived from subacute and other
ancillary services, approximately 21% were derived from traditional basic
nursing home services and the remaining approximately 3% were derived from
management and other services.
The Company was incorporated in March 1986 as a Pennsylvania
corporation and reorganized as a Delaware corporation in November 1986. The
Company's principal executive offices are located at 10065 Red Run Boulevard,
Owings Mills, Maryland 21117 and its telephone number is (410) 998-8400. Unless
the context indicates otherwise, Integrated Health Services, Inc. and its
subsidiaries are referred to herein collectively as "IHS" or the "Company."
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby. This
Prospectus contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below, as well as
those discussed elsewhere in this Prospectus.
RISKS RELATED TO SUBSTANTIAL INDEBTEDNESS. The Company's indebtedness
is substantial in relation to its stockholders' equity. At March 31, 1997, the
Company's total long-term debt, net of current portion, accounted for 65.3% of
its total capitalization(66.7% on a pro forma basis after giving effect to the
issuance of $450 million aggregate principal amount of its 95/8% Senior
Subordinated Notes due 2007 and the use of proceeds therefrom to repurchase
approximately $214.9 million of its outstanding senior subordinated notes and to
repay approximately $191 million under its revolving credit facility). The
Company also has significant lease obligations with respect to the facilities
operated pursuant to long-term leases, which aggregated approximately $224.0
million at March 31, 1997. For the year ended December 31, 1996 and the three
months ended March 31, 1996 and 1997, the Company's rent expense was $77.8
million ($77.0 million on a pro forma basis after giving effect to the
acquisition of First American, the sale of IHS' pharmacy division and a majority
interest in its assisted living services division and certain other acquisitions
consummated in 1996), $17.7 million and $24.0 million, respectively. In
addition, the Company is obligated to pay up to an additional $155 million in
respect of the acquisition of First American during 2000 to 2004 under certain
circumstances. The Company's strategy of expanding its specialty medical
services and growing through acquisitions may require additional borrowings in
order to finance working capital, capital expenditures and the purchase price of
any acquisitions. The degree to which the Company is leveraged, as well as its
rent expense, could have important consequences to stockholders, including: (i)
the Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or general corporate purposes may be
impaired; (ii) a substantial portion of the Company's cash flow from operations
may be dedicated to the payment of principal and interest on its indebtedness
and rent expense, thereby reducing the funds available to the Company for its
operations; (iii) certain of the Company's borrowings bear, and will continue to
bear, variable rates of interest, which expose the Company to increases in
interest rates; and (iv) certain of the Company's indebtedness contains
financial and other restrictive covenants, including those restricting the
incurrence of additional indebtedness, the creation of liens, the payment
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of dividends and sales of assets and imposing minimum net worth requirements. In
addition, the Company's leverage may also adversely affect the Company's ability
to respond to changing business and economic conditions or continue its growth
strategy. There can be no assurance that the Company's operating results will be
sufficient for the payment of the Company's indebtedness. Both Moody's and
Standard & Poors in May 1997 confirmed their ratings of IHS' long-term debt
obligations, but with a negative outlook. Moody's stated that it retained a
negative outlook anticipating that IHS will continue to be an aggressive
acquirer of companies, and that it would view negatively any increase in
leverage. Standard & Poors stated that its ratings reflected the Company's
aggressive transition towards becoming a full service alternate-site healthcare
provider and its limited cash flow relative to its heavy debt burden. If the
Company were unable to meet interest, principal or lease payments, or satisfy
financial covenants, it could be required to seek renegotiation of such payments
and/or covenants or obtain additional equity or debt financing. If additional
funds are raised by issuing equity securities, the Company's stockholders may
experience dilution. Further, such equity securities may have rights,
preferences or privileges senior to those of the Common Stock. To the extent the
Company finances its activities with additional debt, the Company may become
subject to certain additional financial and other covenants that may restrict
its ability to pursue its growth strategy and to pay dividends on the Common
Stock. There can be no assurance that any such efforts would be successful or
timely or that the terms of any such financing or refinancing would be
acceptable to the Company. See "--Risks Related to Capital Requirements."
RISKS ASSOCIATED WITH GROWTH THROUGH ACQUISITIONS AND INTERNAL
DEVELOPMENT. IHS' growth strategy involves growth through acquisitions and
internal development and, as a result, IHS is subject to various risks
associated with its growth strategy. The Company's planned expansion and growth
require that the Company expand its home healthcare services through the
acquisition of additional home healthcare providers and that the Company
acquire, or establish relationships with, third parties that provide post-acute
care services not currently provided by the Company, that additional MSUs be
established in the Company's existing facilities and that the Company acquire,
lease or acquire the right to manage for others additional facilities in which
MSUs can be established. Such expansion and growth will depend on the Company's
ability to create demand for its post-acute care programs, the availability of
suitable acquisition, lease or management candidates and the Company's ability
to finance such acquisitions and growth. The successful implementation of the
Company's post-acute healthcare system, including the capitation of rates, will
depend on the Company's ability to expand the amount of post-acute care services
it offers directly to its patients rather than through third-party providers.
