FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 1, 1997
FOHP, Inc.
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(Exact name of registrant as specified in its charter)
New Jersey 0-25944 22-3314813
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(State or other (Commission (IRS Employer
jurisdiction File Number) Identification
of incorporation) Number)
3501 State Highway 66
Neptune, New Jersey 07753
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (732)918-6700
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
Conversion of Convertible Debentures by FHS - Effective December 1,
1997, Foundation Health Systems, Inc. ("FHS") converted the remaining $50
million of the principal amount of the convertible debenture, dated as of April
30, 1997, issued by FOHP, Inc. (the "Company"), into 4,941,049 shares of the
Company's Common Stock, par value $.01 per share ("Common Stock"). After the
conversion, FHS owned 5,109,158 shares of the 7,195,997 shares of Common Stock
outstanding, which represented 71% of the fully-diluted equity of the Company.
In order to satisfy certain statutory net worth requirements applicable
to First Option Health Plan of New Jersey, Inc. ("FOHP-NJ"), a wholly-owned
subsidiary of the Company which operates a health maintenance organization in
New Jersey, and in accordance with the Amended and Restated Securities Purchase
Agreement dated February 10, 1997, among the Company, FOHP-NJ and FHS, as
amended by the amendment thereto dated as of March 13, 1997 and letter agreement
dated April 30, 1997, FHS elected on December 8, 1997 to infuse $29 million into
the Company in exchange for a convertible debenture (the "New Convertible
Debenture") in form and substance substantially similar to the convertible
debenture issued to FHS on April 30, 1997. Immediately upon receipt of the New
Convertible Debenture, FHS converted approximately $18,952,930 of the principal
amount thereof into 92,804,003 shares of Common Stock. After the partial
conversion of the New Convertible Debenture, FHS owned 97,913,161 shares of the
100,000,000 shares of Common Stock outstanding, which represents approximately
98% of the fully-diluted equity of the Company.
As of year end 1997, FHS also contributed an additional $24 million to
the Company to satisfy certain statutory net worth requirements applicable to
FOHP-NJ in return for additional subordinated debentures.
FHS acquisition of Physicians Health Services, Inc. - See the Press
Release dated January 5, 1998 that is attached hereto as Exhibit 1, and which is
made a part hereof.
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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 hereunto duly authorized.
FOHP, Inc.
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(Registrant)
By: /s/ Donald Parisi
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Donald Parisi
Senior Vice President, Secretary
and General Counsel
Date: January 30, 1998
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Exhibit 1
FHS
Foundation Health Systems, Inc.
FHS Investor Contact: David Olson
(818) 676-6978
[email protected]
FHS Media Contact: Lisa Haines
(916) 631-5971
[email protected]
PHS Contact: Alice Ferreira
(203) 225-8836
[email protected]
FHS COMPLETES ACQUISITION OF PHYSICIANS HEALTH SERVICES FOR
$271 MILLION; CONVERTS INVESTMENT IN FOHP OF NEW JERSEY
Transactions Lead to Formation of 1.2 Million-Member
Northeast Region-FHS Now Third Largest Operator of
Plans in Tri-State Area
LOS ANGELES, January 5, 1998 - Foundation Health Systems, Inc.
(NYSE:FHS) today announced the formation of its Northeast region, comprised of
three health plans with a total of more than one million members in the New York
tri-state area. FHS is now the third largest operator of health plans in the
region.
Formation of the new FHS region was prompted by the completion of the
acquisition of Physicians Health Services, Inc. of Shelton, Conn., for a total
consideration of $271 million, or $28.25 per share in cash. The acquisition was
effective for accounting purposes as of December 31, 1997.
Today, FHS also announced it has converted approximately $70 million of
convertible
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debentures of First Option Health Plan of New Jersey in return for a 98 percent
equity ownership of the plan. Prior to the conversion, FHS purchased $29 million
of convertible debentures which, when added to its original purchase of $52
million of such debentures, brings FHS's total investment in First Option to $81
million.
