Shareholders OK Board at Western Health Plans

Executives at Western Health Plans, who have been cutting operating costs to halt a string of quarterly losses, weathered a stormy annual meeting Monday that did not include the proxy battle some company observers had predicted.

The management-backed slate for board of directors was overwhelmingly approved during the meeting.

However, Western shareholders defeated a management proposal that would have limited directors from liability from monetary damages stemming from breach of duty.

Several of the 400 shareholders--mostly doctors who provide health care for Western--complained about cost-cutting procedures that have failed to reduce the flow of red ink.

The large turnout was a “vote of no-confidence” in the board, one doctor in attendance said. “Something must not be right.”

“We’re going to have to find a way to make ourselves competitive,” responded Allan Goodman, chairman of the San Diego-based health maintenance organization.

Goodman told shareholders the company is positioned to begin showing profits during the third quarter, which ends March 31.

However, Western on Monday reported a $2.2-million net loss and $33 million in revenue for the second quarter ended Dec. 31. The company reported $400,000 in net income and $24.3 million in revenue for the previous second quarter.

Western benefited from increased revenue and decreased administration costs during the second quarter, but those gains were countered by a 10% rise in health-care costs, Goodman said.

“Medical costs increased 4% to $29.01, and hospital costs increased 11% to $30.65 per HMO employee,” Goodman said.

Western expects those increased hospital and medical costs to be balanced by a premium increase that took effect Jan. 1, Goodman said.

During recent quarters, Western has been reducing administrative and marketing expenses by cutting employees and programs. The company laid off 40 members of its administrative staff in December and imposed a hiring freeze that resulted in a further 5% staff reduction.

Goodman said the cost-cutting gives Western “improved cost control, improved administrative functions and improved products.”