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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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): JUNE 10, 1998
OXFORD HEALTH PLANS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-19442 06-1118515
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(State or other jurisdiction) (Commission (IRS Employer
of incorporation) File Number) Identification No.)
800 Connecticut Avenue, Norwalk, Connecticut 06854
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(Address of principal executive offices) (Zip Code)
(203) 852-1442
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On June 10, 1998, Oxford Health Plans, Inc. (the "Company") voluntarily
suspended marketing and most enrollment of new members under its Oxford Medicare
Advantage Plans in New York, New Jersey, Connecticut and Pennsylvania. The
action taken by the Company was instituted in order to provide the Company with
an opportunity to strengthen its operations and institute certain corrective
actions required by the Health Care Financing Administration ("HCFA") as a
result of its February 1998 on-site review of the Company's Medicare operations
over the prior six months. This action, however, does not apply to potential
enrollees of Oxford's Medicare Advantage group accounts. The Company believes
that the suspension will be temporary, lasting several months, and service to
existing members will not be affected.
The Company has agreed with HCFA to develop and implement a plan of
corrective actions relating to deficiencies in the Company's compliance with
operational standards contained in its contracts with HCFA. Operational
deficiencies noted by HCFA include claims payment turnaround times, interest
payments on delayed claims, enrollment and disenrollment procedures and
documentation and member appeal procedures and notifications. The Company's
ability to resume marketing and enrollment, and to be granted new
Medicare+Choice contracts for next year, will be subject to HCFA's satisfaction
with the progress made by the Company in implementing the corrective actions
agreed upon.
The Company has worked cooperatively with HCFA to address the concerns
it has raised and believes it will be able to implement corrective actions
satisfactory to HCFA; however, there can be no assurance that the Company will
ultimately succeed in resuming marketing and enrollment or in obtaining new
contracts for 1999. A long-term suspension of marketing and enrollment would
adversely affect revenues since member disenrollment would result in a
continuing reduction in membership. A failure to obtain a new contract for 1999
would mean that the Company would not participate in the Medicare managed care
program, with a corresponding reduction in revenues (the Company experienced
operating losses in Medicare in 1997 and the first quarter of 1998). In that
event, the Company would need to reduce overall administrative costs
proportionately. Non-participation by the Company in the Medicare managed care
program could also adversely affect the Company's ability to negotiate favorable
provider contracts for its commercial business since the Company would represent
significantly less revenue potential for many providers.
*****
Certain statements herein, such as statements concerning the Company's
belief as to the temporary character and length of the suspension of marketing
and enrollment of new members in the Company's Medicare plans, the Company's
belief as to its ability to develop and implement corrective actions
satisfactory to HCFA, future administrative costs and other statements regarding
matters that are not historical facts, are forward-looking statements (as
defined in the Securities Exchange Act of 1934, as amended); and because such
statements involve risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Factors that
could cause actual results to differ materially include, but are not limited to:
- - The Company's ability to develop processes and systems to support its
operations.
- - Changes in federal or state regulation relating to health care and health
benefit plans.
- - High administrative costs in operating the Company's business and the cost
and impact on service of changing technologies.
- - Rising medical costs or higher utilization of medical services, including
higher out-of-network utilization under point-of-service plans.
- - Competition from health benefit plan providers and competitive pressure on
pricing Oxford products.
- - The effect, if any, of recent events at the Company (including any adverse
publicity) on future enrollment in the Company's health benefit plans.
- - Any changes in the Company's estimates of its medical costs and expected
cost trends as a result of information gained in the process of continuing
to reconcile delayed claims and to pay down backlogged claims.
- - The impact of litigation (including purported class actions filed against
the Company and certain officers and directors), regulatory proceedings and
other governmental action (including the examination, investigation and
review of the Company by HCFA, the New York State Insurance Department and
other regulatory authorities and the inquiries by the Securities and
Exchange
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Commission and the New York State Attorney General regarding, among other
matters, public disclosures by the Company).
- - Those factors included in the discussion under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Cautionary Statement Regarding Forward-Looking Statements" in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1998, which discussion is incorporated herein by reference.
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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, thereunto duly authorized.
OXFORD HEALTH PLANS, INC.
Date: June 11, 1998 By: /s/ BRENDAN R. SHANAHAN
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BRENDAN R. SHANAHAN
Vice President and Controller
