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Oxford Drops Medicaid in 2 States While Its Legal Troubles Deepen

MANAGED CARE April 1998. © MediMedia USA
News and Commentary

Oxford Drops Medicaid in 2 States While Its Legal Troubles Deepen

MANAGED CARE April 1998. ©1998 Stezzi Communications

Welcome to the job: Less than a week after Norman Payson, M.D., took over as chief executive officer of Oxford Health Plans, the once high-flying HMO announced plans to pull out of the Medicaid business in Connecticut and New Jersey and to subcontract Medicaid operations in Pennsylvania. Meanwhile, Oxford's legal woes broadened with separate lawsuits by Connecticut and 10 medical societies for problems stemming from the company's now-notorious financial and information systems mess.

Oxford's withdrawal from the Connecticut and New Jersey Medicaid programs affects 75,000 people. In Pennsylvania, the HMO will remain a player, but has turned over program management and payment of medical costs to Health Risk Management. In return, Oxford will pay the Minnesota-based company 97 percent of annual premiums.

In a pair of unrelated developments, Connecticut's attorney general has joined New York State's class-action lawsuit against Oxford, charging it with concealing the extent of its operating and financial problems. And 10 medical societies signed on to legal actions initially filed against Oxford by the New York County [that's the borough of Manhattan] Medical Society, alleging nonpayment of $140 million. Oxford claims that the figure is far less and that it is making progress in paying claims.

Oxford now has breathing room to continue that effort, as well as to retreat and retrench. The Texas Pacific investment group pumped $350 million into Oxford, with the promise of raising an additional $350 million for debt financing.

With a new management team and a fresh stash of cash at Oxford, physicians and benefits managers are wondering what the HMO will look like by the end of this year. Texas Pacific's move cooled rumors that Payson's orders were to shape up the HMO for a sale, possibly to Aetna U.S. Healthcare — rumors fueled by Payson's record. Payson sold his own company, Healthsource, to Cigna last year when it ran into troubles similar to those Oxford now faces.

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