There can be no assurance that suitable acquisition candidates will be located,
that acquisitions can be consummated, that acquired facilities and companies can
be successfully integrated into the Company's operations, that MSUs can be
successfully established in acquired facilities or that the Company's post-acute
healthcare system, including the capitation of rates, can be successfully
implemented. The post-acute care market is highly competitive, and the Company
faces substantial competition from hospitals, subacute care providers,
rehabilitation providers and home
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healthcare providers, including competition for acquisitions. The Company
anticipates that competition for acquisition opportunities will intensify due to
the ongoing consolidation in the healthcare industry. See "--Risks Related to
Managed Care Strategy" and "--Competition."
The successful integration of acquired businesses, including First
American, is important to the Company's future financial performance. The
anticipated benefits from any of these acquisitions may not be achieved unless
the operations of the acquired businesses are successfully combined with those
of the Company in a timely manner. The integration of the Company's recent
acquisitions will require substantial attention from management. The diversion
of the attention of management, and any difficulties encountered in the
transition process, could have a material adverse effect on the Company's
operations and financial results. In addition, the process of integrating the
various businesses could cause the interruption of, or a loss of momentum in,
the activities of some or all of these businesses, which could have a material
adverse effect on the Company's operations and financial results. There can be
no assurance that the Company will realize any of the anticipated benefits from
its acquisitions. The acquisition of service companies that are not profitable,
or the acquisition of new facilities that result in significant integration
costs and inefficiencies, could also adversely affect the Company's
profitability.
IHS' current and anticipated future growth has placed, and will
continue to place, significant demands on the management, operational and
financial resources of IHS. IHS' ability to manage its growth effectively will
require it to continue to improve its operational, financial and management
information systems and to continue to attract, train, motivate, manage and
retain key employees. There can be no assurance that IHS will be able to manage
its expanded operations effectively. See "--Risks Related to Capital
Requirements."
There can be no assurance that the Company will be successful in
implementing its strategy or in responding to ongoing changes in the healthcare
industry which may require adjustments to its strategy. If IHS fails to
implement its strategy successfully or does not respond timely and adequately to
ongoing changes in the healthcare industry, the Company's business, financial
condition and results of operations will be materially adversely affected.
RISKS RELATED TO MANAGED CARE STRATEGY. Managed care payors and
traditional indemnity insurers have experienced pressure from their
policyholders to curb or reduce the growth in premiums paid to such
organizations for healthcare services. This pressure has resulted in demands on
healthcare service providers to reduce their prices or to share in the financial
risk of providing care through alternate fee structures such as capitation or
fixed case rates. Given the increasing importance of managed care in the
healthcare marketplace and the continued cost containment pressures from
Medicare and Medicaid, IHS has been restructuring its operations to enable the
Company to focus on obtaining contracts with managed care organizations and to
provide capitated services. IHS believes that its home healthcare capabilities
will be an important component of its ability to provide services under
capitated and other alternate fee arrangements. However, to date there has been
limited demand among managed care organizations for post-acute care network
services, and there can be no assurance that demand for such services will
increase. Further, IHS has limited experience in providing services under
capitated and other alternate fee arrangements and setting the applicable rates.
Accordingly, there can be no assurance that the fees received by IHS will cover
the cost of services provided. If revenue for capitated services is insufficient
to cover the treatment costs, IHS' operating results could be adversely
affected. As a result, the success of IHS' managed care strategy will depend
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in large part on its ability to increase demand for post-acute care services
among managed care organizations, to obtain favorable agreements with managed
care organizations and to manage effectively its operating and healthcare
delivery costs through various methods, including utilization management and
competitive pricing for purchased services. Additionally, there can be no
assurance that pricing pressures faced by healthcare providers will not have a
material adverse effect on the Company's business, results of operations and
financial condition.
Further, pursuing a strategy focused on risk sharing fee arrangements
entails certain regulatory risks. Many states impose restrictions on a service
provider's ability to provide capitated services unless it meets certain
financial criteria, and may view capitated fee arrangements as an insurance
activity, subjecting the entity accepting the capitated fee to regulation as an
insurance company rather than merely a licensed healthcare provider accepting a
business risk in connection with the manner in which it is charging for its
services. The laws governing risk sharing fee arrangements for healthcare
service providers are evolving and are not certain at this time. If the risk
sharing activities of the Company require licensure as an insurance company,
there can be no assurance that the Company could obtain or maintain the
necessary licensure, or that the Company would be able to meet any financial
criteria imposed by a state. If the Company was precluded from providing
services under risk sharing fee arrangements, its managed care strategy would be
adversely affected. See "--Uncertainty of Government Regulation."
RISKS RELATED TO CAPITAL REQUIREMENTS. IHS' growth strategy requires
substantial capital for the acquisition of additional home healthcare and
related service providers and geriatric care facilities and the establishment of
new, and expansion of existing, MSUs. The effective integration, operation and
expansion of the existing businesses will also require substantial capital. The
Company expects to finance new acquisitions from a combination of funds from
operations, borrowings under its bank credit facility and the issuance of debt
and equity securities. IHS may raise additional capital through the issuance of
long-term or short-term indebtedness or the issuance of additional equity
securities in private or public transactions, at such times as management deems
appropriate and the market allows. Any of such financings could result in
dilution of existing equity positions, increased interest and amortization
expense or decreased income to fund future expansion. There can be no assurance
that acceptable financing for future acquisitions or for the integration and
expansion of existing businesses and operations can be obtained. The Company's
bank credit facility limits the Company's ability to make acquisitions, and
certain of the indentures under which the Company's outstanding subordinated
debt securities were issued limit the Company's ability to incur additional
indebtedness unless certain financial tests are met. See "--Risks Related to
Substantial Indebtedness."
