Filed by RightCHOICE Managed Care, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: RightCHOICE Managed Care, Inc.
Commission File No. 333-34750
The following communications contain forward-looking statements
within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. In particular,
statements regarding the reorganization of RightCHOICE Managed
Care, Inc., a Missouri corporation, are based on management's
current expectations or beliefs and are subject to a number of
factors and uncertainties that could cause actual results to
differ materially from those described in the forward-looking
statements. Careful consideration should be given to risk
factors included in RightCHOICE's reports filed with the
Securities and Exchange Commission, especially the section
entitled "Risk Factors" in "ITEM 1. BUSINESS" of RightCHOICE's
Annual Report on Form 10-K for the year ended December 31, 1999.
ANNUAL MEETING FINAL PRESENTATION 7/11/00
JOHN A. O'ROURKE, CHAIRMAN, PRESIDENT AND CEO, RIGHTCHOICE
MANAGED CARE, INC.
SLIDE 1 RIGHTCHOICE LOGO SLIDE
2000 Annual Shareholder's Meeting
July 11, 2000
SLIDE 2 Improved Finances, Services and Relationships
- Financial turnaround continues
- Service levels improve
- Relationships with state regulators improve
- Leadership role at BCBSA develops
- Second quarter earnings estimate increased
Presentation for this slide:
Now I would like to bring you up-to-date on the status of our
business.
And the progress that we have made since our last Annual Meeting.
I'm very pleased to tell you that RightCHOICE is a company with a
bright future.
Consistency, discipline, and a focus on the fundamentals are the
factors that characterize our company.
And, this has positive long-term implications for shareholder
value.
Since our last Annual Meeting:
- The financial turnaround has continued and our financial
profile has strengthened.
- Service levels have improved.
- We have taken on a leadership role within the national Blue
Cross Association.
- Our public image has strengthened.
- We have become more competitive in the marketplace.
- In the past 12 months, medical costs and G&A have been
effectively managed, and we have experienced a significant
increase in membership.
- Last month, we were pleased to announce that net income for
the 2nd quarter would exceed Wall Street expectations.
Concurrent with these developments, we have resolved a plethora
of regulatory and legal challenges that once threatened the
company.
In December of 1999, the Supreme Court of Missouri ruled that we
had the right to negotiate a settlement to the "Purposes Lawsuit"
and that Circuit Court approval was not necessary.
Many of you may recall that the "Purposes Lawsuit" threatened our
Blue Cross franchise and impeded our ability to grow.
The Supreme Court ruling removed a huge barrier to progress and
as a result, we were able to make peace with Missouri regulators
and move toward establishing the Missouri Foundation for Health.
The progress I just summarized would not have been possible
without the leadership of our Board, their confidence in the
management, and the hard work and commitment of our employees.
SLIDE 3 What sets us apart in our market?
- Regional leader with national presence
- Largest managed care company in Missouri with 2.4 million
members
- High brand recognition
Presentation for this slide:
Today, RightCHOICE is a major player in the Midwest market. We
are the oldest and largest managed care company in Missouri, and
with our HealthLink subsidiary, we service 2.4 million members in
7 states.
We are strongly tied to the state of Missouri through our
involvement in community activities and through strong, visible
local management.
- We have customer service sites in 3 strategic cities in
Missouri.
- We are a Blue Cross franchise.
- And that franchise conveys a special sense of dependability
and quality.
- Today, our brand recognition is unparalleled in our market.
SLIDE 4 Strong Regional and National Presence
This slide presents an outline of the United States showing in
which states Alliance Blue Cross Blue Shield, HealthLink, Inc.,
and PPO/BlueCard are available.
Presentation for this slide:
We do business in Missouri as Alliance Blue Cross Blue Shield and
as HealthLink.
- Outside of Missouri, we do business as RightCHOICE Insurance
Company and HealthLink.
- Regardless of what you call it, our members have a superior
choice of multiple plans and networks.
- In Missouri, being blue differentiates RightCHOICE from
other managed care companies -- because we offer a recognized
brand name with coast-to-coast coverage. This assures that our
members will receive dependable service and access when they
travel.
SLIDE 5 HealthLink: Healthy Growth!
This slide depicts a graph showing HealthLink's membership growth
in millions for December 1997 [1.1 million], December 1998 [1.3
million], December 1999 [1.5 million], and March 2000 [1.7
million].
