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

To: william liao who wrote (959)	2/7/1998 9:54:00 PM
From: Tom Hua	Respond to of 2068

William, Those were just articles from NYTimes that I hadn't seen before. Thought someone else might be interested in reading them. Besides they were not that old, published in 1998 long after OXHP had tumbled. Regards, Tom

To: william liao who wrote (959)	2/7/1998 10:32:00 PM
From: Tom Hua	Respond to of 2068

William, not a history teacher, but I do like to dig to get a broader view and to hear others' viewpoints. Here's more, from the Dec 29, 1997 Fortune magazine issue. regards, Tom Oxford made a colossal mistake, one of towering overconfidence, and Wiggins deserves most of the blame. The company decided to create the software internally. Michael Kornett was president of Oxford in '92 and '93 and remains a great admirer of Wiggins. "He's so talented, he can almost will things to happen," says Kornett. The decision to make the software at home was Wiggins'. "He didn't want to buy something off the shelf," says Kornett. "He's computer-literate and a systems jockey. His mindset was 'We aren't a vanilla company, and we can't buy a vanilla managed-care processing system.'" They should have picked vanilla. And if Hickey, the veteran of conservative Aetna, had been around at the time, they might have. Aetna gave up creating its own systems a dozen years ago. "Technology is not a competitive edge in this business," says Hickey. "Customers don't come to you because you have technology that pays claims on time. They expect that. As long as your system doesn't suck any more than the next guy's, you're okay. Have outside specialists create it." So Oxford made a pistachio-fudge-ripple mess. Anne Anderson, proprietor of Atlantis Investment, a small New Jersey company, is perhaps the only analyst who was paying close attention to Oxford numbers that were less exciting than reported revenues and earnings. As early as June '94 she was urging clients to sell their Oxford stock, noting, among other things, discrepancies in membership figures. Oxford's CFO, Drew Cassidy, countered that she had "incorrectly interpreted" a filing with New York insurance regulators. Anderson continued to point out anomalies. If membership was soaring, why weren't hospital admissions charged to Oxford growing rapidly as well? Anderson was no longer welcome at Oxford's get-togethers with analysts. As the months passed, however, it became more and more difficult for Oxford to deny that it had serious problems. Physicians and hospitals complained they were not being paid. Oxford acknowledged the situation and advanced the doctors $247 million while it straightened out the books. An audit of the September '97 figures was completed in late October. The results were stunning. Not only was Oxford delinquent in paying doctors and hospitals; it was many months behind in sending bills to members and collecting premiums. Although major companies can be counted on to pay up, Oxford has little hope of collecting from thousands of small companies and individuals who owe millions of dollars. Did Oxford do anything deliberately dishonest? Probably not. Some officers sold shares in the few months before Ugly Monday, but those were relatively insignificant amounts compared with their holdings. The few millions' worth of stock Wiggins sold were small change compared with the whopping $125 million he lost in the plunge. Physicians suspect that Oxford held back payments to inflate earnings. The company denies the charge. And the fact is that not all the mistakes the computers made were in Oxford's favor--notably those premiums it failed to collect. Oxford's real flaw was self-deception: a commitment to growth so powerful that executives denied the importance of anything that could slow it. No one in the executive suite fretted about whether the computers could keep up with the marketers. Wiggins acknowledges the mistake. "We only hired people who could go as fast as the rest of us," he admits glumly. As for Oxford's future, much depends on several things going right. The company has hired consultants to determine whether its computer system can be overhauled or must be replaced. Wiggins believes there won't be more revelations that vaporize earnings; analyst Anderson isn't so sure. She is concerned about an arrangement with some physicians called risk-sharing partnerships. Oxford put a ceiling on how much it would pay if those physicians' patients were sent to specialists or hospitals outside the partnership. In one case Oxford tried to collect $10 million from a Long Island partnership. The doctors refused to pay, and Oxford eventually forgave the debt. Anderson says the $10 million was never charged against Oxford's earnings. "How many more cases are there like this?" she wonders. Oxford maintains that the write-off was accounted for. Oxford will undergo an important test in January, the time of the year major companies renew or cancel their contracts. So far only physicians, hospitals, and investors have suffered in Oxford's mess. Patients continue to get good care. But some companies may worry that their employees will be stranded if physicians get so angry at Oxford they abandon its networks. What's clear is that for the next year or so, Oxford will remain in the intensive-care unit.

To: william liao who wrote (959)	2/7/1998 10:45:00 PM
From: Tom Hua	Read Replies (1) \| Respond to of 2068

Full story in Dec 15, 1997 Forbes magazine The writting on the wall at Oxford Health plans Back to story 8/94 Stephen Wiggins, Oxford's CEO, sells 30,000 shares for $2.1 million. 9/94 Analyst Thomas Hoddap of Robertson, Stephens pens a 133-page report touting OXHP. 10/94 Atlantis Investment's Anne Anderson questions nine restatements of membership rolls made by OXHP. Management declined to comment on the discrepancies. 5/95 Anderson finds OXHP's costs 14% higher than rival U.S. Healthcare's. 6/95 Wiggins sells 50,000 shares, worth $2.8 million. 4/96 Merrill Lynch;Goldman, Sachs; Montgomery; andRobertson, Stephens comanage OXHP stock offering of 5.2 million shares.The company raises $220 million. 11/96 Wiggins sells 420,000 shares for $22 million. 12/96 OXHP customers complain of inaccurate billing; physicians report OXHP's nonpayment of bills. 2/97 OXHP 1996 results show surge in premiums receivable, medical claims payable. 3/97 N.Y. Attorney General asks OXHP for data on nonpayment of claims. 5/97 OXHP says it's paying claims faster. 8/97 OXHP's second quarter strong; Wiggins resigns CEO post, remains chairman, says all claims will be paid within 30 days from now on. 8/97 Three operating officers sell stock, reaping $6.7 million. CFO Drew Cassidy sells $1.5 million worth; Wiggins sells $15.3 millionin stock. 9/97, 10/97 Buy, buy, buy, say Bear,Stearns; Merrill Lynch; Montgomery;First Boston; Robertson, Stephens. Atlantis has The Street's only "sell" on OXHP. 10/27/97 Oxford estimates third-quarter loss of $53 million. Medical costs up, membership down. 11/97 Actual loss: $78 million. Chief Financial OfficerCassidy resigns.