RISKS RELATED TO RECENT ACQUISITIONS. IHS has recently completed
several major acquisitions, including the First American acquisition, and is
still in the process of integrating those acquired businesses. The Company's
Board of Directors and senior management face a significant challenge in their
efforts to integrate the acquired businesses, including First American. The
dedication of management resources to such integration may detract attention
from the day-to-day business of IHS. There can be no assurance that there will
not be substantial costs associated with such activities or
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that there will not be other material adverse effects of these integration
efforts. There can be no assurance that management's efforts to integrate the
operations of IHS and newly acquired companies will be successful or that the
anticipated benefits of the recent acquisitions will be fully realized.
IHS has recently expanded significantly its home healthcare operations.
On a pro forma basis, after giving effect to the acquisition of First American
(which derives substantially all its revenue from Medicare), approximately 88%,
89% and 85% of IHS' home healthcare revenues were derived from Medicare in the
year ended December 31, 1996 and the three months ended March 31, 1996 and 1997,
respectively. On a pro forma basis, after giving effect to the First American
acquisition, home nursing services accounted for approximately 97.6%, 97.3% and
92.9%, respectively, of IHS' home healthcare revenues in these periods. Medicare
has developed a national fee schedule for infusion therapy, respiratory therapy
and home medical equipment which provides reimbursement at 80% of the amount of
any fee on the schedule. The remaining 20% is paid by other third party payors
(including Medicaid in the case of "medically indigent" patients) or patients;
with respect to home nursing, Medicare generally reimburses for the cost
(including a rate of return) of providing such services, up to a regionally
adjusted allowable maximum per visit and per discipline with no fixed limit on
the number of visits. There generally is no deductible or coinsurance. As a
result, there is no reward for efficiency, provided that costs are below the
cap, and traditional home healthcare services carry relatively low margins.
However, IHS expects that Medicare will implement a prospective payment system
for home nursing services in the next several years, and implementation of a
prospective payment system will be a critical element to the success of IHS'
expansion into home nursing services. Based upon prior legislative proposals,
the Company believes that a prospective payment system would most likely provide
a healthcare provider a predetermined rate for a given service, with providers
that have costs below the predetermined rate being entitled to keep some or all
of this difference. There can be no assurance that Medicare will implement a
prospective payment system for home nursing services in the next several years
or at all. The implementation of a prospective payment system will require IHS
to make contingent payments related to the First American acquisition of $155
million over a period of five years. The inability of IHS to realize operating
efficiencies and to provide home healthcare services at a cost below the
established Medicare fee schedule could have a material adverse effect on IHS'
home healthcare operations and its post-acute care network. See "--Risk of
Adverse Effect of Healthcare Reform."
RISKS RELATED TO HISTORICAL FINANCIAL PERFORMANCE OF FIRST AMERICAN.
During the year ended December 31, 1995 and the nine months ended September 30,
1996, First American recorded a net loss of $110.4 million and $36.2 million,
respectively. Numerous factors have affected First American's performance and
financial condition to date, including, among others, high administrative costs
and the settlement of claims for reimbursement of certain overpayments and
unallowable reimbursements under Medicare (which settlement resulted in a
reduction to patient service revenues of $54.6 million for the year ended
December 31, 1995 and $10.4 million for the nine months ended September 30,
1996). In addition, in February 1996, in response to the stoppage by the Health
Care Financing Administration ("HCFA") of its bi-weekly periodic interim
payments ("PIP") to First American, First American was forced to declare
bankruptcy. In March 1996, the bankruptcy court ordered HCFA to resume PIP
payments to First
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American. However, the bankruptcy filing and operation of First American in
bankruptcy until its acquisition by IHS has adversely affected the business,
results of operations and financial condition of First American. There can be no
assurance that these factors or the First American bankruptcy will not continue
to have an adverse effect on First American's and IHS' business, financial
condition and results of operations in the future. There can be no assurance
that the historical losses incurred by First American will not continue.
RELIANCE ON REIMBURSEMENT BY THIRD PARTY PAYORS. The Company receives
payment for services rendered to patients from private insurers and patients
themselves, from the federal government under Medicare, and from the states in
which it operates under Medicaid. The healthcare industry is experiencing a
trend toward cost containment, as government and other third party payors seek
to impose lower reimbursement and utilization rates and negotiate reduced
payment schedules with service providers. These cost containment measures,
combined with the increasing influence of managed care payors and competition
for patients, have resulted in reduced rates of reimbursement for services
provided by IHS. Aspects of certain healthcare reform proposals, such as
cutbacks in the Medicare and Medicaid programs, containment of healthcare costs
on an interim basis by means that could include a short-term freeze on prices
charged by healthcare providers, and permitting greater state flexibility in the
administration of Medicaid, could adversely affect the Company. See "--Risk of
Adverse Effect of Healthcare Reform." During the years ended December 31, 1994,
1995 and 1996 and the three months ended March 31, 1996 and 1997, the Company
derived approximately 56%, 55%, 60%, 57% and 67%, respectively, of its patient
revenues from Medicare and Medicaid. Substantially all of First American's
revenues are derived from Medicare. On a pro forma basis after giving effect to
the First American acquisition and the sale of a majority interest in its
assisted living division, approximately 69%, 68%, 68% and 67% of the Company's
patient revenues would have been derived from Medicare and Medicaid during the
years ended December 31, 1995 and 1996 and the three months ended March 31, 1996
and 1997, respectively.
