SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
(X) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PHYSICIANS HEALTHCARE PLAN OF NEW JERSEY
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
HMO Blue Welcomes PHPNJ
HMO Blue
<PAGE>
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Physician HealthCare Plan of New Jersey
REASONS FOR SEEKING A STRATEGIC PARTNER
o Not feasible for the Company to gain a viable position in the
marketplace given its capital base and infrastructure.
o Not feasible to raise the significant amounts of capital required to
enable the Company to compete effectively with the major industry
leaders operating in the state.
o In March 1997, the Board authorized a Due Diligence Committee to work
with independent advisors and counsel to evaluate strategic proposals
and made a recommendation to the Board.
o Four diverse proposals were received
o Five additional parties requested information but did not
submit an offer
o One additional party submitted an unsolicited, non-binding
proposal after the HMO Blue proposal was accepted.
Slide 1
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<PAGE>
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Physician HealthCare Plan of New Jersey
SUMMARY OF THE PROPOSED TRANSACTION
o HMO Blue to purchase PHPNJ's group contracts and provider agreements
for a cash purchase price equal to the greater of $1,000,000 or $300
per HMO member at closing (For example, based upon 6,474 members as of
9/30/97, the purchase price would be $1,942,200).
o PHPNJ remains liable for a period of 12 months following closing for
any obligations arising under the contracts before closing (IBNR).
o Thereafter PHPNJ will surrender its certificate of authority.
o For a period of five years following surrender of the COA, the Company
and its affiliates will not use the PHPNJ trade name or service mark.
Slide 2
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<PAGE>
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Physician HealthCare Plan of New Jersey
SUMMARY OF THE PROPOSED TRANSACTION (CONT'D)
o PHPNJ physicians will gain significant representation on various
committees and boards of the purchaser:
o Two physicians to be appointed to BCBSNJ's Medical Policy
Committee
o One physician to be appointed to BCBSNJ's Professional
Advisory Committee
o Two physicians to be appointed to HMO Blue's Quality
Improvement Committee
o Two physicians to be appointed to Quality Improvement
subcommittees on Clinical Issues, Credentialing and
Governance/Appeals
o Two physicians to be appointed to HMO Blue's Panel of
Independent Medical Examiners for each specialty ([140]
appointees)
o PHPNJ will present a slate of three candidates from which
one will be appointed to the Board of HMO Blue's parent
o As of July 1, 1997, HMO Blue provides administrative and management
services to PHPNJ at a rate of $15.00 PMPM providing significant
reduction of management fee expense to PHPNJ, thereby preserving cash.
Slide 3
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<PAGE>
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Physician HealthCare Plan of New Jersey
CONCLUSION
o Proposal accepted by PHPNJ Board and being submitted to shareholders
for vote addresses the following objectives initially established by
PHPNJ's due diligence committee:
o Continuing role of physicians in direction of care
o Preserving value for shareholders to the extent possible
o Continuity of care for existing subscribers
o Partner with experience and sizeable resources
o Process
o Proxy materials mailed to shareholders on November 10, 1997
o Shareholder meeting scheduled for December 9, 1997 for
approval of proposal
o Assuming approval by shareholders and state regulators,
closing anticipated by year-end
Slide 4
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<PAGE>
INTRODUCTION TO HMO BLUE
o BCBSNJ is the Leading Health Insurer in the State of New Jersey
o Strong Capital Base
o Significant HMO Enrollment
o Diversified Product Line
o Marketing Resources
o Strong Contracting Experience and Market Clout
o Reaching Out to Physicians for Input and Participation
Slide 5
<PAGE>
HMO BLUE'S NEW LEADERSHIP
o Christy Bell, President and COO
o Donna Celestini, Executive Vice President
o Dr. Lawrence Baker, Chief Medical Officer
Slide 6
<PAGE>
HMO BLUE MISSION STATEMENT
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Improve the health status of
members by providing access to
quality care and quality service
in a cost effective manner
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Slide 7
<PAGE>
HMO BLUE VISION STATEMENT
To be the Managed Care Organization of Choice
To be the Choice of:
Members
Providers
Payers
Employees
Slide 8
<PAGE>
HOW WILL WE ACHIEVE
OUR VISION?
