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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 24, 1999
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
(Exact Name of Registrant as Specified in Charter)
Pennsylvania 23-2795795
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
Commission File No.: 0-28390
651 East Park Drive, Harrisburg, PA 17111
(Address of Principal Executive Offices)
(717) 561-7890
(Registrant's Telephone Number, Including Area Code)
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Item 5. Other Events.
As discussed in Item 2. "Management's Discussion and Analysis or Plan
of Operation," in the Form 10-QSB for the fiscal quarter ended June 30, 1999,
and in the Current Report on Form 8-K dated October 13, 1999, of Pennsylvania
Physician Healthcare Plan, Inc. (the "Company"), incorporated herein by
reference, during the second quarter of 1999 Physicians Care PPO, Inc., the
Company's preferred provider organization, which is its sole revenue generating
subsidiary (the "PPO"), incurred significantly larger underwriting losses than
anticipated. These losses continued in the third quarter of 1999. As a result of
these losses, the PPO's external cash requirements have continued to materially
exceed its internally generated cash by an amount in excess of its ability to
borrow or to access the capital markets. The Company has been unable to enter
into any definitive arrangements to provide it with the additional capital it
needs to fund its internal cash requirements. Consequently, the PPO's net worth
has declined below that required by Pennsylvania managed care laws.
On October 13, 1999, the Company met with the Pennsylvania Department
of Insurance (the "Department") so that satisfactory arrangements could be made
to achieve a timely and orderly cessation of the PPO's business, including the
placing of subscribers with other insurance providers. Although the Department
had the authority to seek a rehabilator to manage the PPO's day-to-day
operations, it then advised the Company that it had until October 25, 1999 to
continue to remain in control in order to wind up the PPO's affairs and also to
seek additional sources of funding. The Department indicated that after that
date it would assess the PPO's financial condition, and, if no additional
sources of funding were obtained, the Department would seek an order from the
Commonwealth Court of Pennsylvania (the "Court") appointing a liquidator for the
PPO.
The Company was attempting to obtain additional capital from the
Pennsylvania Medical Society ("PMS") by the October 25, 1999 deadline set by the
Department. However, the Company and PMS were unable to come to a definitive
arrangement regarding the provision of additional capital.
Consequently, on October 24, 1999 the PPO consented to the entry of an
order of liquidation from the Court which places the PPO under the control of
the Department and, among other things, revokes the PPO's license, appoints a
rehabilator and/or liquidator for the PPO, discharges the PPO's employees,
officers and directors, enjoins the PPO from transacting any further business
and orders that the PPO be dissolved. It is expected that the order of the Court
will be issued within five business days. As a result, the liquidation
proceedings could last for many months and there are many uncertainties as to
how provisions of law would be applied. Rights and remedies of creditors could
be altered, limited or denied.
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The Company has entered into an arrangement with certain of the Blue
Cross/Blue Shield plans doing business in the PPO's service area whereby these
plans have agreed to offer coverage without medical underwriting to all of the
PPO's members effective November 1, 1999.
Also on October 24, 1999, the Company's health maintenance
organization, a subsidiary of the Company which has not yet commenced operations
(the "HMO"), agreed to return its license to the Department. The Company and the
Department are currently discussing what portion of the HMO's $1.5 million
statutory net worth deposit will be available to the PPO in order to provide for
the payment of outstanding claims.
The Company is exploring the possibility of selling its service company
subsidiary. However, no assurance can be given that a willing buyer will be
found or the terms of any such transaction, including the consideration to be
received by the Company.
Following the winding-up of the affairs of the PPO and the HMO, the
Company expects that it will seek protection from its creditors under the
bankruptcy laws.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Pennsylvania Physician Healthcare Plan, Inc.
(Registrant)
Date: October 25, 1999 By: /s/ Richard A. Felice
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Richard A. Felice, President
and Chief Executive Officer
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