Michael T. Caracci and Cindy W. Caracci, et al. - Page 17




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          entities in the same positions in which they were employed by the           
          Sta-Home tax-exempt entities, and each member’s compensation and            
          employment benefits remained subject to review by HCFA through              
          the cost reporting process.  The 1995 and 1996 combined salaries            
          paid to Joyce Caracci, Michael Caracci, Vincent Caracci, and                
          Christina McQuillen5 by the Sta-Home entities were as follows:              
               Individual                  1995           1996                        
                    Joyce Caracci        $140,472       $141,685                      
                    Michael Caracci       226,483        232,686                      
                    Vincent Caracci        70,180         65,434                      
                    Christina McQuillen    64,514         55,952                      
               The mid-1990's showed significant growth in the home health            
          care industry.  Natl. expenditures for home nursing care grew               
          from $3.8 billion in 1990 to $20.5 billion in 1997.  There was              
          also substantial activity in home health care agency                        
          acquisitions.  There were 42 such acquisitions in 1994, 60 in               
          1995, 112 in 1996, and 139 in 1997.                                         
               During 1995, the primary buyers of home health agencies were           
          hospitals, nursing homes, and other home health agencies.  They             
          were able to take advantage of a mechanism known as “cost-                  
          shifting”.  This attribute enabled a buyer such as a hospital               
          (which generally received reimbursement under the PPS) to shift             
          some of its costs to a cost reimbursement system for payment by             


               5 Victor Caracci was paid on a consulting basis that varied            
          significantly from year to year.                                            







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