Jomed uncovers $25 million in improper bookings
Jomed N.V. (Beringen, Switzerland) in February continued to initiate a series of moves to right the company after the discovery of improper sales bookings that inflated financial reports over the last two years.

On Feb. 4, Jomed revealed that a preliminary audit of the company’s books by the accounting firm KMPG may have found more than $25 million in revenues that were based on orders that never materialized into actual deliveries.

Jomed N.V.

Financial Results

Net Sales Net Income (Net Loss)
2001
Reported $166.0 $11.0
Revised 147.0 .7
Change -19.0 -10.3
First nine months of 2002
Reported $145.0 $7.0
Revised $120.0 (9.0)
Change $-25.0 -16.0

According to the company’s statement, Jomed issued a number of invoices prior to receiving any order for all of 2001 and the first nine months of 2002. The invoices, the company said, were issued on expected sales in “the near future.”

Jomed stated that invoices issued, but not materialized into a subsequent order, amounted to approximately $2.5 million in 2001 and approximately $25 million in the nine-month period of 2002.

At the heart of the invoice issue are sales agreements for 143 intravascular ultrasound (IVUS) units. Sixty IVUS transactions were reported in the United States, while the other 83 units were tallied for sale in Europe, primarily the United Kingdom and Belgium.

In its revised financial report, Jomed disclosed that net sales in 2001 were overstated by approximately $19 million and net income was inflated by approximately $10.3 million.

Total sales for 2001 have been revised to approximately $147 million, compared with the company’s original release of approximately $166 million in sales. Net income has been revised to approximately $700,000, compared with the initial figure of $11 million.

For the first nine months of 2002, Jomed said sales will be adjusted downward by approximately $25 million to $120 million. Net income for the nine-month period is restated by approximately $16 million to a net loss of approximately $9 million.

Jomed’s board hired KPMG as its independent auditor after the resignation of Deloitte & Touche earlier this year. Deloitte & Touche assumed auditing responsibility for Jomed from Arthur Andersen in 2002. Arthur Andersen audited the 2001 annual accounts.

On Jan. 13, shortly after news of the booking discrepancies became public, Tor Peters, Jomed CEO and head of the management board, resigned. J?rgen Peterson, former COO, was named chairman of the management board and acting CEO. Peterson joined Jomed in 2001 after serving as sales and marketing manager at SKF Sverige A.B. (G?teborg, Sweden).

Jomed also replaced acting CFO Willem Jansen with Vice President of Finance Lars-Johan Cederbrant. Cederbrant has served at Jomed since July 2001, beginning in the position of strategic project manager.

Jomed in February also secured approximately $5 million in short-term financing through an undisclosed investor. In return, Jomed granted the lender an option on one of Jomed’s research-and-development projects.

Jomed is continuing negotiations with other lenders and investors to arrange for mid- and long-term financing within the next few months.


HEI buys Colorado operations of Colorado Medtech
HEI Inc. (Eden Prairie, Minn.) in late January acquired the Colorado operations of Colorado Medtech Inc. (Boulder, Colo.) for 1 million shares of HEI common stock, plus other considerations.

The transaction does not include Colorado Medtech’s Civco Medical Instrument (Kalona, Iowa) business unit, which provides medical imaging products and accessories to the ultrasound market. The Colorado operation is involved in medical technology outsourcing services, including device and software development, medical device connectivity and manufacturing system components for medical imaging equipment.

In addition to the 1 million shares of HEI common stock, HEI assumed certain obligations, including the lease for the Colorado operations facility, warranty obligations and certain customer deposit obligations. With the Colorado operation, HEI garners approximately $7 million in assets, including intellectual property, equipment, inventory and the facilities of Colorado Medtech’s advanced medical technology development and manufacturing business.

HEI estimated that the addition of Colorado Medtech’s business unit will add revenues of between $20 million and $25 million to HEI coffers, essentially doubling the size of the company to more than $50 million this year.

In FY02, ending June 30, 2002, the Colorado operations contributed approximately $46.3 million (or 65 percent) to Colorado Medtech’s total revenues. The business unit also posted a loss from operations of $11.6 million in FY02.

HEI expects to combine the Colorado operation with its HEI’s Microelectronics and High Density Interconnect divisions. The addition also will increase HEI’s work force to approximately 250 employees in three locations within the United States.

