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Coastal Physician Group, Inc.
(Name of Registrant as Specified In Its Charter)
Coastal Physician Group, Inc.
(Name of Person(s) Filing Proxy Statement)
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[LOGO OF COASTAL PHYSICIAN GROUP, INC.]<PAGE>
Divestiture of Non-Core Businesses<PAGE>
Divestiture of Non-Core Businesses
Physicians Planning Group (PPG)
HealthNet Medical Group (HealthNet)
Integrated Provider Network (IPN)
Better Health Plans (BHP)
MedCost
Provider Business Services (PBS)<PAGE>
Divestiture Criteria
Limited Strategic Fit with Core Business of Coastal
- Operationally dissimilar physician-based businesses -
limited operating leverage
- Different management skills required to manage
clinical operations and financial risk
- Geographically dispersed with no critical mass in any
particular market<PAGE>
Divestiture Criteria (cont.)
Significant Investment Required to Build Each Business
- Development of MSO infrastructure (e.g., risk
contracting, care management)
- Capital required to accept financial/clinical risk
- Acquisitions to increase local market coverage and
share
- Integration with local delivery system
- Formation of regional/national PPM business<PAGE>
Divestiture Criteria (cont.)
Readily Marketable
- Significant number of potential buyers
- Active acquisition market with competitive pricing
- Easily separable from Coastal - decentralized
management and administration (some IT issues)<PAGE>
Divestiture Strategy
Individual Businesses - Worth More to Other Providers
- Existing investment in the business or market
- Ability to obtain leverage
Individual Parts - Worth More Than the Whole
- Operationally dissimilar
- Geographically dispersed
Leading Buyers
- Local hospitals/integrated delivery systems
- National Regional Physician Practice Management
Companies<PAGE>
Coastal Physician Group, Inc.
August 27, 1996
Asset Divestiture Summary
Point Investment Final
Asset Person Banker Memorandum
-------------------------------------------------------------------------
1 PPG/HCA Toney Acvest, Inc. N/A
2 Better Health Plan Toney Acvest, Inc. Done
3 Integrated Physician Toney Network Health Done
Network (NC) Financial Srvcs/
Acvest, Inc.
4 HealthNet Corp. (NJ) Toney Acvest, Inc. Done
5 MedCost, Inc. Toney Legg Mason Done
6 Provider Business Services Kuoni Townsend, Done
Frew & Co.
7 Anesthesia/OBGYN Contracts Kuoni Townsend, TBD
Frew & Co.
8 South Florida Clinics Toney Internal Mgmt. TBD<PAGE>
===============================================================
Coastal Physician Services
August 28, 1996
Coastal Physician Services<PAGE>
Early Assessment
===============================================================
- Traditional financial and operational measurements
did not provide effective management tools
- Revenue-driven focus; insufficient attention to cash
flow
>> Customer attrition
>> Margin erosion
>> Many "loser" contracts
- Extrinsic/intrinsic incentives not sufficiently
aligned with good business practices
- Poor decision making at the top
Coastal Physician Services<PAGE>
Focus on the Basics
===============================================================
- Terminate unprofitable CPS and related contracts that
can't be quickly made profitable
- Size organization to fit resulting revenue base
- Address billing/collection issues
- Reduce direct expenses
>> Clinical personnel expenses
>> Medical Malpractice insurance
Coastal Physician Services<PAGE>
Goal: Redefine the Way CPS
Does Business
===============================================================
- Develop consistency in the way we do business and
ensure that we measure results accurately
- Develop short-term and long-term plans and objectives
>> Tracking daily and weekly metrics for results to
be constantly and consistently reviewed
>> communicate plans and objectives throughout the
organization
- Provide people with the resources and incentives to
accomplish the plans and objectives
Coastal Physician Services<PAGE>
Coastal Physician Services
===============================================================
The Right Information
To The Right People
At The Right Time
Coastal Physician Services<PAGE>
Contract Changes
===============================================================
- Voluntary
- Involuntary
- Conversions
- Additions
-----------------
Net Change
Coastal Physician Services<PAGE>
Structural Changes
===============================================================
- Greater P&L responsibility at the operating level
>> Operations (Credentialing & Staffing)
>> Contract Management & Recruiting
>> Accounting/Financial Reporting
>> New Business Development
>> Medical Directors
- Corporate responsibility
>> Functional reporting relationships
>> Strategy & direction
>> Provide resources
>> Track & roll-up results
Coastal Physician Services<PAGE>
Decentralization
===============================================================
FUNCTION
Staffing/ Contract Mgt/
Credentialing Recruiting Finance NBD Medical
------------------------------------------------------------------
Mid Atlantic
------------------------------------------------------------------
------------------------------------------------------------------
TEAM Southeast
------------------------------------------------------------------
------------------------------------------------------------------
West
------------------------------------------------------------------
- Team - make things happen
- Function - support, mentoring, expertise
Coastal Physician Services<PAGE>
Billing/Collection Issues
===============================================================
- A/R Management
>> Flat Rate/Subsidy
>> Fee-for-Service
- Outside
- HBR
- Net Cash Flow
>> Positive $4M variance from company projections
used to borrow money in April
Coastal Physician Services<PAGE>
Direct Expenses
===============================================================
- Clinical Personnel Expenses
>> Medical Directors
>> Independent Contractors
- Medical Malpractice Insurance
>> CAIC
>> Outside
>> Total increase from 1995 to 1996 is 22.81%
Coastal Physician Services<PAGE>
Coastal Physician Services
===============================================================
Lean
Stable
Focused
Coastal Physician Services<PAGE>
Management Action Plan
Summary
===============================================================
- Internal Changes
- Clinical Personnel
Loss Profit
- Malpractice Insurance
- Net-to-Practice
Coastal Physician Services<PAGE>
Coastal Physician Services
===============================================================
Vision
Leadership
Operational Experience
Coastal Physician Services<PAGE>
Improvements from the Past
===============================================================
- Exited unprofitable contracts
- Subsidy improvements
- Overhead reductions
- Direct expense reductions
- Turnaround low-margin contracts
- Net-to-practice improvements
- Better margin control for new business
Coastal Physician Services<PAGE>
Healthcare Business
Resources, Inc.