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By listening and responding to
our customers, by providing
quality service, and through
strong provider "partnerships"
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Slide 9
<PAGE>
OUR GOAL
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Physician directed,
market driven healthcare
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Slide 10
<PAGE>
GROWTH OF MANAGED CARE
BCBSNJ
[Graph appears here--see values below]
1994 1997
---- ----
PPO 239,972 311,657
POS 76,300 254,607
HMO 121,558 255,372
TOTAL 437,830 821,636
Slide 11
<PAGE>
TOTAL MANAGED CARE ENROLLMENT
IN NEW JERSEY AS OF 2nd QTR. 1997
[Pie Chart appears here--See values below]
CIGNA 3.0%
PruCare* 4.1%
Ameri Health 4.2%
Aetna 4.4%
First Option 7.7%
HIP 7.8%
Other 8.5%
Oxford 9.8%
HMO Blue 21.8%
US Healthcare 28.7%
Total Enrollment 2,523,483
*Estimated
Slide 12
<PAGE>
MEDICAID HMO ENROLLMENT
AS OF AUGUST 1997
[Pie Chart appears here--See values below]
Liberty 3.7%
First Option 5.4%
Other 5.9%
AmeriHealth 6.1%
HIP 6.3%
Mgd Hlth Svc 8.4%
AmPreferred 9.7%
Oxford 12.3%
US Healthcare 16.1%
MHPNJ 26.1%
Total Medicaid Enrollment 383,193
Slide 13
<PAGE>
MEDICARE HMO ENROLLMENT
AS OF AUGUST 1997
[Pie Chart appears here--See values below]
Other 0.8%
AmeriHealth 7.1%
Aetna 8.4%
HIP 8.4%
First Option 8.9%
HMO Blue 10.3%
Oxford 14.5%
US Healthcare 41.6%
Total Medicare Enrollment 133,681
Slide 14
<PAGE>
THE NEW DIRECTION
o Physician "Partnerships"
o Hassle-free Managed Care
o World Class Customer Service
o State of the Art Utilization
Management
o Disease Management
o Improving Health Status of our
Members
o Network Strategy
Slide 15
<PAGE>
DEPARTMENT OF
MEDICAL AFFAIRS
o Enhanced Medical Leadership
o "Doc to Doc" Communications
o Regional Presence
o Re-engineered Utilization
Management
Slide 16
<PAGE>
PHYSICIAN-RELATED INITIATIVES
o Provider Relations Enhancements
o Fee for Service vs. Capitation
Changes
o Increase in Billables under
Capitated Arrangements
o Provider/Physician Data
o Physician Risk Sharing
o Enhanced Physician Incentive
Programs
Slide 17
<PAGE>
PHPNJ PARTICIPATION
o Medigroup, Inc. Board of Directors
(HMO Blue)
o Professional Advisory Committee
(BCBSNJ)
o Medical Policy Committee (BCBSNJ)
o HMO Blue Subcommittees
-- Quality Improvement
-- Clinical Issues
-- Credentialing
o IME Panels
Slide 18
<PAGE>
MANAGED CARE SUBCOMMITTEE
ORGANIZATIONAL STRUCTURE
----------------------
| MEDIGROUP, INC. |
| BOARD OF DIRECTORS |
----------------------
|
|
----------------------
| MEDIGROUP OF |
| NEW JERSEY, INC. |
| BOARD OF DIRECTORS |
----------------------
|
|
----------------------
| QUALITY COMMITTEE |
| OF THE MEDIGROUP OF|
| NEW JERSEY, INC. |
| BOARD |
----------------------
|
|
----------------------
| QUALITY IMPROVEMENT|
| COMMITTEE |
----------------------
|
--------------------- | -----------------------
| CREDENTIALS | | | CLINICAL ISSUES |
| SUBCOMMITTEE |-------| SUBCOMMITTEE |
--------------------- | -----------------------
|
|
--------------------- | -----------------------
| DELEGATE OVERSIGHT| | | SERVICES QUALITY |
| SUBCOMMITTEE |-------| SUBCOMMITTEE |
--------------------- | -----------------------
|
|
--------------------- | -----------------------
| RISK MANAGEMENT | | | UTILIZATION MGMT. |
| SUBCOMMITTEE |-------| SUBCOMMITTEE |
--------------------- | -----------------------
|
|
--------------------- |
| APPEALS | |
| COMMITTEE |----
---------------------
Slide 19
<PAGE>
PHPNJ PRESENTATION SCRIPT OUTLINE
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PLEASE ENSURE THAT ANSWERS TO QUESTIONS INCLUDE REFERRING THE STOCKHOLDER TO THE
PROXY STATEMENT.