Colorado Medtech said that it still is seeking buyers for the rest of the company or its Civco Medical Instruments unit. In September 2002, the company hired a financial adviser to help it explore alternatives.

In FY02, Civco reported revenues of $24.4 million (35 percent of Colorado Medtech’s total revenues) and generated income from operations of $6.4 million.


3D medical imaging will expand in U.S. market
3D medical imaging technology is making such an impact on healthcare that market revenues could triple in the United States by 2009.

A new report from market research firm Frost & Sullivan (San Jose, Calif.) projects that 3D medical imaging revenues would increase from $397.6 million in 2002 to $1.15 billion in 2009.

d01c.jpg (13233 bytes)The report found that as 3D medical imaging equipment increases the pace of data inquiry, the influx of more competition will nurse a steady financial incline during the upcoming years.

The Frost & Sullivan report separated the 3D medical imaging U.S. market into two segments: 3D CT, MR and angiography in one grouping, and 3D ultrasound in the second.

The segments were chosen “due to varying market dynamics in underlying modalities used by hospitals or imaging centers,” said Frost & Sullivan research analyst Jim Clayton. “The modalities dictate the technology required for the development of 3D workstations that allow acquisition of 3D imaging.”

Both segments are expected to increase their revenues by 2009, said Clayton, with 3D CT, MR and angiography generating $621 million, and the 3D ultrasound market generating $529 million, accounting for the $1.1 billion total.

In 2002, more than 63 percent of total market revenue was produced by the 3D CT, MR and angiography segment, due to innovations, such as multislice CT.

The explosion of data generated by new scanners, as well as innovations in 3D market workstations and software applications, are the two key influential drivers in this segment.

“It is even more important for the 3D workstations and applications to perform the bulk of image acquisition and routing to allow the physician to provide a more accurate and timely diagnosis to the patient,” said Clayton.

The report also sees 3D ultrasound accumulating a larger share of the 3D market in the coming years. The study concluded that 3D ultrasound’s 37 percent share ($147.1 million) of the U.S. market in 2002 will increase to 45 percent of the market ($517.5 million) in 2009.

He added that innovations in prenatal and cardiac applications also will be major components for that market growth and will extend the figures upwards over the seven-year period.


Annual ISET meeting reports on new techniques
The International Symposium on Endovascular Therapy (ISET) was held in Miami, Fla., from Jan. 19 through Jan. 23, highlighting the latest in research and technology for endovascular care. Hosting ISET’s 15th annual meeting was the Miami Cardiac & Vascular Institute.

The five-day meeting included more than 200 research presentations, 27 live case demonstrations, topical sessions, and first time results and updates on several medical trials.

Medical professionals were presented with a new case concerning prosthetic aortic valves by Martin Leon, M.D., director and CEO of the Cardiovascular Research Foundation at Lenox Hill Hospital (New York). According to Leon, the procedure, which replaces a diseased aortic valve with a prosthetic one, may eliminate open-heart surgery. Patients who are either too elderly or too sick for an operation are most likely to benefit from the procedure.

“This procedure is early-stage technology, but it has a lot of potential for the future,” said Leon. “If in the future we can demonstrate that these valves are durable, that we can do the procedure repeatedly, reliably and safely, it may, in fact, be competitive with surgical valve replacement under many circumstances.”

Genes have become a dominant topic in the medical field. Physicians from the Jobst Vascular Center (Toledo, Ohio) presented a current study using gene therapy to stimulate the growth of new blood vessels in patients with complicated circulatory problems in the lower extremities that risk amputation.

Atherosclerosis, or blocked arteries, occurs in the legs and is generally the result of diabetes, a long history of smoking, a genetic propensity or elevated cholesterol levels. It eventually may be treated by therapeutic angiogenesis — the generation of new blood vessels.

In Phase I of the treatment trials, none of the 51 patients complained of adverse reactions, rather they experienced improved circulation.

During Phase II, the physicians will compare the effectiveness of the growth factor using 70 patients against a placebo.

Results from a study using the PolarCath peripheral transluminal angioplasty system to treat blocked leg arteries also were presented at the ISET. Differing from balloon angioplasty, the PolarCath is filled with liquid nitrous oxide upon advancement into the blocked artery. The liquid nitrous oxide evaporates into a gas, which cools the plaque and vessel wall and dilates the vessel.