The sources and amounts of the Company's patient revenues derived from
the operation of its geriatric care facilities and MSU programs are determined
by a number of factors, including licensed bed capacity of its facilities,
occupancy rate, the mix of patients and the rates of reimbursement among payor
categories (private, Medicare and Medicaid). Changes in the mix of the Company's
patients among the private pay, Medicare and Medicaid categories can
significantly affect the profitability of the Company's operations. The
Company's cost of care for its MSU patients generally exceeds regional
reimbursement limits established under Medicare. The success of the Company's
MSU strategy will depend in part on its ability to obtain per diem rate
approvals for costs which exceed the Medicare established per diem rate limits
and by obtaining waivers of these limitations. There can be no assurance that
the Company will be able to obtain the waivers necessary to enable the Company
to recover its excess costs.
Managed care organizations and other third party payors have continued
to consolidate to enhance their ability to influence the delivery of healthcare
services. Consequently, the healthcare needs of a large percentage of the United
States population are provided by a small number of managed care organizations
and third
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party payors. These organizations generally enter into service agreements with a
limited number of providers for needed services. To the extent such
organizations terminate IHS as a preferred provider and/or engage IHS'
competitors as a preferred or exclusive provider, the business of IHS could be
materially adversely affected.
RISK OF ADVERSE EFFECT OF HEALTHCARE REFORM. In addition to extensive
existing government healthcare regulation, there are numerous initiatives on the
federal and state levels for comprehensive reforms affecting the payment for and
availability of healthcare services, including a number of proposals that would
significantly limit reimbursement under Medicare and Medicaid. It is not clear
at this time what proposals, if any, will be adopted or, if adopted, what effect
such proposals would have on the Company's business. Aspects of certain of these
healthcare proposals, such as cutbacks in the Medicare and Medicaid programs,
containment of healthcare costs on an interim basis by means that could include
a short-term freeze on prices charged by healthcare providers, and permitting
greater state flexibility in the administration of Medicaid, could adversely
affect the Company. In addition, there have been proposals to convert the
current cost reimbursement system for home nursing services covered under
Medicare to a prospective payment system. The prospective payment system
proposals generally provide for prospectively established per visit payments to
be made for all covered services, which are then subject to an annual aggregate
per episode limit at the end of the year. Home health agencies that are able to
keep their total expenses per visit during the year below their per episode
annual limits will be able to retain a specified percentage of the difference,
subject to certain aggregate limitations. Such changes could have a material
adverse effect on the Company and its growth strategy. The implementation of a
prospective payment system will require the Company to make contingent payments
related to the First American acquisition of $155 million over a period of five
years. Additionally, the May 1997 balanced budget agreement between the
President and Congress contemplates changing Medicare payments for skilled
nursing facilities and home nursing services from a cost-reimbursement system to
a prospective payment system. The inability of IHS to provide home healthcare
and/or skilled nursing services at a cost below the established Medicare fee
schedule could have a material adverse effect on IHS' home healthcare
operations, post-acute care network and business. See "--Risks Related to Recent
Acquisitions" and "--Reliance on Reimbursement by Third Party Payors." There can
be no assurance that currently proposed or future healthcare legislation or
other changes in the administration or interpretation of governmental healthcare
programs will not have an adverse effect on the Company or that payments under
governmental programs will remain at levels comparable to present levels or will
be sufficient to cover the costs allocable to patients eligible for
reimbursement pursuant to such programs. See "--Uncertainty of Government
Regulation."
UNCERTAINTY OF GOVERNMENT REGULATION. The Company and the healthcare
industry generally are subject to extensive federal, state and local regulation
governing licensure and conduct of operations at existing facilities,
construction of new facilities, acquisition of existing facilities, additions of
new services, certain capital expenditures and reimbursement for services
rendered. Changes in applicable laws and regulations or new interpretations of
existing laws and regulations could have a material adverse effect on licensure,
eligibility for participation, permissible activities, operating costs and the
levels of reimbursement from governmental and other sources. There can be
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no assurance that regulatory authorities will not adopt changes or new
interpretations of existing regulations that could adversely affect the Company.
The failure to maintain or renew any required regulatory approvals or licenses
could prevent the Company from offering existing services or from obtaining
reimbursement. In certain circumstances, failure to comply at one facility may
affect the ability of the Company to obtain or maintain licenses or approvals
under Medicare and Medicaid programs at other facilities. In addition, in the
conduct of its business the Company's operations are subject to review by
federal and state regulatory agencies. In the course of these reviews, problems
are from time to time identified by these agencies. Although the Company has to
date been able to resolve these problems in a manner satisfactory to the
regulatory agencies without a material adverse effect on the Company, there can
be no assurance that the Company will be able to do so in the future.