IF QUESTIONS ARE ASKED THAT ARE NOT ADDRESSED BELOW, PLEASE REFER THE
STOCKHOLDER TO THE PROXY STATEMENT.
SLIDE NO. 1 - REASONS FOR SEEKING A STRATEGIC PARTNER
A representative of PHPNJ will describe the reasons for seeking a strategic
partner, described on the slide.
QUESTIONS AND ANSWERS ABOUT THE SLIDE:
Q: What resulted in the Company being unable to gain a viable position in
the marketplace?
A: As described in the proxy statement which you have received, the
primary barrier to becoming a successful 100% physician owned and guided managed
health care company was the lack of capital. Because the financial resources of
the Company were, and remain, extremely limited in comparison to the much larger
HMO's in the Company's marketplace, the Board of Directors determined that the
Company could not afford to engage in a premium war with larger organizations in
order to gain market share and contracts with large groups of members. As a
result, the Company's access to the larger employer market, which represents a
more stable insurable population, was severely restricted.
The changing market conditions which negatively impacted the Company's
operations resulted from the dominance, by 1996, of a very few managed care
organizations in New Jersey. The large traditional insurance companies entered
the HMO business, often through mergers with regional HMOs. These large managed
care organizations were financially able to launch expensive, aggressive
marketing campaigns for their HMO products, and to price the products more
attractively than the smaller HMOs.
Also, the Company's provider network had a heavy concentration of
specialists, rather than primary care physicians ("PCPs"). In order to enhance
competitive position, an HMO must be able to offer a broad PCP network to
conveniently serve its target market.
Q: Why was it not feasible for the Company to raise more capital?
A: The very large amount of money that would have been needed to compete
with major industry leaders could not be obtained readily from physicians in the
state, and no major institutional investor would be interested in funding a
small, struggling HMO.
Q: What is the financial condition of the Company currently?
A: Through the end of September, the end of the Company's third quarter,
the Company had a year-to-date loss of $(5,306,236). The Company still exceeds
its statutory minimum net worth
<PAGE>
requirement of $1,000,000, by over $2,800,000. We have taken steps, mentioned in
the proxy statement, to reduce costs, such as entering into the separate
management agreement with HMO Blue and terminating the management agreement with
MGM. However, we have not been able to meet membership growth targets for the
reasons described earlier, and we believe that our members have been utilizing a
higher number or intensity of medical services than we anticipated when devising
our premium structure. This has had a negative impact on our financial
condition.
Q: Why didn't I know about this before?
A: Dr. Billotti has communicated with all stockholders from time to time
and, in [April and June], sent letters to all stockholders regarding PHPNJ's
competitive pressures and the plans for seeking strategic proposals.
Q: What were the terms of the other three proposals that PHPNJ received?
A: As described in the proxy statement, the Due Diligence Committee
reviewed proposals from and attended presentations by:
(1) National Health Plan Plus, Inc., a development stage HMO, which proposed (a)
to acquire 100% of PHPNJ's stock pursuant to a share exchange for an
undetermined valuation, (b) to allow a stockholder to elect to receive a cash
payment per share equal to book value plus 20% at the time of the closing and
(c) to allow a stockholder to put the shares back to the company 9-15 months
after closing at original cost;
(2) NextStage Healthcare, Inc., a healthcare management services company, which
proposed assuming the management of the Company without making a capital
infusion; and
(3) Atlantic Health System, a group of hospitals, and New Jersey Health
Resources, Inc., a practice management company, which proposed to acquire up to
a 50% interest in the Company for a combination of cash and notes based upon an
undetermined valuation and to leave in place PHPNJ's management contract with
MGM.
Q: How do those proposals differ from the proposed transaction with HMO
Blue?
