Founder of FHP International Resigns
A frustrated Dr. Robert Gumbiner, watching his innovative structure being dismantled at FHP International Corp., resigned Thursday from the board of the Fountain Valley health maintenance organization.
Gumbiner, who only a week ago had been bumped up to chairman emeritus from chairman, said in a prepared statement that the “recent direction taken by the board and management lead me to question the wisdom of the company’s long-term strategy.”
In an interview, Gumbiner, 72, who founded the HMO in 1961 and built it into one of the nation’s largest managed care companies, said it was “too frustrating not being listened to” and that he decided to move “forward to bigger and better things.”
“I’m not going to frustrate myself,” Gumbiner said. He said he plans to stay busy with art and museum projects and with the philanthropic FHP Foundation, a separately funded nonprofit organization he chairs.
Last week, the board named director Jack R. Anderson, 70, chairman, succeeding Gumbiner, in a move to reinvigorate the stagnant HMO and boost its lackluster stock performance.
Anderson, former chairman of TakeCare Inc., a Northern California HMO that FHP acquired last year, is expected to push for cost cuts and the sale of certain FHP operations, industry analysts said.
Some analysts believe Anderson may even seek a buyer for the entire company. But Westcott W. Price III, FHP president and chief executive, said in a letter that the company is “here for the long run” and is not for sale.
Analysts have said that, among other problems, FHP is faced with high operating costs, partly because it runs and staffs its own hospitals and clinics, an idea Gumbiner pioneered. The company could save money by contracting with independent physicians and hospitals for those services, they said.
Gumbiner said FHP was about 50% staff-run and 50% contract-operated before the TakeCare acquisition. Now, he said, staff operations account for only 30% of the work. FHP put the figure at 20%.
“I’m of the opinion that the only way to grow and control costs and quality is to own everything,” Gumbiner said. “You need a vertically integrated health care system. You have to own the hospitals, pharmacies and so forth to keep quality up.”
FHP has not sold former TakeCare members on the idea of using strictly FHP doctors and facilities and has been losing some of that membership, said Mary O’Connell, an analyst with Louis Nicoud Associates in San Francisco. The result is a costlier operation.
“The big thing they need to do is to build up membership and improve profit margins,” she said. “They have below-average margins.”
One Southern California chief executive of an HMO said the trend in the industry is away from the staff model, citing FHP’s recent record as a big reason. Gumbiner would be expected to defend the model he helped create, said the executive, who declined to be named.
“It was his baby and near and dear to his heart,” he said.
FHP is knocking at the foundation of Gumbiner’s innovation. It has asked the state to be relieved from a restriction that prohibits it from using its hospitals, clinics and staff to serve those who aren’t FHP members, said Paul Knopick, an FHP spokesman.
*
Times staff writer David R. Olmos contributed to this report.