The approach causes little inflammation and minimal injury to the vessel wall. John Laird, M.D., director of peripheral vascular intervention at Washington Hospital Center (Washington, D.C.), and principal investigator of the study, said that “at nine months, 85 percent of the treated lesions remained patent, which is significantly better than expected patency rates for either angioplasty or stenting.”

More than 250 patients have been treated with the PolarCath system, which received marketing clearance from the FDA last September.


Quantum Medical exceeds goals in 2002
It has been less than three years since company president Scott Matovich and a group of former Trex Medical employees created Quantum Medical Imaging LLC (Ronkonkoma, N.Y.).

Today, the company continues to grow in the United States with more orders for its x-ray systems and garners more inquiries on the international market.

In 2002, Quantum topped the $20 million mark for sales, beating its projection of $18 million for last year. 2002 revenues more than doubled the amount of $8 million to $10 million the company registered in 2001. The revenue goal for 2003 is $30 million.

“We have an aggressive growth plan and we’ll have a solid run rate with the new products we have coming out and we are growing internationally as well,” said Matovich. “Hopefully, the combination will help us quite a bit.”

Internationally, Quantum is looking to grow in the Far East, the Middle East and Asia, as well as casting its eye toward South America and Latin America. In 2003, Europe is added to the business plan. The company works primarily with independent dealers in those regions.

For 2003, Matovich said Quantum plans to work on more digital integration products.

“We’ll continue to stay focused on the digital radiology marketplace,” he added. “There is a big niche there.”

The company still has a reciprocal partnership with Canon Medical Systems (Irvine, Calif.) for Canon’s XDI-22 flat-panel digital x-ray detector. The digital version of Quantum’s QV-800 x-ray system comes courtesy of Canon, while Quantum helps distribute the XDI-22 for Canon in North and South America.

Quantum also may consider developing OEM arrangements for its universal stand and table.

“We will do it in a way so we will not disrupt our dealer base,” Matovich added. “We will make sure not to sell them out at the expense of someone else. We want to find the right relationships that will help bring us into markets. For instance, in Europe, an OEM relationship may be a strong way to go.”

At December’s annual meeting of the Radiological Society of North America (RSNA of Oak Brook, Ill.), Quantum unveiled the QV-800 Plus universal C-arm system, developed for single digital detector applications. The QV-800 Plus utilizes one image receptor — with variable source-to-image distance (SID) — to handle all procedures, including cross-table laterals. It also offers a mobile table with a floating top that can accommodate a weight load of 600 pounds.

Plans are to begin shipments of the QV-800 in the first quarter. Full production is set to start in April or May. Designed for DR applications as a universal digital chest system, the QV-800 carries a list price of $345,000.

Quantum expanded its Q-Rad Tomo series with a design for high-volume radiology departments, emergency rooms and medical imaging centers. Quantum’s ceiling-mounted Tomo tube support incorporates a five-tiered telescoping column with overhead horizontal and transverse travel for flexibility and various imaging capabilities. The system is commercially available.


Hologic outlines direct sales, service plan in 1Q report
The cost to implement a direct sales and service organization and delays by several customers in taking deliveries for digital radiography (DR) equipment adversely affected Hologic Inc.’s (Bedford, Mass.) revenues and earnings in its first fiscal quarter of FY03, ending Dec. 28, 2002.

Total revenues increased 3 percent to $49 million, compared with $47.6 million in the first quarter of FY02. Excluding revenues for Hologic’s phased-out general radiography business, revenues gained 11 percent to $47.6 million. Hologic also reported a net loss of $912,000 in the quarter, compared with a net loss of $1.6 million in the year-ago quarter.

“No one at Hologic is complacent with the results we posted this quarter,” Hologic President and CEO Jack W. Cumming told analysts.

Hologic Product Revenues

For the three-month period ending
Dec 28, 2002 Dec 29, 2001
Mammography $21.8 $17.1
Osteoporosis assessment 16.6 16.7
Digital imaging 4.6 5.5
Mini C-arms 4.5 3.3
General radiography 1.4 4.7

dollars in millions

Hologic had hoped to top $50 million in revenues in the first fiscal quarter, but several factors worked against the company. One factor Hologic noted was a shortfall in DR system sales, because several hospitals had not completed site preparations in order to take delivery and installation of DR equipment.