Presentation
August 28, 1996
Healthcare Business Resources, Inc.<PAGE>
Central Focus
THROUGHPUT
DEFECTS
PRODUCTIVITY
Healthcare Business Resources, Inc.<PAGE>
Issues faced by management
- Re-Building customers confidence (including CPS)
- Billing systems consolidation to Enhance
- System interfaces with field and hospital operations
- Dysfunctional Operations at Durham
- Employee motivation and training
Healthcare Business Resources, Inc.<PAGE>
Changes at HBR
Without a change in process, we will fail.
- Re-engineering the physical flow of documents
- New Operational measures throughout the process
>> New matrix focused statistics include:
+--------------------------------------------------------------+
| Charts on Hold Rejected FTE Reporting |
| invoices |
+--------------------------------------------------------------+
| |
| Charts Charts Coded Invoices |
| Received processed |
| |
+--------------------------------------------------------------+
Healthcare Business Resources, Inc.<PAGE>
Changes at HBR
- Regionalization - Balancing workload throughout
offices
- Re-build a strong working relationship with CPS
>> More successful results for CPS
>> More successful results for HBR
- Eliminate Accounts Receivable Collection Delays
- Information Technology
Healthcare Business Resources, Inc.<PAGE>
Information Systems
- Current true cost to HBR is between $9 and $11
million annually
- Consolidate Multiple Billing Platforms to One
- Expand and improve Electronic interfaces with
hospitals
- Electronic Processing
>> Cash Posting
>> Electronic Funds Transfer
>> Coding and processing of charts
Healthcare Business Resources, Inc.<PAGE>
Recent Accomplishments
- Enrollment Holds Reduced by 22% or $4.5 million since
July 27
>> This equals about $2 million in cash
- Identification of 15 separate programs to reduce
Accounts Receivable Days Outstanding with a total
value of more than $7 gross million
- Electronic claims submission have increased from 30%
to 65% of eligible claims
- Establishment of senior level contact at HCFA to
resolve enrollment issues with carriers
Healthcare Business Resources, Inc.<PAGE>
Examples of MAPs
Specific Goals Date of Completion
Complete collection of A/R's over December 31, 1996
190 days outstanding
Eliminate processing backlogs December 31, 1996
Convert all clients to Enhance December 31, 1996
Billing system
Negotiate an acceptable IS June 30, 1997
contract
Reduce direct and overhead costs June 30, 1997
Establish Lock Box System June 30, 1997
Healthcare Business Resources, Inc.<PAGE>
Strategic Issues
- Strategic issues on hold until process is fixed
>> Pursue independent contracts vs. supporting CPS
growth
>> Development of high tech solutions
>> Growth through acquisition vs. internally
generated growth
>> Expand services to departments outside of
Emergency Department
>> Realization of shareholder value within the
FirstCollect subsidiary
Healthcare Business Resources, Inc.<PAGE>
COASTAL GOVERNMENT SERVICES (CGS)
COASTAL CORRECTIONAL HEALTHCARE (CCH)
Business Overview CGS CCH
Key Markets Navy, Army, Air State Prisons, County/
Force VA, IHS City Jails, BOP
Services EM, Primary Care Staffing - Total Care
Clinics, OB/GYN,
Nurses, Support
Staffing<PAGE>
Accomplishments
- Growth
- First to receive 100% Incentive Awards
- Customer Testimonial - State Medical Director
- First Navy Emergency Medicine
- Preferred OB/GYN Provider
- Service Excellence<PAGE>
Present Status
- Experienced Management
- Strong Team
Business Development
Operations
- Management Outlook<PAGE>
CGS CCH
Size of Market (Bil) $.5 $2.5
Competitors 5/10 6/12<PAGE>
Internal Focus
- Manage Costs - Direct & O/H
- Manage Risks
- Best Systems
- Sensitivity to Clients<PAGE>
Road to Growth & Profitability
- Stable Organization & Management Support
- Some Capital/Cash Flow
- Best Lean Team
- Continuing Opportunities<PAGE>
Health Plan Southeast (HPSE)<PAGE>
Situation
In the past, HPSE significantly under performed its potential.
