2 Top Officers Replaced in Shake-Up at Maxicare : Some Attribute Removal of Wasserman as CEO and Anderson as President to Pressure From Lenders

Ailing Maxicare Health Plans said Monday that Chairman and Chief Executive Fred W. Wasserman and President Pamela K. Anderson have been replaced by outside director Peter J. Ratican as the company faces a loss of roughly $50 million for the second quarter.

The terse announcement raised speculation that the company’s lenders had forced the management shake-up and could push the nation’s largest publicly held health maintenance organization into bankruptcy court. Maxicare spokeswoman Tobi Nyberg declined to specify who instigated the management change and said the company has “no plans” to file for bankruptcy law protection.

The change also will have no effect on health care for Maxicare’s 2 million members, and no layoffs are planned. “It’s business as usual,” she said.

Wasserman, 50, and Anderson, 41, will remain as consultants to the company for one year. The husband-and-wife team will maintain offices “for a time” at the company’s headquarters near Los Angeles International Airport, Nyberg said. Wasserman and Anderson also have resigned as directors of Maxicare.

Departure of Co-Founder

The ouster marks the culmination of the swift and sure decline of Wasserman, who helped found Maxicare in 1973 and masterminded its rapid expansion, and Anderson, who was generally viewed as the operations tactician.

Maxicare also announced Monday that it has settled its legal disputes with Hawthorne Community Medical Group, a large medical group representing about a third of its members in Southern California.

The sister firms--Hawthorne’s doctors helped found Maxicare in 1973--had been fighting for months. The dispute heated up in February when Maxicare canceled its contract with Hawthorne and the two have been vying for the slightly more than 100,000 patients ever since.

Maxicare launched an ambitious expansion program in the early 1980s as Wasserman strived to build the HMO into a national firm. HMOs, which charge patients a prepaid fee and put doctors on a set monthly budget rather than reimbursing them for specific services, would benefit by going national, Wasserman reasoned. That’s because a national firm could attract large clients looking for a single HMO for their scattered employees.

But the final gulp in the acquisition binge left Maxicare with a roaring case of indigestion. Back-to-back purchases in 1986 of two money-losing competitors, HealthCare USA and HealthAmerica, sent profits plummeting 79% for the year to $4.3 million.

The health-care plans turned out to be in worse shape than Maxicare imagined, and the HMO’s problems were exacerbated by its heavy debt burden, soaring medical costs and increased competition within the industry.

Maxicare went on to report a $60.9-million loss for 1987, which was subsequently restated to $255.9 million; its liabilities exceeded its assets by $29.3 million. For the first quarter of 1988, Maxicare’s loss was $21.3 million.

The company that was once the darling of Wall Street suddenly could do nothing right. Financial World magazine in October called Maxicare one of the nation’s 10 worst-managed companies. Only six months before, the magazine had selected Wasserman as the hospital management industry’s best chief executive.

In June, Standard & Poor’s downgraded some of Maxicare’s debt, saying the company’s “prospects for a return to profitability are dubious.”

Shrinking Company

Maxicare’s stock closed at $1 a share Monday in over-the-counter trading, down 6.25 cents. A year ago, Maxicare’s stock was trading at $12.75.

The Maxicare that Peter Ratican has inherited is shrinking now, selling off money-losing plans in an attempt to return to a profitable core business.

Ratican, 44, previously was chief financial officer and a member of the board of directors and office of the president for De Laurentiis Entertainment Group, which has been having financial problems of its own. For the nine years before he joined DEG in early 1987, Ratican had worked for entertainment conglomerate MCA Inc. in various financial positions.

Ratican has been a member of the Maxicare board since August, 1983, and in the early 1970s served on an advisory committee that helped set up laws governing HMOs in California.

Analysts speculated that Maxicare would continue to sell assets at a rapid pace, perhaps even dismantling the company piece by piece.

“For them to bring in a financial guy from outside the industry doesn’t suggest a long-term game plan,” said Bernard F. McDonagh, vice president of the Piper, Jaffray & Hopwood brokerage in Minneapolis.

“I guess I’m surprised that it didn’t happen sooner,” said Larry Selwitz, vice president of research for Cruttenden & Co., an investment banking firm in Newport Beach. “If you talked to Fred Wasserman, this guy was under a lot of stress.”

Seen as Unlikely

Some analysts doubted that Maxicare’s lenders would force it into bankruptcy proceedings because the company has few tangible assets to pursue other than its health-care plans, which must remain in operation to maintain any value.

“It’s in no one’s interest to force them down that route,” said Kenneth Abramowitz, an analyst with Sanford C. Bernstein & Co.

A spokesman for Bankers Trust Co., Maxicare’s lead bank, did not return a reporter’s telephone call seeking comment.

Maxicare did not elaborate on what contributed to its anticipated loss of about $50 million, but Selwitz guessed that part of it could be traced to losses from the sale of some assets. Maxicare has not yet revealed how much it has received from asset sales this year, but Wall Street analysts have estimated it at between $50 million and $60 million.

Canceled Contract

In the second quarter of 1987, Maxicare recorded an $8-million loss on revenue of $462.5 million.

Maxicare canceled its contract with Hawthorne Community Medical Group in February after a three-member arbitration panel ruled that Maxicare had been underpaying Hawthorne for services to Maxicare members. Hawthorne was awarded a net amount of about $11.7 million.

Hawthorne said the cancellation was in retaliation for its victory. Maxicare said there were several reasons, including the discovery of alleged kickbacks paid to Hawthorne by American Medical International for sending Maxicare patients to AMI hospitals--a charge Hawthorne and AMI have denied.

As part of the settlement of the litigation--which concerned tactics used by both sides to attract patients--Maxicare agreed to turn over to Hawthorne the $11.7-million award. Other terms were not revealed.

MAXICARE’S UPS AND DOWNS

1982: Maxicare buys CNA Health Plans, taking company outside California for first time and launching ambitious expansion program.

- July, 1986: Maxicare agrees to buy HealthCare USA and HealthAmerica Corp. in separate deals, making Maxicare a national firm.

- February, 1988: Maxicare cancels contract with Hawthorne Community Medical Group after a three-member arbitration panel rules that Maxicare had underpaid Hawthorne for services to members, awarding Hawthorne about $11.7 million.

- March: Maxicare announces 1987 loss of $60.8-million.

- April: Maxicare restates 1987 results to show $255.9-million loss, resulting in negative net worth of $29.3 million. Renegotiates $175-million bank debt.

- June: Standard & Poor’s Corp. downgrades some debt, saying “prospects for a return to profitability are dubious.”

- August: Maxicare Chairman Fred W. Wasserman and President Pamela K. Anderson are replaced by Director Peter J. Ratican. Company says it will report a roughly $50-million loss for second quarter.