A: The share exchange proposed by National Health Plan Plus, Inc. (NHPP)
would have resulted in PHPNJ stockholders owning 24% of the merged entity if all
stockholders elected to exchange their shares. However, this development stage
company could not provide sufficient financial information, primarily because of
its limited operating history, to permit PHPNJ's Board of Directors to analyze
the valuation of the proposed share exchange transaction. However, the proposal
would have provided the PHPNJ stockholders (assuming all exchanged their shares)
with only a 24% ownership interest in an entity whose only operations would be
those of PHPNJ. The Due Diligence Committee believed that this placed too high a
value on the value added, if any, by NHPP. In addition, the Due Diligence
Committee was unable to assure itself that this candidate would have funds
available to
<PAGE>
provide the book value plus 20% cash payment to any PHPNJ stockholder who
elected such payment in lieu of a share exchange or to honor the put option. At
the time the Due Diligence Committee received this proposal, the book value of a
share of PHPNJ common stock plus 20% was approximately $2,220. The actual value
that would have been paid to a stockholder who elected the payment option would
have been based on the book value per share as of the date of closing, plus 20%.
If such proposal had been approved by PHPNJ, and if the transaction closed as of
June 30, 1997, for example, the book value per share payable to a PHPNJ
stockholder would have been approximately $1,140. This proposal could possibly
have resulted in the payment to PHPNJ stockholders of an amount greater than the
amount, if any, that they will receive upon the liquidation of PHPNJ after
consummation of the proposed transaction with HMO Blue. However, in addition to
uncertainty regarding certain financial aspects of this transaction, the Due
Diligence Committee had significant concerns about the prior performance and
practices of, and previous legal proceedings involving, certain members of the
management of this candidate. The Due Diligence Committee believed that the
possibility that stockholders could receive a larger payment was outweighed by
the financial and other risks perceived by the Due Diligence Committee.
The NextStage proposal did not involve any capital infusion into the
Company or any payment which might enhance the amount of funds distributable to
stockholders. The proposal suggested that the Company could realize a cost
savings of approximately $100,000 - $150,000 per month as a result of lower
management fees, but no cash was offered to apply against liabilities. NextStage
did offer to arrange a $1,500,000 line of credit for PHPNJ, but the Due
Diligence Committee did not believe PHPNJ should consider a transaction
requiring debt service at this time, given PHPNJ's financial condition. The Due
Diligence Committee viewed favorably the facts that this candidate has prior HMO
marketing experience and relationships with insurance brokers, that PHPNJ
shareholders would not cede control of their company by selling their shares,
and that this candidate offered opportunities for a continued high level of
physician involvement in corporate governance. On the other hand, the Due
Diligence Committee was concerned that this proposed manager did not have its
own management information systems, and that a management arrangement, without a
cash infusion, could not improve substantially the Company's financial position,
nor allow the Company to fund membership growth. The Due Diligence Committee
believed that such an arrangement was not as advantageous as the HMO Blue
proposal which offered both a reduction in management fees and a cash payment,
in addition to significant HMO industry experience. A reduction in management
fees alone would not have permitted the Company to pursue a course other than
liquidation, and the amounts, if any, distributed to stockholders upon
liquidation would not have been augmented by a cash infusion, as is the case
with HMO Blue proposal.
The Due Diligence Committee believed that the investment proposed by
Atlantic Health System and New Jersey Health Resources, Inc. was not in the best
interest of the stockholders because the candidates were unable to be specific
about the value they would ascribe to PHPNJ, because the proposed investment
(whatever the amount) involved notes rather than a permanent cash infusion, and
because the candidate was unable to provide a definitive business plan for the
Company. In addition, the Due Diligence Committee was concerned that the
candidates lacked HMO administrative resources, making it less likely that the
candidates could implement a successful
<PAGE>
strategy to reduce losses, particularly if the capital infusion made by the
candidates was low. In contrast, BCBSNJ presented the Due Diligence Committee
with a proposal for the way it would handle management of the Company's
business, prior to assumption of its operations, in addition to making a
definable cash payment to purchase the Company's operations.
Q: What were the terms of the unsolicited, non-binding proposal that was
submitted after the HMO Blue proposal was accepted?/Was the unsolicited proposal
from QualCare?/ I received a letter from them stating that PHPNJ would be
providing materials indicating why a deal with QualCare did not take place. What
are those materials?
