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Biotech / Medical : Oxford Health Plan (OXHP) -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (586)	12/16/1997 11:30:00 AM
From: Thomas Haegin	Respond to of 2068

Re: Cash advances to doctors IMO the apparent status quo is the most conservative one in terms of bookkeeping: They are not booked at all! I mean unless they collected this money from employees or entertained fund raising events, chances are they paid it out from some company bank account and therefore it should show up in the expenses. My point is, they did not create an asset item in their BS as of 09/30/97 for these advances. So whatever they once will get back if they get back something from doctors, it will be extraordinary income so to say. On the other hand I do not expect any repayments from providers to happen: OXHP would have been really stupid if they transferred more to the provider than they thought they owe him. Even if they did not have exact figures, they should have at least some idea what they owed the particular provider. But even this matters little in case I'm correct in the previous paragraph. I do not have the time myself right now to call their IR mayself :) Any comments welcome, Thomas

To: Michael Burry who wrote (586)	12/16/1997 11:37:00 AM
From: Thomas Haegin	Read Replies (1) \| Respond to of 2068

Michael and all other Faithfuls, since nobody else seems to be able to challenge you on your figures back from 12/10, I'll try. But I cannot really either because, basically, I think they add up to yours quite well :) Here I go: I assume end-of-qtr 12/31 enrollment of 2'050'000. This translates to an average enrollment during the 4th qtr of 1'996'300. By observing the premiums earned trend per average head count over the history of quarterly income statements, I assume that OXHP earned $575 per head during the 4th quarter (I may be aiming $5 to $10 low here). I further assume that OXHP spent $475 per head on medical expenses during the 4th qtr. (let's assume for a moment that I have found a plausible model for me to stick out my head here and postulate this figure). We know from the IS that OXHP spent $94 per head on MG&A in the 3rd qtr. I go with this figure for the 4th qtr as well (total MG&A therefore still increases because of slightly higher enrollment). This means that OXHP made a net $6 per head or (rounded-off) $12m on operations, before other regular income and all one-time items. Every $ retained either by increased premium prices or lower costs goes to the bottom line with $2m of additional net revenue (that's quite a useful figure in itself IMO). I assume they earned $19m in the 4th qtr from 3rd-party-admin and investment income (maybe a little too low). This results in total 31m oprating income, before one-time items. Increase or decrese this figure as you like by assuming other numbers. In one-time items we have charges $164m for NY, $36m for non-NY, partially offset by a gain of $18m on an asset sale. I would be in favor of just assuming a net $182m one-time-charge, because it's a matter of timing only when the $36m charge will be taken. So we should brace ourselves for a loss in the order of $150 for the 4th quarter which has to offset against equity. Therefore the Wiggins statement for equity being around $500m as on 12/31/97 seems OK to me. I try now to get a shot at the liability side of the balance sheet as of 12731/97: Going back to $475 per head (avg. head count 1'996'300) for medical expenses for the 4th qtr, we arrive at a total of $948m before charges or 948 + 164 + 36 = $1148m including the announced medical charges. Using this number in the model I cited above , I would assume that 4th quarter medical claims in the BS will be $670m. Here it seems I get another figure than Michael. I would expect that the A/P to rise again in light of continuing extra overhead costs: lawyers, MIS people, IT people, geographical expansion, etc. I'm guessing only: I just put at $107m. I have to guess the unearned premiums also: I have no idea, I put them at $40m. Equity we have said is $495m then (assuming a loss of $150m). This means that total capitalization should be around 670 + 107 + 40 + 495 = $1312m. Can somebody get hold of their assets side? I need to let go now, too many figures. Any comments or corrections on assumptions welcome. Thomas