“The answer is in driving backlog to a point where it won’t matter if five installations have to be delayed,” he added, “because there are five [customers] in the wings that can accept delivery.”

Hologic also initiated a major investment in November 2002 to transition from dealer distribution and service of its Lorad mammography systems to a direct sales and service organization in 26 markets. The dealer network accounted for 75 percent of mammography systems in FY02, with the former Diagnostic Imaging Inc. (DI of Jacksonville, Fla.) contributing $28 million to the total. Last month, Hologic terminated its distribution agreement with DI, which since has become SourceOne Healthcare Technologies (Mayfield Village, Ohio).

Cumming said the reason for the transition is to enhance the company’s ability “to provide an increased level of consistency and reliability in the delivery of sales and service support, and, of course, to improve our long-term revenue growth opportunities” for the company’s entire product portfolio.

Cumming said the second fiscal quarter “already looks much improved” in the DR segment, with Hologic having shipped five DR systems in January and expectations to almost double detector output in the quarter.


CTI Molecular Imaging riding PET popularity
CTI Molecular Imaging Inc. (CTI of Knoxville, Tenn.) says strong demand for its positron emission tomography (PET) and PET-CT scanners drove revenues and earnings higher in its fiscal first quarter, ending Dec. 31, 2002.

Revenues increased 27 percent to $60.6 million, compared with $47.6 million in the first quarter of FY02. CTI also posted a profit of $3.4 million, compared with a net loss of $600,000 in the year-ago quarter.

In the first quarter, the company’s CTI Services business unit booked 25 orders for PET and PET/CT scanners; 21 of those orders are U.S. sales. That amount alone is more than the entire number of units sold by CTI Services in FY02, ending Sept. 30, 2002. Most of the orders are scheduled for delivery in the third and fourth quarter of 2003.

CTI Molecular Imaging Net Revenues Revenues

For the three months Dec. 31
2002 2001
   OPS $31.9 $28.9
   PETNet 16.1 12.3
   Detector Materials 0.5 0.3
   CTI Services 12.1 6.0
Total 60.6 47.5

dollars in millions

In the first fiscal quarter, CTI’s CPS Innovations division shipped 28 scanners, a gain of 40 percent over the year-ago quarter. Ninety percent of the first-quarter orders were for CPS’ LSO-based (lutetium oxyorthosilicate) scanners; more than 40 percent of the orders were for PET/CT scanners.

CTI and other PET equipment vendors have been aided by the addition of PET breast imaging to the list of Medicare-reimbursed procedures by the Centers for Medicare & Medicaid Services (CMS of Baltimore, Md.). Since CMS initiated PET breast imaging coverage on Oct. 1, 2002, CTI said breast scans doubled from its fourth fiscal quarter to the first fiscal quarter, and now account for approximately 10 percent of all PET procedures.

In the first fiscal quarter, CTI also tripled its field sales force from eight to 24 people. The company added that it expects the investment to begin paying off in the third fiscal quarter of FY03

CPS Innovations contributed the majority of net revenues to CTI, with a gain of 10 percent to $31.9 million, compared with $28.9 million in the first quarter of FY02.

Net revenues for CTI Services doubled to $12.1 million, compared with $6 million in the year-ago quarter. CTI credited PET and PET/CT scanner sales and an increased number of scanner service contracts for the advance.

Net revenues at CTI’s radiopharmaceutical business unit, PETNet, increased to $16.1 million, up 31 percent from $12.3 million in the year-ago quarter.

As for FY03, CTI is anticipating revenues of $355 million to $365 million. The company achieved revenues of $258.4 million in FY02.


Siemens collaborates with Pennsylvania hospitals on security
Siemens Medical Solutions USA Inc. (Malvern, Pa.) and Pennsylvania healthcare officials are partnering to help improve homeland security in emergency rooms throughout the state.

Siemens’ Health Surveillance Network is the foundation of the pilot program, which began to take shape last year. Siemens and Pennsylvania health officials will implement a computer network that will link as many as 225 hospital emergency departments across the state.

The program, one of the largest currently operating under the federal homeland security legislation, is an attempt to detect potential bioterrorism threats, disease outbreaks and epidemics.

“Hospitals now will be able to communicate real-time healthcare information to public health agencies automatically, without manual data entry,” said John Kijewski, group vice president for Siemens Technology Service, in a prepared statement. “This will facilitate the early detection of syndromic trends and potential bioterrorism events in the state.”

