Oxford Shares Dive on New Revelations
For months, Oxford Health Plans, one of the country’s largest managed-care companies, had issued assurances that glitches in its computer and billing systems had been corrected. On Monday, the Norwalk, Conn.-based company was red-faced, admitting that the problems persisted.
Oxford, once the crown jewel of HMO stocks for its rapid growth, warned that the troubles would force it next week to report a loss for the last three months.
Wall Street reacted with a vengeance. Even before the full extent of the stock market’s overall decline became apparent, Oxford’s shares took a beating. By the close of trading on Nasdaq, Oxford had plunged 62%, falling $42.88 a share to $25.88.
The timing of the announcement could not have been worse, Oxford Chairman Stephen F. Wiggins acknowledged.
“Ideally, I don’t release the worst news we’ve had in 15 years to a wobbly stock market,” he said.
Oxford’s problems--combined with the plummeting stock market--also left some California managed-care companies shaking.
WellPoint Health Networks was hit the hardest, its shares plummeting 15% to $47.50, off $8.38 a share.
Like Oxford, Woodland Hills-based WellPoint has been one of the strongest financial performers among managed-care firms. Oxford’s stunning news may have sparked jitters among investors awaiting WellPoint’s third-quarter results, due out Thursday.
Cynthia Coulter, a WellPoint spokeswoman, had no explanation for the sharp decline. “It’s very volatile right now,” she said, “and we’re trying to get our arms around it.”
“Oxford has been the premier growth company in managed care fairly consistently over the past several years,” said David Olson, a spokesman for Foundation Health Systems, another Woodland Hills-based HMO. “To have such a profound change in its finances come so suddenly was just a shock to the market.”
Olson said he believes Oxford’s problems were “company-specific” and did not reflect on the industry generally.
Among other California HMOs, PacifiCare Health Systems A shares fell $5.25, or 7.8%, to $62.50. Foundation Health was down $2.25 to $29.75, or 7%, and Maxicare Health Plans fell 88 cents to $13.88, or 6%.
Wiggins said Oxford would not increase its members’ co-payments or premiums to make up for its losses. Oxford said it will take a one-time charge of $47 million to $53 million in the third quarter to shore up reserves for medical claims. The company lowered its quarterly revenue outlook by $111 million and said it expects to report a loss of between 83 cents and 88 cents a share.
Consumer advocates said that in the short-term at least, Oxford’s financial problems are unlikely to affect customers. They warned, however, that consumers should keep a careful watch for higher prices in the future.
“The salad days are over,” said Art Levin, director of the Center for Medical Consumers, an advocacy group in New York City. “Here we have one of the stars of the field . . . stumbling for the first time.”
Oxford’s stock emerged as Monday’s biggest percentage loser in extraordinarily heavy trading of nearly 50 million shares--more than 25 times its usual volume.
Oxford has come under sharp criticism in recent months from hospitals, doctors and others who have complained about the company owing millions of dollars in unpaid claims and reimbursements. Oxford has said the problems are related to bugs in a new computer system, which led to trouble issuing bills.
“Shame on us for not getting the bills out on time,” Wiggins said. “This is the price we pay. Most of the adjustment to our third quarter is related to receivable problems.” He said Oxford remains a strong company with excellent prospects.
Analysts, however, said investors were blindsided by the company. “They’re far from being out of the woods about reestablishing their credibility,” said Gary Frazier, a managing director at Bear, Stearns & Co. in New York.
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Times staff writer James Olmos contributed to this report.