Recently effective provisions of the regulations adopted under the
Omnibus Budget Reconciliation Act of 1987 ("OBRA") have implemented stricter
guidelines for annual state surveys of long-term care facilities and expanded
remedies available to HCFA to enforce compliance with the detailed regulations
mandating minimum healthcare standards and may significantly affect the
consequences to the Company if annual or other HCFA facility surveys identify
noncompliance with these regulations. Remedies include fines, new patient
admission moratoriums, denial of reimbursement, federal or state monitoring of
operations, closure of facilities and termination of provider reimbursement
agreements. These provisions eliminate the ability of operators to appeal the
scope and severity of any deficiencies and grant state regulators the authority
to impose new remedies, including monetary penalties, denial of payments and
termination of the right to participate in the Medicare and/or Medicaid
programs. The Company believes these new guidelines may result in an increase in
the number of facilities that will not be in "substantial compliance" with the
regulations and, as a result, subject to increased disciplinary actions and
remedies, including admission holds and termination of the right to participate
in the Medicare and/or Medicaid programs. In ranking facilities, survey results
subsequent to October 1990 are considered. As a result, the Company's strategy
of acquiring poorly performing facilities could adversely affect the Company's
business to the extent remedies are imposed at such facilities.
The Company is also subject to federal and state laws which govern
financial and other arrangements between healthcare providers. These laws often
prohibit certain direct and indirect payments or fee-splitting arrangements
between healthcare providers that are designed to induce or encourage the
referral of patients to, or the recommendation of, a particular provider for
medical products and services. These laws include the federal "Stark Bills,"
which prohibit, with limited exceptions, financial relationships between
ancillary service providers and referring physicians, and the federal
"anti-kickback law," which prohibits, among other things, the offer, payment,
solicitation or receipt of any form of remuneration in return for the referral
of Medicare and Medicaid patients. The Office of the Inspector General of the
Department of Health and Human Services, the Department of Justice and other
federal agencies interpret these fraud and abuse provisions liberally and
enforce them aggressively. Members of Congress have proposed legislation that
would significantly expand the federal government's involvement in curtailing
fraud and abuse and increase the monetary penalties for violation of these
provisions. In addition, some states restrict certain business relationships
between physicians and other providers of healthcare
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services. Many states prohibit business corporations from providing, or holding
themselves out as a provider of, medical care. Possible sanctions for violation
of any of these restrictions or prohibitions include loss of licensure or
eligibility to participate in reimbursement programs (including Medicare and
Medicaid), asset forfeitures and civil and criminal penalties. These laws vary
from state to state, are often vague and have seldom been interpreted by the
courts or regulatory agencies. The Company seeks to structure its business
arrangements in compliance with these laws, and from time to time the Company
has sought guidance as to the interpretation of such laws; however, there can be
no assurance that such laws ultimately will be interpreted in a manner
consistent with the practices of the Company.
Many states have adopted certificate of need or similar laws which
generally require that the appropriate state agency approve certain acquisitions
or capital expenditures in excess of defined levels and determine that a need
exists for certain new bed additions, new services and the acquisition of such
medical equipment or capital expenditures or other changes prior to beds and/or
services being added. Many states have placed a moratorium on granting
additional certificates of need or otherwise stated their intent not to grant
approval for new beds. To the extent certificates of need or other similar
approvals are required for expansion of the Company's operations, either through
facility acquisitions or expansion or provision of new services or other
changes, such expansion could be adversely affected by the failure or inability
to obtain the necessary approvals, changes in the standards applicable to such
approvals and possible delays in, and the expenses associated with, obtaining
such approvals.
The Company is unable to predict the future course of federal, state or
local regulation or legislation, including Medicare and Medicaid statutes and
regulations. Further changes in the regulatory framework could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "--Risk of Adverse Effect of Healthcare Reform."
COMPETITION. The healthcare industry is highly competitive and is
subject to continuing changes in the provision of services and the selection and
compensation of providers. The Company competes on a local and regional basis
with other providers on the basis of the breadth and quality of its services,
the quality of its facilities and, to a more limited extent, price. The Company
also competes with other providers in the acquisition and development of
additional facilities and service providers. The Company's current and potential
competitors include national, regional and local operators of geriatric care
facilities, acute care hospitals and rehabilitation hospitals, extended care
centers, retirement centers and community home health agencies, other home
healthcare companies and similar institutions, many of which have significantly
greater financial and other resources than the Company. In addition, the Company
competes with a number of tax-exempt nonprofit organizations which can finance
acquisitions and capital expenditures on a tax-exempt basis or receive
charitable contributions unavailable to the Company. New service introductions
and enhancements, acquisitions, continued industry consolidation and the
development of strategic relationships by IHS' competitors could cause a
significant decline in sales or loss of market acceptance of IHS' services or
intense price competition, or make IHS' services noncompetitive. Further,
technological advances in drug delivery systems and the development of new
medical treatments that cure certain complex diseases or
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reduce the need for healthcare services could adversely impact the business of
IHS. There can be no assurance that IHS will be able to compete successfully
against current or future competitors or that competitive pressures will not
have a material adverse effect on IHS' business, financial condition and results
of operations. IHS also competes with various healthcare providers with respect
to attracting and retaining qualified management and other personnel. Any
significant failure by IHS to attract and retain qualified employees could have
a material adverse effect on IHS' business, results of operations and financial
condition.
