Quantum Loses Its Bid to Retain Profit Margin

Quantum Health Resources Inc. said Wednesday that it failed to persuade the state of California to change its Medicare reimbursement rates on a therapy for hemophilia that the health care company sells.

The company, which supplies therapies and services to people with long-term chronic diseases and conditions, said that its brewing controversy with the state over the amount it charges for a blood-coagulating product took a disappointing turn when the state’s Department of Health Services advised it of its reimbursement policy for future business.

The state told the company that it will pay health-care providers at a rate equal to the providers’ net cost of the product from the manufacturer, plus 1%.

John DeStefanis, Quantum’s president, said the company historically has been getting a 25% gross profit on the business, though the state now insists that it should get only 1%. The debate between the state and the company arose earlier this year, he said, when the company asked the state to modify its reimbursement policy. The state’s action means that the company will reduce its first-quarter margin on that business by about $1.3 million, the company said.

DeStefanis estimated that the company’s Medicare revenues in the state would be about $21 million this year, assuming the business continues. He said it’s possible that if the company can’t earn a reasonable return on its Medicare sales in the state, that it will withdraw from the business. However, he said, the company will first attempt to appeal the state’s decision.

Separately, Quantum is pursuing an appeal of another decision, by the state controller’s office, that the company overbilled it for $2.3 million worth of past Medicare claims. That decision stemmed from a partial audit of $27.5 million in payments the state made to the company during a four-year period.