A: As described in the proxy statement, on August 20, 1997, the Company
received an unsolicited acquisition proposal from QualCare, Inc., a preferred
provider organization located in New Jersey. The proposal was subject to
QualCare conducting a due diligence investigation of the financial, operational,
personnel, legal and regulatory records of PHPNJ. QualCare proposed a merger
whereby each share of PHPNJ common stock would be exchanged for 10.5 shares of
QualCare common stock, resulting in PHPNJ shareholders collectively owning
approximately 13% of QualCare. Alternatively, QualCare proposed a reverse merger
whereby QualCare shareholders would own approximately 86% of PHPNJ. QualCare
deemed each share of PHPNJ to be worth $693 for purposes of its proposal,
although no specific support for this valuation was included with QualCare's
proposal. The Board noted, however, that QualCare proposed to reduce the
exchange ratio on a dollar for dollar basis to the extent that PHPNJ's liquid
assets at closing were not sufficient to cover all liabilities including claims
incurred but not reported. Although the Board recognized that the equity
consideration offered by QualCare had the potential to appreciate in value over
time, the Board also recognized that such appreciation is speculative and could
not be quantified at this time, and that, currently, there is not a public
market for QualCare's securities. QualCare also proposed to provide management
services for PHPNJ pending the closing of the merger. After consideration of the
proposal at a meeting on September 11, 1997, PHPNJ's Board of Directors
determined that further pursuing a transaction with QualCare would not be in the
best interest of PHPNJ and its stockholders. This determination was based, in
part, on the illiquidity of the consideration offered by QualCare, concerns
about QualCare's lack of experience in HMO management, and, significantly, the
likely adverse consequences to PHPNJ and its shareholders if PHPNJ abandoned the
proposed transaction with HMO Blue and attempted to negotiate and close a
transaction with QualCare. Such consequences would include the (i) termination
of the Management Services Agreement with HMO Blue and the increased costs
associated with the second management transition in one year, (ii) the increased
transaction costs for PHPNJ associated with negotiating a second substantial
transaction, and (iii) the possibility that PHPNJ would not have the capital to
cover operating losses during the period of time that would be required to
negotiate, obtain regulatory approval for, and close a transaction with
QualCare.
The proxy statement is the document that QualCare must have been
referring to, and the reasons which I just stated for not pursuing a transaction
with QualCare are included in the proxy statement.
Q: Why HMO Blue/BCBSNJ? What is their plan?
<PAGE>
A: You will next hear from HMO Blue representatives who will talk about
HMO Blue's mission and plans.
As described in the proxy statement, the Due Diligence Committee
believed that HMO Blue's proposal represented the best combination of financial
strength, opportunity for continued physician involvement in managed care, and
continued service to members and providers because of HMO Blue's experience in
marketing and operating an HMO in the New Jersey market. The Due Diligence
Committee viewed BCBSNJ as the leading health insurer in the State of New
Jersey, with significant HMO enrollment, a diversified product line and strong
contracting experience. In addition, the Due Diligence Committee concluded that
a sale of the Company's contracts for a cash payment of no less than $1,000,000
would provide additional cash for the Company's use in satisfying pre-closing
claims liabilities. The Due Diligence Committee also concluded that the
engagement of HMO Blue to provide management services to the Company at a fee
lower than that paid by the Company to its former manager would permit the
Company to reduce the magnitude of financial losses currently being incurred by
the Company and thus provide more cash available to satisfy pre-closing
liabilities. The Due Diligence Committee believed that the reduction of
financial losses also could preserve more cash for potential distribution to
stockholders. The Due Diligence Committee gave strong consideration to the fact
that representatives from PHPNJ's physician network would have up to 140 seats
on HMO Blue's specialty panels, and a seat on other Due Diligence Committees and
the board of directors of HMO Blue's parent company. In addition, because the
Board of Directors believed that the Company could no longer maintain a viable
position in its marketplace for the reasons described above, the Due Diligence
Committee believed that the sale of the Company's operations was a strategic
option in the best interest of the stockholders, rather than another type of
strategic alliance which might provide lower management costs but no capital, or
a limited amount of capital without substantive strategic expertise, or another
less desirable alternative.
SLIDES NO. 2 AND NO. 3 - SUMMARY OF THE PROPOSED TRANSACTION
A representative of PHPNJ will describe the elements of the transaction between
PHPNJ and HMO Blue, as outlined on the slide.
