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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
RIGHTCHOICE MANAGED CARE, INC.
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(Name of Issuer)
Class A
Common Stock
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(Title of Class of Securities)
766 57K 10 1
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(CUSIP Number)
Hugo Tagli, Jr.
Vice President and
Corporate Counsel
Health Care Service Corporation
300 E. Randolph Street, 15th Floor
Chicago, Illinois 60601
(312) 655-6000
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
October 22, 1999
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(Date of Event Which Requires Filing of this Statement)
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CUSIP No. 766 57K 10 1
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1. Names of Reporting Persons. I.R.S.
Identification Nos. of Above Persons (entities only).
Health Care Service Corporation
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2. Check the Appropriate Box if a Member of a Group
(a) / /
(b) / /
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3. SEC Use Only
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4. Source of Funds
WC
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5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e): /X/
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6. Citizenship or Place of Organization
Illinois
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Number of Shares 7. Sole Voting Power 695,800
Beneficially ------------------------------------------
Owned by Each 8. Shared Voting Power 0
Reporting Person ------------------------------------------
With: 9. Sole Dispositive Power 695,800
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10. Shared Dispositive Power 0
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
695,800
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12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares / /
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13. Percent of Class Represented by Amount in Row (11)
18.8
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14. Type of Reporting Person
IC
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SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
Class A Common Stock
RightCHOICE Managed Care, Inc.
1831 Chestnut Street
St. Louis, Missouri 63103-2275
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c):
Name: Health Care Service Corporation
State of Incorporation: Illinois
Principal Business: Health insurance
Address (principal business and
principal office): 300 East Randolph Street
Chicago, Illinois 60601-5099
(d) Criminal Proceedings:
On July 16, 1998, HCSC entered a plea of guilty to
each of eight felony charges in the U.S. District
Court for the Southern District of Illinois. The
charges alleged a conspiracy to obstruct and impede a
government audit, obstruction of a government audit,
and the making of false statements in violation of
the federal false statement statute. In connection
with its guilty plea, HCSC paid a criminal fine of $4
million and civil penalties of $140 million.
Although HCSC entered a plea of guilty to each of the
charges, it is important to understand that the
conduct alleged by the government was limited to a
small number of HCSC's Medicare Part B employees
located in a remote facility located in Marion,
Illinois. The government's investigation leading up
to the charges failed to develop any basis to
conclude that the misconduct was known to or approved
by any member of HCSC's senior management team. In
fact, the government, when announcing the charges,
openly acknowledged that the conduct which gave rise
to the prosecution occurred without the knowledge or
sanction of HCSC senior management. When summarizing
the charges to the court, the government's attorney
publicly stated that the Marion employees concealed
their misconduct from the Health Care Financing
Administration and HCSC's senior management.
Neither the government nor HCSC's management became
aware of the misconduct until 1995, at which time the
Company conducted an extensive internal
investigation, the results of which promptly were
provided to the government. At the conclusion of its
internal
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investigation, HCSC promptly implemented corrective measures
to ensure future compliance with all regulatory and legal
requirements. HCSC continued to cooperate fully with the
government throughout the pendency of the government's
investigation.
An essential component of the overall settlement
agreement struck between HCSC and the government was
the government's commitment that HCSC would not be
debarred, excluded or suspended from any government
program as a result of the misconduct which gave rise
to the prosecution. Before agreeing to this
commitment, the government attorneys first satisfied
themselves that the conduct was neither sanctioned by
nor known to HCSC's senior management.
(e) Civil Proceedings:
Not applicable
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Working Capital -- $6,644,890
ITEM 4. PURPOSE OF TRANSACTION.
The purpose of the purchase by HCSC of 695,800 shares
referred to in Item 5 is to acquire a significant equity position in
the Issuer. Although these shares constitute approximately 18.8% of
the Issuer's Class A Common Stock, these shares constitute about
3.7% of all Common Stock issued by the Issuer. In light of the right
of the holders of Class B Common Stock to vote 10 votes per share,
HCSC will have about .5% of the aggregate vote of the Class A and
Class B Common Shares.
HCSC currently intends to seek some form of alliance or
combination with the Issuer and Blue Cross and Blue Shield of
Missouri ("Missouri Blue Cross"). Any such alliance or combination
could be effected in a number of different ways (e.g., acquisition
of stock, merger, acquisition of assets, joint venture, reinsurance,
management agreement). Any such alliance or combination could result
in changes in the present board of directors or management of
Missouri Blue Cross or the Issuer. There can be no assurance that
any such alliance or combination will be effected or as to the terms
or timing of such alliance or combination.
HCSC has engaged in discussions with Missouri Blue Cross
and the Issuer regarding a possible alliance or combination with
HCSC. No agreement as to an alliance or combination was achieved as
a result of such discussions.
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In light of Missouri Blue Cross ownership of all of the
Issuer's Class B stock (with 10 votes per share), and the corporate
structure of Missouri Blue Cross, HCSC believes that any combination
or alliance of HCSC with Missouri Blue Cross and the Issuer may be
effected only with the approval of the Board of Directors of
Missouri Blue Cross and the Issuer and applicable regulatory and
judicial authorities.
Other than as indicated above, HCSC has no present plans or
proposals with respect to the Issuer (although it reserves the right
to develop any such plans and proposals) that relate to or would
result in the occurrence of any the events set forth in paragraphs
(a) - (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) 695,800 shares of Class A Common Stock which is 18.8% of the
outstanding shares in this class.
(b) Incorporated by reference to items (7), (8), (9), and (10) on the
attached cover page(s).
(c) None.
(d) None.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
A Confidentiality Agreement which contains standstill
provisions (with specified exceptions) has been entered into by
HCSC, Missouri Blue Cross and the Issuer in connection with the
discussions referenced in Item 4.
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
None
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
November 1, 1999
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DATE
/s/ Sherman M. Wolff
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SIGNATURE
Executive Vice President
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NAME/TITLE