Pinnacle Health Systems (Harrisburg, Pa.) has been working with Siemens since the fall of 2001 on an experimental study that would help establish a proof-of-concept for real-time syndromic surveillance.

“Pinnacle is among the first hospitals to link its emergency rooms across two of our facilities, because we understood the immediate benefit that such a network would bring not only to the communities we serve, but also to our nation’s safety,” said James Taylor, M.D., medical director of Pinnacle’s emergency department, in a prepared statement.


SourceOne picks Mentor, Ohio, for new home
It looks like SourceOne Healthcare Technologies Inc. (Highland Heights, Ohio) will move its corporate headquarters to Mentor, Ohio.

The medical supply distribution company cited a “favorable new economic development incentive package” as one reason for its decision.

SourceOne has been sharing space with its former owner, Philips Medical Systems International B.V. (Best, Netherlands), in Highland Heights.

The new Mentor facility covers 42,000 square feet. The company anticipates moving more than 170 employees into its new headquarters in May and expanding to approximately 300 employees by year-end.

The tentative agreement includes an annual grant for 10 years, based on the amount of payroll tax SourceOne generates. The majority of SourceOne headquarters employees live in the immediate area, said Jerry C. Cirino, company president and CEO.

SourceOne plans to house corporate functions, such as legal, finance, human resources and operations, in the new location. Approximately 34,000 square feet will be office space.


Financial Pulse
An increase in international orders in its Oncology Systems business powered Varian Medical Systems Inc. (Palo Alto, Calif.) to double-digit growth in net sales and earnings in its first fiscal quarter of FY03, ending Dec. 31. Sales rose 18 percent to $206.7 million, up from $175.1 million in the first quarter of FY02. Net income increased to $21 million, compared with $13.2 million in the year-ago quarter. Varian also posted a healthy gain of 26 percent in net orders in the quarter to $251 million, compared with $199.2 million in the same quarter of FY02. The company also cited what it described as a “stronger than expected recovery” in its X-Ray Products business for first-quarter gains. Sales in the X-Ray Products business — including tubes and amorphous silicon flat-panel digital imagers — climbed 38 percent to $34 million, compared with $24.7 million in the year-ago quarter. Oncology Systems continues as Varian’s largest product segment with first-quarter sales of $166 million, up 14 percent from $145.9 million in the year-ago quarter.

d01d.gif (11456 bytes)

Cardinal Health Inc. (Dublin, Ohio) credits an expansion of its diverse and proprietary products and services offering for growth in its second fiscal quarter, ending Dec. 31, 2002. Revenues increased to $12.7 billion, up 13 percent from $11.2 billion in the second quarter of FY02. Net income advanced to $367.5 million, compared with $283.3 million in the year-ago quarter. For the six-month period, revenues increased 14 percent to $24.1 billion, compared with $21 billion in the first half of FY02. Earnings climbed to $656 million, compared with $459.6 million in the year-ago period. Cardinal’s Pharmaceutical Distribution and Provider Services unit contributed revenues of $10.5 billion in the second quarter, while its Medical Products and Services segment accounted for $1.6 billion in revenues.

Compiled and analyzed by Health Care Markets Inc. (Hilton Head, S.C.), the stock indices above plot the performance of two market segments: Imaging Devices and Imaging Services. The indices are part of WDI’s healthcare database of more than 1,000 companies. For comparison we also plot the progress of the S&P 500. The indices began in January 1991 with a base of 100.


Financial Watch
Cerner Corp. (Kansas City, Mo.) notched a 39 percent rise in revenues in 2002 to $751.9 million, compared with $542.4 million in 2001. Net earnings (before non-recurring items) gained 51 percent to $51.8 million, compared with $34.2 million in 2001. Cerner also posted total revenue backlog of $1 billion in the fourth quarter of 2002, up 27 percent over the year-ago quarter. The IT company also said that it expects revenues in 2003 to be between $880 million and $900 million, up from a prior estimate of $870 million to $880 million. Cerner expects revenues in the first quarter to range between $205 million and $210 million.