PHS and First Option join M.D. Health Plan of Connecticut, which FHS
acquired in March 1995, to form the FHS Northeast region.
"We are now positioned to be a significant competitor in the New York
area. PHS's outstanding reputation, along with M.D.'s superior record of member
satisfaction and First Option's rapid growth in New Jersey give us great
confidence as we move forward to forge these three plans into a single operating
unit," said Malik M. Hasan, M.D., chairman and chief executive officer of FHS.
2-2-2-2 FHS COMPLETES ACQUISITION OF
PHYSICIANS HEALTH SERVICES
PHS, the largest of the three FHS plans in the region, has more than 500,000
members. It has members in each of the three states, with approximately 300,000
in Connecticut. Including M.D., FHS plans now have approximately 500,000 members
in Connecticut, the largest membership in the state.
In New Jersey, FOHP has 270,000 members, joining the 70,000 PHS members
in the state. In New York, PHS has 152,000 members, primarily through its
Healthcare Solutions joint marketing agreement with The Guardian Life Insurance
Company of America. Healthcare Solutions currently has more than 200,000 members
in the three states.
"We want to bring to consumers across the tri-state area a single brand
and identity as quickly as possible," Dr. Hasan explained. "We are currently in
the process of selecting a single brand name for the region."
Robert L. Natt, President of PHS, will head the management team for the
Northeast region, Paul M. Philpott will head FHS's sales and marketing
operations in the region. He will remain as PHS's executive vice president and
chief marketing officer.
"Bob Natt and Paul Philpott have done a superb job in restoring PHS's
profitability, while maintaining its tradition of quality. We are confident that
they will have even greater success heading FHS's efforts in the tri-state
area," Dr. Hasan noted.
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Dr. Hasan added that FHS's Northeast region includes two of the
highest-rated health plans in the United States. USA TODAY earlier this year
cited M.D. Health Plan of Connecticut as the health plan with the highest level
of member satisfaction in the nation. In addition, PHS was rated as the top
health plan in the tri-state area in a 1997 survey conducted by Watson Wyatt
Worldwide, a leading health care consulting firm.
FHS intends to focus its Northeast efforts on open access products that
maximize consumer choice of physicians and hospitals. Both M.D. Health Plan and
PHS have successfully marketed open access products for a number of years.
"M.D. has demonstrated consistently that open access products are the
most popular with consumers," Dr. Hasan commented. Since its acquisition by FHS
in March 1995, M.D. has grown from approximately 50,000 members to more than
200,000.
In addition, the FHS open access products will be backed by the most
sophisticated consumer health call center in the industry.
"The FHS call center currently serves more than three million of our
members nationwide, providing direct, unhindered access to the most appropriate
physician or other health care professional depending on our member's health
status," Dr. Hasan noted. All M.D. and FOHP members are currently served by the
FHS Call Center, with all PHS members slated to have access to the call center
by April 1, 1998.
3-3-3-3 FHS COMPLETES ACQUISITION OF PHYSICIANS HEALTH SERVICES
"The call center possesses an extraordinary knowledge base, backed by
the leading medical experts in the country, bringing the latest in medical
research directly to our members," Dr. Hasan noted.
Certain statements contained in this press release are forward-looking
in nature and are believed to be reasonable based on information available to
management at this time. Actual results may vary. For more information, please
refer to the Risk Factors section of the company's various filing with the
Securities and Exchange Commission and the respective documents incorporated by
reference therein.
FHS is the nations' fourth-largest publicly traded managed health care
company. Its mission is to enhance quality of life for its customers by offering
products distinguished by their quality, service and affordability. The
company's HMO, insured PPO and government contracts
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subsidiaries provide health benefits to nearly six million individuals in 18
states through group, individual, Medicare risk, Medicaid and CHAMPUS programs.
FHS subsidiaries also offer managed health care products related to workers'
compensation, PPO networks, behavioral health, dental, vision and prescription
drugs, and offer managed health care product coordination for multi-region
employers and administrative services for medical groups and self-funded
benefits programs.
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