Presentation for this slide:
- Our HealthLink subsidiary provides network rental and
administrative services. HealthLink does not assume underwriting
risk.
- Our strategy of investing in a non-risk bearing business has
proven very beneficial.
- The network rental business is predictable and it
compliments our insured business. For example, as companies
sometimes opt for self-funded plans, we often transfer the
business to HealthLink and retain the cash flows and the margins.
- Since we acquired HealthLink in 1995, our market share has
more than doubled and they have experienced consistent increased
earnings. In a little over three years, HealthLink membership
has grown by 54%.
- This chart speaks for itself!
SLIDE 6 Sustaining a Strong Financial Performance Trend
This slide is a bar graph depicting revenues in millions for 1997
[$719 million]; 1998 [$767 million], and 1999 [$817 million]; as
well as earnings per share of -$1.29 in 1997, $0.30 in 1998, and
$0.92 in 1999.
Presentation for this slide:
Our decision to buy HealthLink and our strategy to focus on
business fundamentals has clearly paid off. This chart depicts
the turnaround I mentioned.
Since 1997, total revenue has grown 14 percent. Our operating
margins improved dramatically, and we have moved from a net loss
of 1 dollar 29 cents per share on 719 million dollars of revenue
to a net income of 92 cents per share on 817 million dollars of
revenue in 1999.
SLIDE 7 First Quarter EPS Historical Snapshot
This slide compares each quarter's earnings per share for 1997,
1998, 1999, and 1Q 2000 as well as estimated 2Q 2000. 1997: 1Q
$0.33, 2Q [$0.12],
3Q [$1.22], 4Q [$0.28]; 1998: 1Q $0.05, 2Q $0.06, 3Q $0.03; 4Q
$0.16; 1999: 1Q $0.25, 2Q $0.21; 3Q $0.21; 4Q $0.25; 2000: 1Q
$0.39; 2Q estimated $0.40-$0.45
Presentation for this slide:
The financial turnaround continued into the first quarter of
2000. In April, we were pleased to report earnings of 39 cents
per share on a net income of $7.5 million.
As you can see from this slide, this was the eighth consecutive
quarter of improved profitability.
In June, we estimated that earnings for the second quarter would
be between 40-45 cents per share.
SLIDE 8 Sustaining a Strong Financial Performance Trend
This slide is a bar graph which compares percentages of medical
loss ratio and G&A for 1997 [MLR of 84.8%; G&A of 22.7%]; 1998
[MLR of 83.5%; G&A of 20.8%]; 1999 [MLR of 82.2%; G&A of 20.0%];
2000 [MLR of 80.5%; G&A of 19.7%]
Presentation for this slide:
The turnaround at RightCHOICE reflects a renewed focus on
business fundamentals.
In our business, success is often measured by two key ratios:
G&A as a percent of revenue, and
The medical loss ratio
During the past three years, RightCHOICE has delivered consistent
improvements in these key operating ratios.
For example, our G&A ratio has improved from 22.7 percent in 1997
to 19.7% for the first quarter of 2000.
Our medical loss ratio has improved sequentially, from 84.8
percent in 1997 down to 80.5% for the first quarter of 2000.
Improvements in these ratios add to the bottom line.
For example, each one percent improvement in the medical loss
ratio makes an $8 million improvement to the operating income.
SLIDE 9 Sustaining a Strong Margin Performance Trend
This slide is a bar graph depicting Medical Margin PMPM and G&A
PMPM by year: 1997 [MM PMPM of $16.67; G&A PMPM of $7.66]; 1998
[MM PMPM of $19.90; G&A PMPM of $7.12]; 1999 [MM PMPM of $23.68;
G&A PMPM of $6.73]; 1Q 2000 [MM PMPM of $27.20; G&A PMPM of
$6.62].
Presentation for this slide:
The performance of RightCHOICE is impressive when viewed on a per
member per month basis.
In looking at this chart, you'll notice that our medical margin
per member per month for the first quarter of 2000 was 27 dollars
and 20 cents. This is a 15% improvement over 1999. Importantly,
we achieved a 19% improvement in both 1999 and 1998.
The G&A per member per month has consistently declined. It was 6
dollars and 62 cents in the first quarter of 2000, a 2%
improvement over 1999.
These trends are obviously very important because they show that
we are able to manage cost while growing membership.
