February 7, 1998 (NYTimes)
Doctor Said to Top Candidates for Chief of Oxford Health
By REED ABELSON
Could there be a doctor in the house?
In an effort to quiet complaints from doctors in its network, Oxford Health Plans is looking at a doctor to run the
company.
Norman C. Payson, a physician who created and ran a fast-growing managed care company, has become the
leading candidate to become Oxford's next chief executive, say people who have been briefed about the
negotiations.
Payson, who sold his New Hampshire company, Healthsource Inc., to Cigna Corp., the insurance giant, last year
for $1.7 billion, netting some $90 million for himself, is one of at least three finalists for the job, these people say.
One person considered a long shot but still a candidate is Daniel Crowley, a venture capitalist and former chief
executive of Foundation Health Corp. The identity of the third finalist could not be learned. A preliminary decision
could come as soon as the middle of next week.
Separately, Oxford's stock, decimated in recent months, received a vote of confidence Friday when filings with
the Securities and Exchange Commission showed that Franklin Mutual Advisors, the investment group headed by
Michael Price, the well-respected mutual fund manager, had taken a 5 percent stake in the company. When Price
amasses such large positions, he often pushes for changes that benefit all shareholders. Indeed, news of his
interest helped the stock close at $19.25 a share, up nearly $3.
Oxford, one of the largest managed care companies in the New York region, has struggled in recent months
between management and operational problems. Last month, it announced that it would replace its chief
executive, William M. Sullivan, who is expected to stay with the company in a lesser capacity.
Oxford is also looking for as much as $200 million in fresh equity financing and is hoping to announce a new chief
executive along with new financing when it reports fourth-quarter results at the end of the month. While the
search for new managers and new money might proceed separately, the new investors might want some say over
the management team and how much stock options they can expect.
Oxford declined to comment Friday on succession issues or on Price's emergence as a shareholder.
Payson did not return calls seeking comment, but he is believed to be interested in the job only if he is given the
top job. It is therefore unclear how his appointment might affect Stephen F. Wiggins, Oxford's founder and
chairman.
But the news might go over well with some frustrated doctors who have criticized the company for being slow to
pay its bills. This week, a group representing 5,000 Manhattan doctors filed arbitration proceedings against Oxford
in a quest to recover tens of millions of dollars they say they are owed.
Healthsource, now part of a company that is very much a direct competitor of Oxford, had its share of stumbles
under Payson despite his reputation as a strong leader. The company's stock hit a high of $40.875 in February
1996 but was trading below $20 when Cigna bought it at $21.75 a share. Healthsource has been criticized by
analysts as growing too rapidly and failing to control costs -- criticisms that have also been leveled against Oxford.
An associate of Price expressed confidence that Oxford was a good investment. Oxford "will fix the problems they
have," said Raymond Garea, a portfolio manager at Franklin Mutual Advisors.
As if it needed a fresh reminder of those problems, Oxford acknowledged Friday that its computers once again
bedeviled the company by sending erroneous 1099 income tax forms this week to 5,000 of its members, igniting
fears that they owed tax on money they received from Oxford last year. Reimbursement for health care is not
taxable, and 1099 forms should have gone only to doctors and hospitals.
Mark Melrose, an Oxford member, said he had received two forms, informing him that he owed taxes on $3,200
in income. When he inquired, he was told to fax the forms back to Oxford with a cover letter and the matter
would be corrected.
His mind was not entirely eased. "The very last person you want to make think you have extra money is the IRS,"
he said.
According to Oxford, the mistake was caught before any forms were forwarded to the Internal Revenue Service,
so members need not worry.
Barry Barnett, a benefits consultant with the Kwasha Lipton Group, a unit of Coopers & Lybrand, said such an
error was troubling since it suggested that Oxford was having trouble getting to the bottom of who was paid what
last year. |
