Maxicare Trims Jobs at Recently Acquired HMOs : L.A.-Based Firm Lays Off 20% of HealthCare Staff After $67-Million Buy-Out
Just a week after completing its $67-million acquisition of ailing HealthCare USA, Los Angeles-based Maxicare Health Plans Inc. said Wednesday that it has laid off more than 20% of HealthCare’s employees.
The layoff of 192 clerical workers employed by Orange-based HealthCare’s General Med unit and its Southfield, Mich.-based Independence Health Plan unit--both health maintenance organizations--is expected to save about $6 million a year.
“Every person is worth about $32,000, including benefits,” said Fred Wasserman, Maxicare’s chairman and chief executive officer.
IHP, the hardest-hit HealthCare unit, was cut by more than half to 125 employees from 257, said Clive Hallett, a Maxicare spokesman.
Because the giant health maintenance organization is extensively computerized, there is no need for the large numbers of employees at General Med and IHP to keep track of members’ claims by hand, Hallett said.
An additional 170 jobs at General Med are to be phased out, but the employees will be offered positions with Maxicare.
“We anticipate that a good number of them will want to work with us,” Hallett said.
Maxicare--which is the nation’s largest publicly held HMO--quietly began negotiating a friendly takeover of HealthCare in early 1985. Although its informal $11-a-share offer in February was rebuffed, the two companies eventually settled on a $13.50-per-share buy-out that was approved last week by HealthCare’s shareholders.
As part of the merger agreement, Harlan Loomas, HealthCare’s chairman and chief executive, received more than $3 million for his stake in the company and from the acceleration of stock options he held. Additionally, Loomas will receive $75,000 a year as a consultant and will be paid bonuses totaling $1 million through 1992 as part of his agreement not to compete against Maxicare.
Ernest L. Park, who joined HealthCare in April as president and chief operating officer, received more than $1 million under terms of the merger, according to documents filed with the Securities and Exchange Commission. HealthCare’s nine directors also received bonuses ranging from $10,000 to $25,000 apiece, the documents state.
HealthCare’s HMOs, particularly General Med, were profitable on an operating basis but suffered from high administrative costs, said Larry Selwitz, a health care analyst with the Los Angeles investment firm of Bateman Eichler, Hill Richards.
“There was too much fat at the corporate office,” said Selwitz, who added that the layoffs were inevitable because of the duplication of many jobs that resulted from the merger. “Obviously, if you have three companies, you don’t need three corporate communications departments.”
