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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 9, 1997
PHC. Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 0-23524 4-2601571
(State or oth (Commission (I.R.S.Employer
jurisdiction of File Number) Identification No.)
incorporation)
200 Lake Street Suite 102. Peabody, MA 01960
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (508) 536-2777
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On February 19, 1997, the Company's Franvale Nursing and Rehabilitation
Center ("Franvale") was cited for deficiencies by the Massachusetts Department
of Public Health as the result of a routine survey. A civil penalty of $3,050
per day was imposed which was reduced to $2,250 per day March 12, 1997, which
fines continue to accrue. The Company has the right to appeal these fines and
has requested an informal review of the fines imposed. If the company does not
appeal the imposition of the fines and the deficiency notice, the penalties
could be reduced by 35%. At the time of the original citation, the Company was
notified by the Department of Public Health and by the federal agency, HCFA,
that Franvale would be terminated from the Medicare and Medicaid programs unless
Franvale was in substantial compliance with regulatory requirements by March 14,
1997. Franvale submitted a plan of correction to the Department of Public Health
and on March 12, 1997, as the result of a resurvey by the Department of Public
Health, a new statement of deficiencies was issued, which contained a
significant number of violations but recharacterized the level of seriousness of
the deficiencies to a lower degree of violation and which extended the
threatened date of termination to April 30, 1997.
As a result of the new statement of deficiencies, the Department of Public
Health has precluded the Company from admitting new patients to its Franvale
facility. In addition, patients may be readmitted to Franvale facility from a
hospital only after a case by case review by the Department of Public Health.
The Company is obligated to notify the attending physician of each resident of
Franvale who was found to have received substandard care of the deficiency
notice and is obligated also to notify the Massachusetts board which licenses
the administrator of Franvale. HCFA has informed the Company that it will
publish a notice of impending termination in the Boston Globe not later than
April 14, 1997, unless Franvale has been found to be in substantial compliance
by that date. The Company has requested authority to admit new patients on a
case by case basis and is awaiting approval.
The Company has replaced the management team at Franvale and is attempting
to bring the facility into substantial compliance at the earliest possible date,
including the expenditure of significant sums for staffing and programmatic
improvements. However, if the Franvale facility is not in substantial compliance
before April 30, 1997, Franvale may be unable to admit new patients or may
continue to be subject to a case by case review of readmissions, may continue to
incur significant civil penalties, may lose its certification under the Medicare
and Medicaid programs which would materially affect the number of residents at
the facility and would call into question its ability to operate, and could lose
its licensure altogether.
As a result of the decrease in census resulting from the inability of
Franvale to admit new patients and the limitations on its ability to re-admit
patients, the monetary penalties which continue to accrue, and the expenses that
have been incurred by the Company in an attempt to cure the cited deficiencies,
the Company anticipates an adverse effect on its financial results for the
quarter ended March 31, 1997 with the possibility of continued adverse financial
impacts in future quarters if new patients cannot be admitted.
The Company is confident that the deficiencies at Franvale have been
corrected, as evidenced by the second plan of correction that has been submitted
to the Department of Public Health. On April 8, 1997, Franvale submitted a
statement of allegation of substantial compliance with the Department of Public
Health and anticipates that resurveyance of Franvale by the Department will
occur shortly. If Franvale is not found to be in substantial compliance by the
Department of Public Health as a result of such resurvey, the Company intends to
appeal the decision. The Company has hired a new experienced Director of
Admissions whose primary responsibility is to see new admissions as soon as
regulating approval is received.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereinto duly authorized.
PHC, INC.
Date: April 9, 1997 BY: /s/ Bruce A. Shear
Bruce A. Shear
President