Most recently, Management has taken action to perform an
operational turnaround.
- Historically under managed
-Physician - owned
-Weak managed care
-Respectable membership growth
-Eroding profitability
- Currently stabilized and improving quickly
-Critical actions taken
-Key performance measures showing significant
improvement
-Management action plan in place<PAGE>
Actions Taken To-Date
HPSE has taken a number of steps toward the operational
turnaround:
- Installed key management
- Instituted traditional managed care controls
-Referral process
-Utilization management
- Began restructuring provider contracts
-Best Value Facility
-IPA contract
- Reduced administrative expenses<PAGE>
Impact To-Date
- Significantly reduced medical loss ratio
-Utilization down
-Unit cost down
- Administrative expenses well below budget
- Revenue and membership on target<PAGE>
Going Forward
- Further control of utilization
-Expansion of referral process
-Better concurrent utilization
- Further reducing other medical cost drivers
-Network
-Pharmacy costs
-Disease management
-Further capitation
- Growing membership and revenue moderately and profitably
-Holding administrative expense growth well below sales
growth
-Ongoing process improvement
-Contiguous geographic expansion
-Fully rolling out existing products<PAGE>
Potential Value Impact
Overall, Coastal management believes HPSE has the potential to
significantly increase in value over the next 12 to 24 months:
- Continued profit improvement
- Continued moderate growth
- Demonstrated track record of improved performance
- Opportunity for greater growth through potential new
initiatives<PAGE>
Risks
While the upside potential for HPSE is significant, the
downside is limited:
- Market currently valuing HPSE based on historically
poor performance
- HPSE currently operating cash-positive
- HPSE's market is, and will likely continue to be,
strategically attractive
- Will keep Coastal's options open in the future<PAGE>
Group is a Service Organization
Accounting, Public Reporting
Treasury, Cash Management, Cash Forecasting
Business & Strategic Planning
Tax, Legal
Investor, Government Relations.<PAGE>
Assessment of Current Position
Qualitative
Stakeholder perception of Group is poor
Downsizing from 200 + in January to 91 currently is a co-factor
in current problems
Management currently augmented by PW staff<PAGE>
Group's Value Added
Oversee Turnaround Activity
Major re-write of ISSC contract, related contract with
Advantis
Re-sized organization will have significant effect on Real
Estate
Businesses to be re-configured or divested
Shrink-to-fit as programs are completed
Bottom line: Experienced management on-site to re-scope Group<PAGE>
Forward-looking Information or Statements: Except for state-
ments of historical fact, statements made in this presentation
and in the conference of which this presentation is a part are
forward looking statements, and are inherently subject to un-
certainties. The actual results of the Company may differ
materially from those reflected by the forward looking state-
ments based on a number of important risk factors including,
but not limited to: receipt of sufficient proceeds from
divested assets and the timing of any divestitures, fulfillment
of scheduled divestiture efforts; the level and timing of im-
provements in the operational efforts; the possibility of poor
accounts receivable collection and/or reimbursement experience;
the possibility of increased medical expenses due to increased
utilization; the possibility that the Company is not able to
improve operations or execute its divestiture strategy as
planned; and other important factors disclosed from time to
time in the Company's form 10-K, form 10-Q, form 8-K and other
Securities and Exchange Commission filings, including the form
10-Q for the quarter ended June 30, 1996.
Certain Additional Information: Coastal Physician Group, Inc.
will be soliciting proxies to elect directors at its 1996 An-
nual Meeting of Stockholders. In addition to those persons
listed on Appendix I to the Company's proxy statement, the
following individuals may be deemed participants in such
solicitations of proxies: John G. Ball; Kirk Doolittle; Jeff
Smith; Terry W. Blackwood; Charles F. Kuoni III; Lewis Sanders;
Timothy Hassenger; and Mark E. Toney. As of June 30, 1996, Mr.
Doolittle is the beneficial owner of 1,100 shares of the
Company's common stock; Mr. Smith is the beneficial owner of
less than 100 shares of the Company's common stock; and Mr.
Blackwood is the beneficial owner of 842 shares of the
Company's common stock. Mr. Toney is an employee of Price
Waterhouse LLP, which has been engaged pursuant to an agreement
between Price Waterhouse and Coastal to assist the Company in
its revitalization plan. In connection with such agreement,
the Company has agreed to pay Price Waterhouse $70,000 per
month for the services of the Plan Managers, and $46,400 per
month for any additional Price Waterhouse personnel that may
provide services under the agreement. The Company also granted
Price Waterhouse an option to purchase 50,000 shares of Coastal
common stock at a price of $7 7/8, which has not yet vested,
and a separate option to purchase up to 50,000 shares of
Company common stock, which will vest at a rate of 10,000
shares each month for five months commencing May 15, 1996, at a
strike price equal to the average closing price of the common
stock on the New York Stock Exchange for the first ten trading
days of each month prior to the vesting date.