SLIDE 10 Setting the Standard for Quality
- 1999 BlueCard Service Index = 97 out of 100
- Accreditations: NCQA for BlueCHOICE HMO; AAHCC/URAC for
Alliance/HealthLink PPO
- Disease Management Programs:
- RightSteps(R), Asthma, Congestive Heart Failure
- Oncology
- Diabetes
Presentation for this slide:
In our industry, good service levels separate the winners from
the losers. At RightCHOICE, we believe that enhanced customer
satisfaction and healthy financial performance are compatible
goals.
Progress on the financial front would be "illusionary" and short-
lived without a serious focus on customer service.
Good service contributes to sales and profitability.
Let me give you some examples of the progress we have made toward
improving service to our members.
I've mentioned the importance of our national PPO BlueCard
Program. To do well in that program, Blue plans must achieve
superior levels of customer service . . . and we do.
- In 1999, our service score average was 97 points out of a
possible 100 . . . with several months of perfect scores. This
level of service also saved us money in terms of fees paid to the
Blue Cross Blue Shield Association . . . amounting to 900
thousand dollars in 1999.
- Additionally, we have earned highly sought-after industry
accreditations.
- These verify that we are implementing best practices and
that we have the necessary infrastructure to provide our members
with quality products and services.
- In 1999, we have earned accreditation from the National
Committee for Quality Assurance for our BlueCHOICE HMO.
- Both our Alliance and HealthLink PPOs have been re-
accredited by the American Accreditation Healthcare
Commission/URAC.
- Service to our members is further enhanced through the
provision of special disease management programs which are
designed to help our members and their physicians focus on
certain health conditions.
Our RightSteps(R) Prenatal Program offers help to identify high
risk pregnancies early.
A study conducted to analyze its effectiveness, reflected that
mothers to be and their babies who participated in the
Rightsteps(R) Program reduced by half their likelihood of having
a premature baby, resulting in over 2 million dollars of
savings, and most importantly, resulting in healthier babies
having fewer serious health problems.
Our Take Charge Asthma Program helps provide information and
support to both adults and children with serious respiratory
problems.
We also have developed a program for members affected by
congestive heart failure and are implementing programs this fall
for our members with cancer and diabetes.
SLIDE 11 Forging Key Provider Relationships
- Physician Group Partners Programr
- Physician Consultative Committee
- Reduced precertification requirements
Presentation for this slide:
In our business, good physician relationships are critical.
As a matter of strategy, we continuously focus on opportunities
to improve our relationship with participating physicians.
That's why we developed the Physician Group Partners Program
known as PGPP.
Today, this program covers over 40% of our HMO network. It
provides participating physicians with information on patient
satisfaction, physicians' compliance with standards of care, and
financial information related to their practice patterns.
- Over the past two years, patient satisfaction and compliance
with standards of care have met or exceeded our expectations.
- Importantly, the medical trends for PGPP physicians is 50%
lower than non-PGPP physicians.
- Both RightCHOICE and the physicians in our community are so
pleased with the results that we will be implementing a similar
program in our PPO for specialists this year.
- We also launched the Physician Consultative Committee, an
effort designed to improve communications with the St. Louis
medical community.
- Its objective is to create a stable environment. One that
will best serve the interests of our members.
- In conjunction with the committee, RightCHOICE has reduced
the number of procedures that require pre-certification from 300
to 30 procedures. Currently, the 30 procedures that still
require pre-certification are generally those where experience
suggests, based on recognized standards of care, that members may
be at risk for over- or under-utilization of such procedures.
SLIDE 12 Achieved Settlement Milestones
- Reorganization Agreement signed
- Foundation & new RIT incorporated
- Initial DOI regulatory approval issued
- BCBSA reinstates permanent licenses & issues preliminary
approval of reorganization
- Preliminary filings made with SEC
- Private letter ruling request filed with IRS
- Lending banks issue approval
Presentation for this slide:
My presentation today would be incomplete without an update on
the long anticipated settlement agreement and the upcoming
reorganization of RightCHOICE with Blue Cross and Blue Shield of
Missouri.
- Most of you are probably aware that both RightCHOICE and
Blue Cross have reached agreement with Missouri regulators to
resolve litigation of Blue Cross related to its continued
ownership of RightCHOICE.
- We are excited about this because we believe it is the right
thing to do and because it is in the best interest of our
members, RightCHOICE shareholders and the community.
- This settlement is supported by 90 consumer groups
representing over 1 million Missourians.
In January, we signed a reorganization agreement and have worked
since then on satisfying the conditions to the closing.