QUESTIONS AND ANSWERS ABOUT THE SLIDE:
Q: How much is PHPNJ saving by using HMO Blue to provide management
services rather than MGM?
A: As stated in the proxy statement, the Company provided its financial
advisors, Shattuck Hammond Partners, with data showing that the costs incurred
by PHPNJ for the equivalent administration and management services to be
provided by HMO Blue were $27.16 PMPM on an assumed member base of 6,000 (which
is in line with average levels during May and June 1997).
Based on assumed PHPNJ membership levels of 6,000, Shattuck Hammond
calculated the monthly economic benefit to PHPNJ of the Management Fee
Accommodation to be $72,960
<PAGE>
($27.16-$15.00 x 6,000 members = $72,960). Shattuck Hammond assumed monthly
savings of $70,000 multiplied by a range of 3-6 months during which the
Management Services Agreement is expected to be in effect prior to closing.
Hence, the range of economic benefit to PHPNJ of the Management Fee
Accommodation is estimated at $210,000-420,000.
Q: How will PHPNJ physicians be appointed to HMO Blue panels and related
committees?
A: Representatives will be identified by PHPNJ's board of directors with
input from the PHPNJ physicians. Please let us know if you would be interested
in serving.
SLIDE NO. 4 - CONCLUSION
A representative of PHPNJ will conclude this portion of the presentation by
outlining the process to consummate the transaction.
QUESTIONS AND ANSWERS ABOUT THE SLIDE:
Q: How much money will I get back from my initial $5,000 investment? When
will funds be distributed to stockholders?
A: As described in the proxy statement, after the surrender of the
Certificate of Authority, it is expected that the Company will be dissolved and
assets remaining, if any, after satisfaction of the Company's liabilities will
be distributed to stockholders. AMOUNTS DISTRIBUTED IN RESPECT OF EACH
OUTSTANDING SHARE OF THE COMPANY'S COMMON STOCK ARE EXPECTED TO BE SUBSTANTIALLY
LOWER THAN THE PURCHASE PRICE PAID BY A STOCKHOLDER FOR SUCH SHARE. HOWEVER, THE
COMPANY IS UNABLE TO ESTIMATE AT THIS TIME WHAT AMOUNTS, IF ANY, WOULD BE
AVAILABLE FOR DISTRIBUTION. Dissolution would require additional stockholder
action, and the affirmative vote of a majority of the votes cast by holders of
shares entitled to vote thereon would be required to approve the dissolution.
Q: What is the percentage stockholder vote required to approve the
transaction with HMO Blue?
A: A quorum of 10% of the total number of stockholders must vote by proxy
or in person in order for the stockholders' meeting to be valid. A majority of
the votes by proxy or in person, assuming we have a quorum, is required for
approval of the transaction.
Q: When is the stockholders' meeting? Where will it be held?
A: The meeting will be on Tuesday, December 11, 1997 at 6:30, at the Hyatt
Regency in New Brunswick. The address is in the proxy materials.
Q: Do I have to attend the stockholders' meeting to vote?
<PAGE>
A: No. You can vote by proxy.
Q: How do I vote by proxy? When do I have to return the proxy? To whom
do I return it?
A: You vote by proxy by marking the proxy form that was sent to you with
the proxy materials, signing it, and returning it in the stamped, addressed
envelope that was included in you package. YOU MUST RETURN THE PROXY SO THAT IT
IS RECEIVED BEFORE THE STOCKHOLDERS MEETING. THEREFORE, YOU SHOULD MAKE SURE IT
IS RETURNED BY DECEMBER 8, 1997. If you have lost the return envelope, or any
portion of the proxy materials, please call Karen Brayer at 800-422-5611 to
obtain a duplicate copy.
Q: What if I forget to mark my vote on my proxy?
A: Proxies which are signed by not marked will be voted for the
transaction.
Q: What if I forget to sign my proxy?
A: It will be returned to you for signature.
Q: What will happen if the transaction is not approved?
A: It is unlikely that PHPNJ will be able to stay in business, and the
company will likely be dissolved as soon as applicable approvals can be
obtained. In such an event, it is impossible to estimate whether stockholders
would receive any distribution but they most certainly would not receive a total
recovery of their initial investment.
<PAGE>
SLIDE 5
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o PHPNJ representative will present reasons for considering BCBSNJ/HMO Blue,
a major health insurer in New Jersey, as an entity to align with. The
reasons are bulleted on the slide.