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS. IHS' Third Restated
Certificate of Incorporation and By-laws, as well as the Delaware General
Corporation Law (the "DGCL"), contain certain provisions that could have the
effect of making it more difficult for a third party to acquire, or discouraging
a third party from attempting to acquire, control of IHS. These provisions could
limit the price that certain investors might be willing to pay in the future for
shares of Common Stock. Certain of these provisions allow IHS to issue, without
stockholder approval, preferred stock having voting rights senior to those of
the Common Stock. Other provisions impose various procedural and other
requirements that could make it more difficult for stockholders to effect
certain corporate actions. In addition, the IHS Stockholders' Rights Plan, which
provides for discount purchase rights to certain stockholders of IHS upon
certain acquisitions of 20% or more of the outstanding shares of Common Stock,
may also inhibit a change in control of IHS. As a Delaware corporation, IHS is
subject to Section 203 of the DGCL, which, in general, prevents an "interested
stockholder" (defined generally as a person owning 15% or more of the
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) for three years following the date such person became
an interested stockholder unless certain conditions are satisfied.
POSSIBLE VOLATILITY OF STOCK PRICE. There may be significant volatility
in the market price of the Common Stock. Quarterly operating results of IHS,
changes in general conditions in the economy, the financial markets or the
healthcare industry, or other developments affecting IHS or its competitors,
could cause the market price of the Common Stock to fluctuate substantially. In
addition, in recent years the stock market and, in particular, the healthcare
industry segment, has experienced significant price and volume fluctuations.
This volatility has affected the market price of securities issued by many
companies for reasons unrelated to their operating performance. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been initiated against such
company. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
upon IHS' business, operating results and financial condition.
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USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders.
SELLING STOCKHOLDERS
The Company will supplement this Prospectus from time to time to
include certain information concerning the security ownership of the Selling
Stockholders and the position, office or other material relationship which a
Selling Stockholder has had within the past three years with the Company or any
of its predecessors or affiliates.
PLAN OF DISTRIBUTION
The Company is registering the Shares on behalf of the Selling
Stockholders. All costs, expenses and fees in connection with the registration
of the Shares offered hereby will be borne by the Company. Brokerage
commissions, if any, attributable to the sale of Shares will be borne by the
Selling Stockholders (or their donees or pledgees).
Sales of Shares may be effected from time to time in transactions
(which may include block transactions) on the New York Stock Exchange, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, or
at negotiated prices. The Selling Stockholders have advised the Company that
they have not entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their securities. The
Selling Stockholders may effect such transactions by selling Common Stock
directly to purchasers or to or through broker-dealers which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder and/or the
purchasers of Common Stock for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Stockholders and any broker-dealers that act in connection with the sale of the
Common Stock might be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the shares of Common Stock as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Stockholders may
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<PAGE>
agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. Liabilities under the
federal securities laws cannot be waived.
Because the Selling Stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the Selling
Stockholders will be subject to prospectus delivery requirements under the
Securities Act. Furthermore, in the event of a "distribution" of the Shares,
such Selling Stockholder, any selling broker or dealer and any "affiliated
purchasers" may be subject to Regulation M under the Securities Exchange Act of
1934, as amended, which Regulation would prohibit, with certain exceptions, any
such person from bidding for or purchasing any security which is the subject of
such distribution until his participation in that distribution is completed. In
addition, Regulation M under the Exchange Act prohibits, with certain
exceptions, any "stabilizing bid" or "stabilizing purchase" for the purpose of
pegging, fixing or stabilizing the price of Common Stock in connection with this
offering.
The Selling Stockholders may be entitled under agreements entered into
with the Company to indemnification against liabilities under the Securities
Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby have been passed upon for the Company by Marshall A. Elkins,
Executive Vice President and General Counsel of the Company. Mr. Elkins is the
brother of Robert N. Elkins, the Company's Chairman of the Board and Chief
Executive Officer. Mr. Marshall Elkins owns 17,299 shares of Common Stock and
options to purchase 161,535 shares of Common Stock.
EXPERTS
The consolidated financial statements of Integrated Health Services,
Inc. and subsidiaries as of December 31, 1995 and 1996 and for each of the years
in the three-year period ended December 31, 1996 have been incorporated by
reference in the Registration Statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP refers to changes in accounting
methods, in 1995, to adopt Statement of Financial Accounting Standards No. 121
related to impairment of long-lived assets and, in 1996, from deferring and
amortizing pre-opening costs of medical specialty units to recording them as
expenses when incurred.
The consolidated financial statements of First American Health Care of
Georgia, Inc. as of December 31, 1994 and 1995 and for each of the years in the
three-year period ended December 31, 1995 have been incorporated by reference in
the Registration Statement from IHS' Current Report on Form 8-K/A (dated October
17, 1996 and filed with the Commission on November 26, 1996), in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing. The report of KPMG Peat Markwick LLP contains an
explanatory paragraph regarding the uncertainty with respect to certain
contingent payments which may be payable under a settlement agreement with the
Health Care Financing Administration.
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======================================= =====================================
NO PERSON IS AUTHORIZED IN CONNECTION
WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT 2,400,000
BE RELIED UPON AS HAVING BEEN AUTHORIZED Shares
BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE COMMON STOCK INTEGRATED HEALTH
OFFERED HEREBY, NOR DOES IT CONSTITUTE SERVICES, INC.
AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO Common Stock
MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPEC-
TUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY -------------------------
DATE SUBSEQUENT TO THE DATE HEREOF.
PROSPECTUS
-----------------------
TABLE OF CONTENTS -------------------------
PAGE
Available Information ................
Incorporation of Certain
Documents by Reference .............
