http://www.washingtonpost.com/wp-srv/WPlate/2000-01/19/110l-011900-idx.html Computer Blamed for Late Pay

By David S. Hilzenrath Washington Post Staff Writer Wednesday, January 19, 2000; Page E04

About 2,000 employees of financially troubled Integrated Health Services Inc. did not get paid as scheduled Friday morning because of a computer error, a spokesman for the Sparks, Md., nursing-home company said yesterday.

More than half of those workers received their biweekly pay before the day was out, but some were not expected to get their money until today, IHS Executive Vice President Marc B. Levin said.

The problem affected only employees who get paid by an electronic transfer of funds to their bank accounts, or direct deposit, the company said. Over the weekend, the company began handing out cash to workers "who could encounter hardship" waiting for their deposits, as the IHS payroll department phrased it in an internal e-mail message Friday.

Many of the workers "make very little money--they've got to be living hand to mouth," an employee said.

IHS, once a highflier in the nursing-home industry, has missed millions of dollars in interest payments to bondholders since late last year and has been negotiating with lenders to restructure its debts. "The Company believes its existing common stock will have little or no value," IHS said in a December news release.

The stock, which traded as high as $38.37 1/2 in early 1998, has since been removed from the New York Stock Exchange. Last month, Integrated Health Chairman Robert N. Elkins sold more than 500,000 shares at 13 cents a share.

On Friday, John Heller, the company's president of long-term care, sent a letter to employees saying in part: "We recognize the urgency of this situation and the possible impression you may have in light of the company's financial situation. I want to personally assure you that the nature of this problem lies with the electronic transfer of funds from our bank to yours, and not with the company's ability to meet payroll."

Still, some employees formed a different conclusion.

"At my facility, there were some of us who thought, they're going under, they've run out of money and we're not going to get paid," an IHS employee said. During weekend shifts, "a lot of us felt like we were basically doing volunteer work," she added.

The disruption affected about 2,000 of the company's more than 80,000 employees and about 80 of its more than 400 facilities nationwide, Levin said. The cause remained murky. Levin said the company transmitted the data for the direct deposits "and for some reason it was not received."

-- Homer Beanfang (Bats@inbellfry.com), January 19, 2000