SLIDE 6
- -------
o PHPNJ representative will introduce HMO Blue Leadership (if present):
Christy Bell o Senior Vice President, Health Industry Services, BCBSNJ
o President, HMO Blue - responsible for Provider
Contracting, Public Relations, Medical Management and
HMO Subsidiaries
o Twenty-five years managed care experience - previously
serving as Executive Director of Humana Medical Plan in
South Florida and as Executive Director for Fallon
Community Health Plan in Massachusetts.
Donna Celestini o Vice President of Managed Care, BCBSNJ
o Executive Vice President, HMO Blue
o Twenty plus years BCBSNJ experience in Financial,
Contracting, and Underwriting functions. Five years
experience in HMO Blue, with accountability for
Administration, Special Programs, Integrated Delivery,
Finance and Operations.
Dr. Lawrence Baker o Chief Medical Officer, HMO Blue
o Twenty years managed care experience - previously
serving as Chief Medical Officer and Senior Vice
President for Merck-Medco Managed Care and as Senior
Vice President for Medical Affairs at Tufts Associated
Health Plans in Massachusetts.
<PAGE>
SLIDES 7, 8, 9, and 10
- ----------------------
o HMO Blue Representatives will review HMO Blue's Mission, Vision and Goals
o Describe How we Get Input from Members and Providers
-- Committees, surveys, forums, telephone and written communications
o Describe How we Achieve our Goals
-- TQM principles
-- Provider "partnerships"
o Describe What "Physician Directed, Market Driven Healthcare" Means
-- We have to provide what our customers want in a way that allows
physicians to provide healthcare services without unnecessary
interventions
SLIDES 11, 12, 13 and 14
- ------------------------
o HMO Blue Representatives will describe BCBSNJ's managed care growth and
marketshare
SLIDE 15
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o HMO Blue Representatives will describe current HMO Blue initiatives
o Physician "Partnerships"
-- Innovative changes in incentive programs and risk-sharing opportunities
-- More provider input into development of policies and procedures
o Hassle-Free Managed Care
-- Direct access to OB/GYN's
-- Improved referral process
-- Specialists as PCP's for chronic cases
-- 24 hour medical director availability
-- Reduced pre-authorization requirements
-- 24 hour nurse line
-- Expanded network
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o World Class Customer Service
-- Extended telephone service hours
-- Efficient claims processing
-- Streamlined processing of emergency room claims
-- Provider directory on-line
-- Service quality initiatives
o State of the Art Utilization Management
-- Regional presence
-- Collaborative medical management
o Disease Management
-- Current status
o Improving Health Status of our Members
-- HEDIS results
-- New programs
o HMO Blue representative will describe the plans for development of new
products and network strategies.
SLIDE 16
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o HMO Blue Representative will review Department of Medical Affairs
o Enhanced Medical Leadership
-- Regional medical directors
-- Current staff of medical directors
o "Doc to Doc" Communication
-- Availability of medical leadership to participating providers
o Regional Presence
-- Plans for expansion
o Re-engineered Utilization Management
-- Hospital relationships
-- Streamlined procedures
-- Changes in contracting
-- One face to providers
-- On-site concurrent review nurses
<PAGE>
SLIDE 17
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o HMO Blue Representative will describe Physician-Related Initiatives.
o Provider Relations Enhancements
-- Regional presence
-- More reps in field
o Fee for Service vs. Capitation Changes
-- Fee for service up to panel sizes of 250
o Increase in Billables under Capitated Arrangements
-- HMO Blue will allow physicians under capitation to bill for services
that traditionally have been covered under capitation
o Provider Data
-- HMO Blue will provide individual provider reports that will show their
results vs. their peers
o Provider Risk Sharing
-- HMO Blue will describe plans for risk sharing arrangements with
provider groups
o Enhanced Provider Incentive Programs
-- HMO Blue will describe the changes planned for 1998 in its current
physician incentive programs
SLIDE 18
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o HMO Blue Representative will describe the PHPNJ participation on
BCBSNJ/HMO Blue committees and panels which are responsible for
development of programs, policies and procedures
SLIDE 19
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o HMO Blue Representative will describe HMO Blue's committees structure and
committee responsibility