Schick Technologies Inc. (Long Island City, N.Y.) reported greater revenues and earnings in its third fiscal quarter, ending Dec. 31, 2002. Net revenues increased to $8.8 million, compared with $7 million in the third quarter of FY02. Net income also rose to $2.8 million, up from $1.5 million in the year-ago quarter. For the nine-month period, net revenues grew to $22.5 million, up 27 percent from $17.7 million in the same period of FY02. Net income climbed to $5.1 million, compared with $1.9 million in the year-ago period.

Sonus Pharmaceuticals Inc. (Bothell, Wash.) reported a net loss of $11.6 million in 2002, compared with net income of $542,000 in 2001. 2001 results included $8.5 million from the remaining value of the company’s prior ultrasound contrast technology through the assignment of the intellectual property to Amersham plc (Buckinghamshire, United Kingdom) and Chugai Pharmaceutical Co. Ltd. (Tokyo). Operating expenses for 2002 increased to $12.2 million, compared with $8.5 million in 2001. Last year’s increase reflected Sonus’ continued investment in the Phase 2 clinical development program for Sonus’ Tocosol Paclitaxel, initiated in March 2002. The development company had revenues of $25,000 in 2002, compared with $8.7 million in 2001, primarily from its Amersham and Chugai contracts.

Schering AG (Berlin) has another $55 million coming its way from Biogen Inc. (Cambridge, Mass.). The biotechnology company agreed to pay that amount to the German drug manufacturer to settle a patent dispute over a drug for multiple sclerosis. The U.S. Court of Appeals in late January upheld most of a ruling that Biogen did not violate patents held by Schering’s U.S. affiliate, Berlex Laboratories Inc. (Montville, N.J.), on the production of beta interferon. In January, Biogen agreed to pay Berlex $20 million and agreed to make a second payment, if it lost its appeal.

Total orders at GE Medical Systems (GEMS of Waukesha, Wis.) rose 7 percent to $3 billion in the fourth quarter of 2002. General Electric Co.’s (GE of Fairfield, Conn.) financial report shows that GEMS received 193 orders for its LightSpeed 16 multislice CT scanners, bringing total orders to 341 since the system’s June 2002 introduction. The company also noted that ultrasound orders increased 18 percent in the fourth quarter to $341 million, compared with the fourth quarter of 2001. Surgical and vascular imaging orders climbed 21 percent to $250 million, while medical services orders advanced 12 percent to $760 million.

Eastman Kodak Co. (Rochester, N.Y.) is reporting sales and earnings gains in its Health Imaging division for 2002. Sales increased to $2.27 billion last year, compared with $2.26 billion in 2001. The Health Imaging division posted earnings of $431 million, up from $323 million in 2001. Sales in the United States remained flat from year to year, totaling $1.088 billion in 2002, compared with $1.089 billion in 2001. Outside of the United States, sales increased 1 percent to $1.18 billion, compared with $1.17 billion in 2001. In the fourth quarter, the division achieved a 9 percent gain in sales to $619 million, compared with $570 million in the fourth quarter of 2001.

Revenue growth in its Pharmaceutical Solutions segment powered McKesson Corp. (San Francisco) to a 13 percent gain in total revenues in its third fiscal quarter of FY03, ending Dec. 31, 2002. Total revenues rose 13 percent to $14.9 billion, compared with $13.2 billion in the third quarter of FY02. Net income increased 23 percent to $134.3 million, compared with $108.8 million in the year-ago quarter. For the nine-month period, total revenues increased to $42.2 billion, up from $37 billion in the same period of FY02. Net income climbed to $376.4 million, compared with $293.2 million in the year-ago period. Revenues in McKesson’s Information Solutions segment increased 19 percent to $295.3 million in the third quarter, compared with $248.1 million in the year-ago quarter. The operating profit held steady at $15.1 million, compared with the third quarter of FY02.


For the record …
Medical Imaging’s November 2002 News Watch section contained a study from Frost & Sullivan on the potential costs for compliance with the Health Insurance Portability and Accountability Act (HIPAA). The piece stated that 70 percent of managed care organizations (MCOs) filed for extensions beyond the April 2003 deadline. As a clarification, the MCOs may have filed for compliance extensions under HIPAA’s TCS (Transaction and Code Set) requirement. The MI piece did not intend to imply that healthcare entities could file an extension to delay enforcement of HIPAA’s Privacy Rule beyond April 2003. The U.S. Department of Health and Human Services (HHS) has allowed organizations until October 2003 to outline their TCS compliance plans.