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Oxford Health Plans Inc.
(NASDAQ: OXHP)
48 Monroe Turnpike, Trumbull 06611
Chairman and CEO:
Norman C. Payson, M.D.
Revenues (FYE December 31, 1999): $4.198 billion
Net income (FYE December 31, 1999): $274.4 million
Market capitalization: $2.564 billion
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Business New Haven
9/18/2000
By: Kristine Hansen
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Oxford Health Plans Inc.
Last spring Oxford Health Plans Inc., a provider of HMOs and other point-of-service health plans, launched its new Web site, www.oxhp.com. By summer the site had garnered CIO magazine's 2000 “Web Business 50/50 Award” for the best Web sites that use design and technology to serve their target audiences. The award would be a kudo for any company, but for Oxford it also highlighted what had been a significant turnaround.
Three years ago Oxford was losing money - almost $300 million for 1997, and then double that, in 1998, to more than $600 million. To stanch the hemorrhage, the company embarked on a five-part plan to improve its performance.
The company narrowed its market area to focus on three states: Connecticut, New York and New Jersey. Thus exited Florida, Illinois, Pennsylvania and New Hampshire. Its government programs were restructured as Oxford withdrew entirely from Medicaid. The company also adjusted its Medicare partnership, including withdrawing from certain regions due to cost concerns.
Oxford re-priced employer accounts at the anniversary dates of renewal and did not renew those where pricing was not appropriate. Modified pricing, changes in various services such as laboratory and radiology and improved hospital utilization all contributed to maintaining costs.
To further control costs the company reduced administrative expenses including a reduction in occupied space and employee headcount. There were also several changes in senior management.
Restructuring and write-downs for the 1998 year totaled more than $150 million, with an additional nearly $20 million charged in 1999. But for fiscal 1999, Oxford posted positive operating income and net income - something it had not been able to accomplish the previous two years.
This was accomplished in spite of a reduced revenue base due to the restructuring of business operations and the redefining and reduction of the company's core market focus.
Net earnings for the 1999 year were $274.4 million ($3.26 per diluted share), compared to a net loss of $624.5 million (minus $7.79 per diluted share) for 1998. The results were achieved with revenues of $4.1 billion, down from 1998 revenues of $4.7 billion. To accomplish this, Oxford succeeded in reducing expenses by more than 20 percent to $4.0 billion in 1999 from $5.3 billion for the previous year.
Oxford's commercial businesses, including its Freedom and Liberty plans as well as its HMO business, are the major producers of revenues for the company, generating more than $3.3 billion in 1999. In addition, government program revenues amounted to approximately $750 million last year, with remaining revenues derived from investments and third-party administration.
By the end of 1999 Oxford also found itself in a positive cash position, with cash and equivalents exceeding $332 million and cash flow generated from operations in excess of $35 million. This improved cash position allowed the company earlier this year to repurchase some if its outstanding preferred stock from an investor group for approximately $130 million. The company also prepaid, three years early, the rest of a $131 million balance on its bank term loan.
For the second quarter ended June 30, net earnings were positive at $37.0 million (41 cents per diluted share) for the quarter, compared to a net loss of $13.4 million (minus 16 cents per share) for the same 1999 quarter. Cash was positive at June 30 and was further enhanced in July when State of New York regulators approved a $40 million dividend to be paid to Oxford from its New York health plan. The payment increased the company's available cash position to more than $130 million.
Stock performance has reflected Oxford's positive performance. Moving up from a 52-week low of 9 3/4, the stock is now trading in the 30 range, closing at 29 15/64 on September 7. Analysts are mixed, however, between hold, moderate and strong buy, but the majority clearly lean toward a buy.
Rewards can come in many forms and the recognition by CIO magazine is one of them. But Oxford's financial performance and stock performance following its turnaround is ample reward in itself.
Editor's note: As BNH went to press, Connecticut Attorney General Richard Blumenthal filed a federal class-action lawsuit against four of the state's largest HMOs, including Oxford. In general terms, the suit charges the HMOs of being dishonest and arbitrary at the expense of patient care.
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