We have made substantial progress toward making the
reorganization a reality, namely:
- The Missouri Foundation and New RightCHOICE have been
incorporated.
- A nominating committee to select a board of directors for
the Foundation was formed.
- The Missouri Department of Insurance issued a preliminary
approval for the transaction.
- The Blue Cross and Blue Shield Association has given
preliminary approval of the reorganization and has fully restored
our license.
- We have made a preliminary filing with the SEC.
- We have filed a request for a tax ruling from the IRS and
have obtained a tax opinion from PricewaterhouseCoopers relating
to the tax-free nature of the reorganization, and
- We have obtained requisite approval from our lenders.
While we have resolved many of the issues that remain in
litigation, there remains a pending case regarding the status of
Blue Cross that could affect the timing of the closing. This has
to do with the question of whether Blue Cross is a public benefit
or a mutual benefit company. The issue is currently before the
Cole County Circuit Court.
SLIDE 13 Remaining Items to be Completed
- SEC registration
- Shareholder approval
- A private letter ruling from the IRS
- Legal opinion from all parties
- Final Blue Cross Blue Shield approval
- Final DOI approval
Presentation for this slide:
A number of items remain to be completed before the settlement
can be finalized.
- The registration statement filed with the sec must be
amended and subsequently finalized.
- Our shareholders must approve the settlement.
- Assuming things go as planned, we will hold a special
shareholders meeting sometime before the end of the year.
- We are awaiting a tax ruling from the IRS.
- Legal opinions from all parties need to be delivered.
- Final approval from both the Blue Cross and Blue Shield
Association and the Missouri Department of Insurance will be
required.
Currently, we are pleased with our progress and continue to work
diligently toward closing the reorganization.
We continue to anticipate a closing before the end of this year.
SLIDE 14 Post-Reorganization Structure
The slide depicts the structure of New RightCHOICE as a
combination of The Missouri Foundation for Health and Public
Shareholders. It states that the Missouri Foundation for Health
begins ownership immediately after reorganization and that it
will consist of approximately 80% common stock ownership and
voting interest, subject to a voting trust. The Public
Shareholders are presented as having approximately 20% common
stock ownership and voting interest.
Presentation for this slide:
After the reorganization, here is what the new company will look
like.
Blue Cross and RightCHOICE will be combined.
New RightCHOICE will be a fully for-profit company with stock
traded on the New York Stock Exchange.
The Missouri Foundation for Health will own about 80 percent of
the common stock although that stock will be subject to a voting
trust and divestiture agreement. This will provide for an
orderly disposition of the stock.
The foundation has agreed that at least 95 percent of its shares
will be voted as directed by the New RightCHOICE Board of
Directors on all matters except those related to any future
change of control of New RightCHOICE.
SLIDE 15 Goals: In 2000 [Business Objectives]
- Complete reorganization
- Underwritten enrollment growth of 3-5%
- "Superior" customer satisfaction scores
- "Commendable" NCQA accreditation
Presentation for this slide:
In 2000, we are committed to sustaining the momentum that we
experienced in 1999. In 2000, we expect
- To complete the reorganization;
- To increase our overall underwritten enrollment;
- To continue to build on our reputation for service;
- To achieve "superior" scores for customer service as
measured independently by the Blue Cross and Blue Shield
Association.
- To continue our commitment to quality through striving to
achieve a commendable status from NCQA.
SLIDE 16 2000 and Beyond
- Regional leader with a unique national presence
- Blue Brand and HealthLink ownership positions us well for
the future
- Grow our business by doing what we do best
Presentation for this slide:
In closing, I'd like to reiterate:
- That things are very different in July of 2000.
- RightCHOICE is a strong regional player with a unique
national presence. Our blue brand and our ownership of
HealthLink position us well for the future.
- The financial turnaround at RightCHOICE is real and
sustainable. It is a result of discipline and focus on the
fundamentals.
- Today, we have the talent, dedication and will to maintain
the progress we have enjoyed over the past two years.
- As we look toward the future, we see a compelling
opportunity to grow our business by doing what we do best -
carefully managing the company and serving our members.
Again, we look forward to seeing you later this year when we will
give you additional information about the settlement agreement
and our outlook for the future. Thank you for joining us today.
SLIDE 17 RIGHTCHOICE LOGO SLIDE
2000 Annual Shareholder's Meeting
July 11, 2000
