Just months ago, national business headlines trumpeted Oxford Health Plans' innovations in the managed-care field.
But after last week's stock market shake-up, the cutting edge has turned into a cliff for the Norwalk, Conn.-based managed-care company.
Oxford revealed last week that, because of computer problems, it had underestimated what it owed providers for patient care and was behind in collecting premiums from enrollees and employers.
Taxing Oxford's ability to track cash flow was the company's much-heralded albeit less-controllable move to allow enrollees freer access to medical specialists, bypassing primary-care doctors as their gatekeepers.
As a result, Oxford said it would report third-quarter revenues $111 million lower than expected and a loss of $68.5 million, or 83 cents to 88 cents per share.
The news came at the worst possible moment on Oct. 27, as Wall Street began its record 554-point dive. Caught in the downdraft, Oxford's stock price fell 62% to $25.88. By midday last Friday, it had fallen further to $25.19.
In addition to allowing direct access to medical specialists, Oxford was credited with becoming the first managed-care plan in the country to offer enrollees a comprehensive network of alternative medicine providers. It also drew praise for its innovative program of setting up specialist teams and giving them complete control of patients with specific conditions.
Stephen Wiggins thought so highly of the effort that in August he stepped down as Oxford's chief executive officer to head a subsidiary running the program. He remains chairman of Oxford.
But the innovative activity along with glitzy marketing resulted in explosive enrollment growth.
Oxford's enrollment grew 39.5% to 1.8 million in the third quarter this year from 1.3 million in the same period last year, said Douglas Sherlock, an HMO analyst in Gwynedd, Pa.
"The faster you grow, the more vulnerable you are to having shortfalls in your information systems to support your business," Sherlock said.
In response, four groups of Oxford shareholders have filed separate class-action lawsuits against the company in U.S. District Court in New York, charging company officials with concealing the extent of Oxford's problems and profiting from reporting misleading data.
One of the suits alleges top Oxford executives sold off some of their Oxford stock for about $42 million last summer.