The Company ..........................
Risk Factors..........................
Use of Proceeds.......................
Selling Stockholders..................
Plan of Distribution.................. JUNE 2, 1997
Legal Matters ........................
Experts...............................
======================================= =====================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
The contents of the Registration Statement on Form S-8 (Registration
No. 33-86684) of Integrated Health Services, Inc., as filed with the Securities
and Exchange Commission on November 23, 1994, are incorporated herein by
reference.
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The information in the following documents filed by IHS with the
Commission (File No. 1-12306) pursuant to the Exchange Act is incorporated by
reference in this Registration Statement:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
(c) Current Report on Form 8-K dated October 17, 1996 reporting the
acquisition of First American Health Care of Georgia, Inc., as amended by Form
8-K/A filed November 26, 1996;
(d) Current Report on Form 8-K dated October 19, 1996 reporting the
execution of the Agreement and Plan of Merger among the Company, IHS Acquisition
XIX, Inc. and Coram Healthcare Corporation (the "Merger Agreement"), as amended
by Form 8-K/A filed April 11, 1997, reporting the termination of the Merger
Agreement;
(e) Current Report on Form 8-K dated May 23, 1997 reporting the
Company's agreement to issue privately an aggregate of $450 million principal
amount of 9 1/2% Senior Subordinated Notes due 2007;
(f) Current Report on Form 8-K dated May 30, 1997 reporting (i) the
Company's issuance of an aggregate of $450 million principal amount of 9 1/2%
Senior Subordinated Notes due 2007 and (ii) the Company's acceptance for payment
of an aggregate of $114,975,000 principal amount of its 95/8% Senior
Subordinated Notes due 2002, Series A and an aggregate of $99,893,000 principal
amount of its 10 3/4% Senior Subordinated Notes due 2004 pursuant to cash tender
offers;
(g) The description of the Company's Common Stock contained in Item 1
of the Company's Registration Statement on Form 8-A dated September 1, 1993; and
(h) The description of the Company's Preferred Stock Purchase Rights
contained in Item 1 of the Company's Registration Statement on Form 8-A dated
September 28, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all Shares offered
have been sold or which deregisters all Shares then remaining unsold shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in a previously filed document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or was deemed to be incorporated by
reference herein modifies or supersedes such statement.
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Any such statements so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Item 4. DESCRIPTION OF SECURITIES
Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Certain legal matters with respect to the validity of the
Common Stock offered hereby have been passed upon for the Company by Marshall A.
Elkins, Executive Vice President and General Counsel of the Company. Mr. Elkins
is the brother of Robert N. Elkins, the Company's Chairman of the Board and
Chief Executive Officer. Mr. Marshall Elkins owns 17,299 shares of Common Stock
and options to purchase 161,535 shares of Common Stock.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the General Corporation Law of the State of Delaware
(the "DGCL"), a corporation may include provisions in its certificate of
incorporation that will relieve its directors of monetary liability for breaches
of their fiduciary duty to the corporation, except under certain circumstances,
including a breach of the director's duty of loyalty, acts or omissions of the
director not in good faith or which involve intentional misconduct or a knowing
violation of law, the approval of an improper payment of a dividend or an
improper purchase by the corporation of stock or any transaction from which the
director derived an improper personal benefit. The Company's Third Restated
Certificate of Incorporation, as amended, provides that the Company's Directors
are not liable to the Company or its stockholders for monetary damages for
breach of their fiduciary duty, subject to the described exceptions specified by
the DGCL.
Section 145 of the DGCL grants the Company the power to
indemnify each officer and director of the Company against liabilities and
expenses incurred by reason of the fact that he is or was an officer or director
of the Company if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The Company's Third Restated Certificate of Incorporation,
as amended, and By-laws, as amended, provide for the indemnification of each
officer and director of the Company to the fullest extent permitted by the DGCL.
In addition, the Company has entered into Indemnity Agreements with its
directors and executive officers, a form of which is included as Exhibit 10.72
to the Company's Registration Statement on Form S-1, No. 33-39339, effective
March 31, 1992.
Section 145 of the DGCL also empowers the Company to purchase
and maintain insurance on behalf of any person who is or was an officer or
director of the Company against liability asserted against or incurred by him in
any such capacity, whether or not the Company would have the power to indemnify
such officer or
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director against such liability under the provisions of Section 145. The Company
has purchased and maintains a directors' and officers' liability policy for such
purposes.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
Item 8. EXHIBITS
Exhibit
No. Description
4 Integrated Health Services, Inc.
1994 Stock Incentive Plan, as amended**
5 Opinion of Marshall A. Elkins, Esq.*
23.1 Consents of KPMG Peat Marwick LLP*
23.2 Consent of Marshall A. Elkins, Esq.*
(filed as part of Exhibit 5)
24 Power of Attorney (included on signature page)*
* Filed herewith.
** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
Item 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers
or sales are being made, a post-effective
amendment to this registration statement:
(i) To include any prospectus required
by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any
facts or events arising after the
effective date of the registration
statement (or the most recent
post-effective amendment thereof)
which, individually or in the
aggregate, represent a fundamental
change in the information set forth
in the registration statement;
(iii) To include any material information
with respect to the plan of
distribution not previously
disclosed in the registration
statement or any material change to
such information in the registration
statement;
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<PAGE>
provided, however, that paragraphs
(1)(i) and (1)(ii) do not apply if
the registration statement is on
Form S-3 or Form S-8, and the
information required to be included
in a post-effective amendment by
those paragraphs is contained in
periodic reports filed by the
registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act
of 1934 that are incorporated by
reference in the registration
statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933,
each such post-effective amendment shall be
deemed to be a new registration statement
relating to the securities offered therein,
and the offering of such securities at that
time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the
securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the
Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration
statement shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission
such indemnification is against public policy as
expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the registrant of expenses
incurred or paid by a director, officer, or
controlling person of the registrant in the
successful defense of any action, suit or proceeding)
is asserted by such director, officer, or controlling
person of the registrant in connection with the
securities being registered, the registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question
whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such
issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Owings Mills, State of Maryland, on June 2,
1997.
INTEGRATED HEALTH SERVICES, INC.
By: /s/ Robert N. Elkins
-----------------------------
Robert N. Elkins
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert N. Elkins, Lawrence P. Cirka and
W. Bradley Bennett, jointly and severally, his true and lawful attorneys-in-fact
and agents, each with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signature Title Date
Chairman of the Board
and Chief Executive Officer
/s/ Robert N. Elkins (Principal Executive Officer) June 2, 1997
- ---------------------
(Robert N. Elkins)
President
/s/ Lawrence P. Cirka and Director June 2, 1997
- ---------------------
(Lawrence P. Cirka)
/s/ Edwin M. Crawford Director June 2, 1997
- ---------------------
(Edwin M. Crawford)
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<PAGE>
/s/ Kenneth M. Mazik Director June 2, 1997
- -------------------------
(Kenneth M. Mazik)
/s/ Robert A. Mitchell Director June 2, 1997
- -------------------------
(Robert A. Mitchell)
/s/ Charles W. Newhall, III Director June 2, 1997
- -------------------------
(Charles W. Newhall, III)
/s/ Timothy F. Nicholson Director June 2, 1997
- -------------------------
(Timothy F. Nicholson)
/s/ John L. Silverman Director June 2, 1997
- -------------------------
(John L. Silverman)
/s/ George H. Strong Director June 2, 1997
- -------------------------
(George H. Strong)
Executive Vice President-
Chief Accounting Officer
/s/ W. Bradley Bennett Principal Accounting Officer) June 2, 1997
- -------------------------
(W. Bradley Bennett)
Executive Vice President-Finance
/s/ Eleanor C. Harding (Principal Financial Officer) June 2, 1997
- -------------------------
(Eleanor C. Harding)
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<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION PAGE NO.
4 Integrated Health Services, Inc.
1994 Stock Incentive Plan, as amended.**
5 Opinion of Marshall Elkins, Esq.*
23.1 Consents of KPMG Peat Marwick LLP.*
23.2 Consent of Marshall A. Elkins, Esq.
( filed as part of Exhibit 5).*
24 Power of Attorney (included on signature page).*
- ---------------
* Filed herewith.
** Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
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June 2, 1997
The Board of Directors
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, Maryland 21117
Dear Sirs:
I refer to the Registration Statement on Form S-8 (the "Registration
Statement") to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), on behalf of Integrated Health
Services, Inc. (the "Company"), relating to 2,400,000 shares of the Company's
Common Stock, $.001 par value (the "Shares"), to be issued pursuant to the
Company's 1994 Stock Incentive Plan, as amended (the "Plan").
As counsel for the Company, I have examined such corporate records,
other documents and such questions of law as I have considered necessary or
appropriate for the purposes of this opinion and, upon the basis of such
examination, advise you that in my opinion all necessary corporate proceedings
by the Company have been duly taken to authorize the issuance of the Shares
pursuant to the Plan and that the Shares being registered pursuant to the
Registration Statement, when issued and paid for in accordance with the terms of
the Plan, will be duly authorized, validly issued, fully paid and
non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the headings "Legal
Matters" and "Interests of Named Experts and Counsel" in the Registration
Statement. This consent is not to be construed as an admission that I am a
person whose consent is required to be filed with the Registration Statement
under the provisions of the Act.
Very truly yours,
/s/ Marshall A. Elkins
Marshall A. Elkins
Executive Vice President and
General Counsel
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Integrated Health Services, Inc.:
We consent to the use of our report dated March 24, 1997 relating to the
consolidated financial statements of Integrated Health Services, Inc. and
subsidiaries, incorporated herein by reference, to the incorporation herein by
reference of our report dated October 17, 1996 relating to the consolidated
financial statements of First American Health Care of Georgia, Inc. and
subsidiaries, which report appears in Form 8-K/A of Integrated Health Services,
Inc. filed on November 26, 1996, and to the reference to our firm under the
heading "Experts" in the registration statement on Form S-8.
Our report dated March 24, 1997 refers to changes in accounting methods, in
1995, to adopt Statement of Financial Accounting Standards No. 121 relating to
impairment of long-lived assets and, in 1996, from deferring and amortizing
pre-opening costs of medical specialty units to recording them as expenses when
incurred. Our report dated October 17, 1996 contains an explanatory paragraph
regarding the uncertainty with respect to certain contingent payments which may
be payable under a settlement agreement with the Health Care Financing
Administration.
/s/ KPMG Peat Marwick LLP
Baltimore, Maryland
May 30, 1997
