OXFORD SHUFFLE. Oxford Health Plans hopes a cash infusion, a physician leader and a new chairman of the board will help heal its financial woes. The struggling, Norwalk. Conn.-based managed care company announced late last month that the investment firm Texas Pacific Group will put $350 million into the company with plans to raise an additional $350 million in debt financing in exchange for four seats on Oxford's board of directors. Norman C. Payson, M.D., the former president and chief executive officer of Healthsource, was named chief executive officer and will personally invest $10 million in the company through a stock purchase.
Oxford also announced that founder Stephen Wiggins will step down as executive chairman of the board, though he will remain as a board member. Fred Nazem will take over as chairman.
The announcements came on the heels of Oxford's grim year-end financial reports:
a fourth quarter net loss of $284.7 million, and an annual loss of $291.3 million. The company attributed the fourth quarter losses to higher than anticipated medical costs and writeoffs for accounts receivable and additions to reserves.
ENTERING THE GATES OF HEALTHCARE. Microsoft Corp. wants to do more than sell software to the healthcare industry. The company announced that it has set up a consulting arm to help healthcare organizations, payers, managed-care organizations, independent software vendors and others deploy Microsoft systems "more rapidly."
The announcement was made Feb. 19, three days before the opening of the annual Healthcare Information and Management Systems Society conference in Orlando, Fla. Microsoft officials predicted 7,000 HIMSS registrants would attend their product demonstration, which featured comedian Bill Cosby.
IPO UPDATE. The recent premiere of two physician practice management companies on the Nasdaq stock exchange received a tepid response from investors.
On Feb. 11, Denver-based Birner Dental Management priced its initial public offering of 2.1 million shares at $7 per share, the low end of the $7 to $8 range it expected. The $14.7 million that Birner raised in the offering was 40% less than the $24.8 million goal the company had set in a November Securities and Exchange Commission filing.
On Feb. 4, BMJ Medical Management of Boca Raton, Fla., also had priced its IPO at $7 per share. BMJ, which, for the most part, manages the practices of orthopedic surgeons, had expected an offering price of $9 to $11. But instead the maximum $44 million it had hoped for, only $28 million was raised, a 36% gap.
Birner and BMJ's low prices reflect the lackluster performance of most PPM stocks in recent months.
CHARTER EXECUTIVE. Genus Aesthetic Medical and Dental Group, a Birmingham, Ala.-based physician practice management company, has hired former Charter Behavior Health Systems President John DeStefanis as its first chief operating officer.
DeStefanis, who resigned from Atlanta-based Charter on Nov. 10, is in charge of Genus' medical and dental operating divisions, which have just started a nationwide push to affiliate with physicians.
Genus, a 1997 start-up founded by former MedPartners Eastern Chief Operating Officer William Dexheimer, plans to develop and affiliate with high-end plastic surgery and specialty dental practices. Its financial backers include big-name venture investors such as Sprout Group of New York, and board members include PhyMatrix and Meditrust Chairman Abraham Gosman.
MAKING THE GRADE. After having its long-term bonds and debt securities downgraded by Standard & Poors in December, Kaiser Permanente has now been put on "CreditWatch with negative implications" by S&P, a status that means Kaiser is under review for a possible further downgrade. In December its rating was lowered to A+ from AA, skipping past a possible AA- rating. (The highest credit rating is AAA.)
The new review is a result of the company's February announcement of higher than expected losses in 1997, according to S&P. Kaiser Foundation Health Plan and Kaiser Foundation Hospitals reported a 1997 loss of $270 million. S&P also cited Kaiser's higher than anticipated growth in medical costs and recent nursing strikes in California as contributing to the downgrade.
PHO DARK DAYS. The board of St. Joseph's Physician Hospital Organization in Phoenix has voted to shut down the organization and terminate physician contracts on May 15 (see February, page 60).
St. Joseph's PHO, which provides healthcare to about 25,000 people, was established in 1992 by St. Joseph's Hospital and Medical Center along with area physicians. It has lost about $3.5 million since its founding, and last year it notified its 662 member physicians there would be a 15% reduction in annual reimbursement, about $3.5 million per year.
St. Joseph's plans to terminate its contracts with two area HMOs within the next 90 days. HMO representatives say they hope to contract directly with St. Joseph's physicians.