NORWALK, Conn. -- Oxford Health Plans Inc. shares fell 62 percent yesterday after the company stunned investors with its warning of a third-quarter loss because of delays and errors in customer billing and payments to doctors.
The Norwalk, Conn.-based health maintenance organization also said profit will be lower than expected in the fourth quarter and next year as the company raises estimates of Medicare expenses and strengthens its administration.
"We overestimated how much of our customer accounts receivable were collectible, and the catch-up of claims payments revealed payment obligations that exceeded our original estimates," Oxford's chairman, Stephen F. Wiggins, said.
Oxford shares fell $42.875 to $25.875 in trading of 49 million shares, wiping out $3.4 billion in market capitalization.
Oxford's disclosures were a surprise, investors said, because the company had said it would resolve the problems resulting from its rapid growth.
"A lot of people feel they were blindsided," said Erik Anderson of Sit Investment Associates Inc., which holds about 166,500 Oxford Health shares. "Investors were led to believe that everything was improving."
Oxford Health was the most active stock on Wall Street and the biggest percentage loser.
Other health care shares also fell. Wellpoint Health Networks Inc. fell $8.375 to $47.50. United Healthcare Corp. fell $8.5625 to $43.0625. Aetna fell $6.375 to $69 and Cigna fell $6.3125 to $163.0625. Aetna and Cigna disappointed investors earlier this month when they said higher-than-expected medical costs would cut earnings.
Oxford Health said it will take a charge of $47 million to $53 million to boost reserves for medical claims, resulting in a loss of 83 to 88 cents a share in the third quarter.
The average estimate of 18 analysts surveyed by IBES International Inc. was for earnings of 47 cents a share in the third quarter.
Employment won't be affected by the charge, Wiggins said. Oxford, one of the largest HMOs, employs about 5,000 people.
The charge also covers payments from previous periods, Oxford said. The company said it expects third-quarter revenue to be about $111 million less than previous estimates.
The company was late in sending out bills for the period September 1996 to June 1997, which affected its ability to collect on them later, