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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): FEBRUARY 25, 1999
OXFORD HEALTH PLANS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19442 06-1118515
(State or other jurisdiction) (Commission (IRS Employer
of incorporation) File Number) Identification No.)
800 Connecticut Avenue, Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip Code)
(203) 852-1442
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
The Company's earnings Press Release dated February 25, 1999 is
attached as an Exhibit hereto and incorporated herein by reference.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
99 Press Release dated February 25, 1999
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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: February 25, 1999 By: /s/ YON Y. JORDEN
------------------------------------
YON Y. JORDEN
Chief Financial Officer
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
99 Press Release dated February 25, 1999 5
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EXHIBIT 99
For Further Information:
Investor Contact: Deborah Abraham
(203) 851-2636
Media Contact: Madeline Hardart
(212) 885-0417
Nicole Reilly
(212) 885-0338
FOR IMMEDIATE RELEASE
OXFORD HEALTH PLANS, INC. ANNOUNCES FOURTH QUARTER RESULTS
QUARTERLY LOSS NARROWS TO $.23 AS COMPANY MAKES PROGRESS IN TURNAROUND
NORWALK, CONNECTICUT, FEBRUARY 25, 1999 - Oxford Health Plans,
Inc. (NASDAQ:OXHP) announced today a net loss of $18.8 million, or $.23 per
common share, for the quarter ended December 31, 1998. The fourth quarter
results were positively affected by the release of restructuring reserves
recorded in the second quarter totaling $29.0 million as the costs associated
with the exit from certain non-core businesses and the exit from or
restructuring of certain governmental programs were less than previously
expected. Fourth quarter results were negatively affected by certain one-time
charges relating to medical costs totaling $14.0 million. Excluding the
favorable aggregate impact of these items, the fourth quarter loss would be
$33.8 million, or $0.42 per share. Cash flow provided by operations for the
fourth quarter totaled $48.1 million; however, this includes the advance receipt
of Medicare premiums of approximately $68 million. "Fourth quarter operating
results, after eliminating one-time items, are better than we expected," said
Oxford Health Plans' Chief Executive Officer, Norman C. Payson, M.D. "Moreover,
better than expected results in executing portions of our turnaround plan have
resulted in a release of certain of the reserves booked in the second quarter."
Revenues for the quarter ended December 31, 1998 were $1.13 billion,
down 3.7% from the third quarter of 1998. For the year ended December 31, 1998,
revenues were $4.72 billion, up 11.0% compared to the prior year. As of December
31, 1998, Oxford's total membership was
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approximately 1,881,400 compared to 2,008,100 at December 31, 1997. The
reductions in membership experienced in 1998 primarily resulted from decreases
in membership and withdrawals from certain non-core businesses and government
programs and reductions in commercial members in the Company's core commercial
markets.
Health care services expense for the fourth quarter was $983 million
and the medical loss ratio (health care services as a percentage of premium
revenue) was 89.4%. Health care services expense was negatively affected by the
establishment of an additional $49 million in medical claims reserves for
disputed claims, a $27 million provision for anticipated losses on individual
products and net accruals of $30 million for certain other medical expense
liabilities, partially offset by favorable medical claims reserve adjustments
totaling $92 million. These items resulted in a net negative impact of $14
million.
Marketing, general and administrative expenses including related
depreciation and amortization were $170.1 million for the fourth quarter or
15.4% of operating revenues, compared to $245.1 million for the same period last
year or 22.1% of operating revenues.
The Company also reported that at December 31, 1998, it had over $1.16
billion in current cash and marketable securities. After giving pro forma effect
to capital contributions to its regulated subsidiaries, Oxford had over $200
million in cash and marketable securities at the parent company as of December
31, 1998. "Oxford's parent company liquidity at year-end is better than we
anticipated as the result of progress with the turnaround plan. The transfer of
our Brooklyn Medicaid business and sale of our Pennsylvania HMO raised an
additional $16.3 million in cash in January 1999," said Yon Yoon Jorden,
Oxford's Chief Financial Officer.
In connection with the completion of Oxford's year-end closing, certain
non-recurring items that were previously classified as unusual charges and
restructuring charges in the second quarter of 1998 have been reclassified to
operating lines in the annual statement of operations. A reclassification of
unusual charges aggregating approximately $73.5 million relates to charges taken
in the second quarter for strengthening medical claim reserves, establishing
reserves for losses on provider advances, and certain other asset impairment
losses. A reclassification of restructuring charges aggregating $18.8 million
relates to the writedown of government program accounts receivable and accruals
of certain litigation and other expense. These reclassifications
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do not affect reported net loss for the second quarter or the full year, but do
have the effect of increasing the second quarter MLR and administrative ratios
from the levels previously reported and full year ratios are also slightly
higher.
Core commercial membership at January 1, 1999 was approximately 1.54
million (after a one-time upward adjustment of 35,000 members to remove the
effect of previous estimates of retroactivity) compared to 1.56 million (prior
to such adjustment) at December 31, 1998. Each year approximately one-third of
Oxford's commercial group membership is required to renew in January. Renewals
and enrollments in January 1999 received an average price increase estimated at
9.8%.
Oxford's membership at January 1, 1999 was approximately 1,712,000, a
reduction of 9% from December 31, 1998. This membership reduction reflects the
loss of 38,000 Medicare members primarily relating to the withdrawal from
certain non-core counties and restructuring provider arrangements and reduced
benefits in other counties. It also reflects the loss of an additional 98,000
Medicaid members as a result of the transfer of its Brooklyn Medicaid business
and the sale of its Pennsylvania subsidiary, and the loss of 14,500 commercial
members in non-core markets.
"Oxford's financial results in the second half of 1998 reflect the
significant progress achieved in implementing the turnaround plan," said Dr.
Payson. "The successful withdrawals from non-core businesses, such as Medicaid
and portions of our Medicare programs, are noteworthy. Moreover, while
operational and other challenges remain, the successful renewal of commercial
business in January at increased premium prices provides a foundation for
continued improvement in financial results in 1999."
Oxford's product lines include traditional health maintenance
organizations, point-of-service plans, third-party administration of employer
funded benefit plans, and Medicare plans. Oxford markets its health plans to
employers in New York, New Jersey and Connecticut, through its direct sales
force and through independent insurance agents and brokers.
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* * * * * * * * * * *
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this press release, including statements concerning
future results of operations or financial position, and other statements
contained herein regarding matters that are not historical facts, are
forward-looking statements (as such term is 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 and to improve its service levels.
- - Changes in Federal or State regulation relating to health care and
health benefit plans.
- - 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, including acceptance of premium rate
increases by the Company's commercial groups.
- - High administrative costs in operating the Company's business and the
cost and impact on service of changing technologies.
- - The ability of the Company to complete and operationalize risk transfer
and other provider arrangements and to successfully and timely dispose
of certain assets and businesses.
- - 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 or claims paid or denied in
error and to pay down backlogged claims.
- - The impact of litigation (including purported class and derivative
actions filed against the Company and certain officers and directors
and proceedings commenced against the Company and several employees by
certain healthcare providers), regulatory proceedings and other
governmental action (including the ongoing examination, investigation
and review of the Company by various Federal and State authorities).
- - Those factors included in the discussion under the caption
"Management's Discussion and Analysis of the Financial Condition and
Results of Operations - Cautionary Statement Regarding Forward-Looking
Statements" in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
1998 1997
----------- -----------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 237,717 4,141
Short-term investments-available-for-sale, at market value 922,990 635,743
Premiums receivable 110,254 275,646
Other receivables 36,540 42,517
Prepaid expenses and other current assets 9,746 10,097
Refundable income taxes -- 120,439
Deferred income taxes 43,385 38,092
----------- -----------
Total current assets 1,360,632 1,126,675
Property and equipment, at cost, net of accumulated depreciation and
amortization of $160,431 in 1998 and $125,926 in 1997 112,941 147,093
Deferred income taxes 100,139 86,406
Restricted investments - held-to-maturity, at amortized cost 44,798 --
Other noncurrent assets 25,197 29,927
----------- -----------
Total assets $ 1,643,707 1,390,101
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Medical costs payable $ 850,197 762,959
Trade accounts payable and accrued expenses 182,790 144,264
Unearned premiums 105,993 124,603
Current portion of capital lease obligations 15,938 --
Deferred income taxes 2,228 9,059
----------- -----------
Total current liabilities 1,157,146 1,040,885
Senior notes payable 200,000 --
Term loan payable 150,000 --
Obligations under capital leases 18,850 --
----------- -----------
Total liabilities 1,525,996 1,040,885
Redeemable preferred stock 298,816 --
Shareholder's equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares -- --
Common stock, $.01 par value, authorized 400,000,000
shares; issued and outstanding 80,515,872 in 1998
and 79,474,439 in 1997 805 795
Additional paid-in capital 507,808 437,653
Accumulated deficit (693,855) (95,498)
Other comprehensive income 4,137 6,266
----------- -----------
Total liabilities and shareholders' equity $ 1,643,707 1,390,101
=========== ===========
</TABLE>
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months and Years Ended December
31, 1998 and 1997 (In thousands, except per share, per
member per month and membership highlights data)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31 December 31
----------------------------- -----------------------------
Revenues: 1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Premiums earned $ 1,100,227 1,107,414 4,612,328 4,167,224
Third-party administration, net 4,455 2,501 17,838 12,592
Investment and other income (expense), net 23,809 28,628 91,436 73,704
----------- ----------- ----------- -----------
Total revenues 1,128,491 1,138,543 4,721,602 4,253,520
----------- ----------- ----------- -----------
Expenses:
Health care services 983,152 1,286,544 4,321,583 3,915,811
Marketing, general and administrative 154,796 227,677 708,452 679,567
----------- ----------- ----------- -----------
Total expenses 1,137,948 1,514,221 5,030,035 4,595,378
----------- ----------- ----------- -----------
Earnings (loss) before income taxes, financing charges,
depreciation and amortization, restructuring and
unusual charges (credits) ("EBITDA") (9,457) (375,678) (308,433) (341,858)
Other charges (credits):
Interest and other financing charges 12,851 11,118 55,857 11,118
Depreciation and amortization 16,588 18,048 67,141 61,045
Restructuring (29,043) -- 151,414 --
Unusual -- 41,618 38,341 41,618
Gain on sale of affiliate -- (25,168) -- (25,168)
Equity in net loss of affiliate -- -- -- 1,140
----------- ----------- ----------- -----------
Total other charges 396 45,616 312,753 89,753
----------- ----------- ----------- -----------
Loss before income taxes (9,853) (421,294) (621,186) (431,611)
Income tax benefit (1,905) (136,609) (24,394) (140,323)
----------- ----------- ----------- -----------
Net loss (7,948) (284,685) (596,792) (291,288)
Less preferred stock dividends and amortization (10,883) -- (27,668) --
----------- ----------- ----------- -----------
Net loss attributable to common stock $ (18,831) (284,685) (624,460) (291,288)
=========== =========== =========== ===========
Loss per common share-basic and diluted $ (.23) (3.58) (7.79) (3.70)
=========== =========== =========== ===========
Weighted average common shares outstanding-basic and diluted 80,463 79,448 80,120 78,635
=========== =========== =========== ===========
Selected information:
Medical-loss ratio 89.4% 116.2% 93.7% 94.0%
Administrative-loss ratio 15.4% 22.1% 16.7% 17.6%
PMPM premium revenue $ 199.94 190.73 199.82 193.06
PMPM medical expense $ 178.67 221.60 187.23 181.46
Fully insured member months 5,502.7 5,806.1 23,081.9 21,584.7
</TABLE>
<TABLE>
<CAPTION>
Membership at
December 31 Increase
MEMBERSHIP HIGHLIGHTS 1998 1997 (Decrease)
--------- --------- ---------
<S> <C> <C> <C>
Freedom Plan 1,318,100 1,333,500 (15,400)
HMO 260,700 270,400 (9,700)
Medicare 148,600 161,000 (12,400)
Medicaid 97,800 189,600 (91,800)
Total Fully Insured 1,825,200 1,954,500 (129,300)
Self-funded 56,200 53,600 2,600
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Total Membership 1,881,400 2,008,100 (126,700)
========= ========= =========
</TABLE>
