Accused of concealing bad financial news, Aetna was hit with a class-action shareholder lawsuit late last week, while one of its former executives simultaneously was hired by Oxford Health Plans to help that managed-care firm out of its quagmire.
Shareholders filed their class-action lawsuit against Hartford, Conn.-based Aetna on Nov. 6 in U.S. District Court in Philadelphia. It accused the company of failing to disclose the ill financial effects of its $8.9 billion acquisition of U.S. Healthcare, based in Blue Bell, Pa., last year.
A day earlier, Aetna reported a 3.8% drop in earnings to $117.8 million, or 78 cents per share, for the third quarter ended Sept 30, from $122.4 million, or 84 cents per share, in the year-ago quarter.
Taking a $103 million charge for claims reserves, Aetna U.S. Healthcare's earnings for the third quarter plunged 96% to $3.7 million from $93.5 million in the year-ago quarter. Revenues grew 12.5% to $3.1 billion from $2.8 billion.
Aetna did not return phone calls seeking comment.
Meanwhile, Oxford, the troubled Norwalk, Conn.-based managed-care company, said on Nov. 6 that it hired Kevin Hickey, a former Aetna health insurance executive, as executive vice president.
Hickey, former president of Health Plans of America and senior vice president of operations at Aetna Managed Health Plans, will focus on improving Oxford's operations.
Oxford itself is facing a number of shareholder lawsuits in the wake of reporting surprisingly large third-quarter losses. They totaled $78.2 million and led to the departure of the company's chief financial officer (See story, p. 60).
In addition to hiring Hickey, Oxford also launched a review of its finance operations to identify needed management and system improvements. Its auditors, KPMG Peat Marwick, will assist in the effort.
The shareholder lawsuits against Oxford also accuse the company of making false and misleading statements or failing to disclose material facts about the company's financial condition and operations.
On reports that Oxford executives knew of the troubles and sold shares before the company's recent plunge in the stock market, New York Attorney General Dennis Vacco issued a subpoena last week seeking records to determine what executives knew of the company's financial difficulties.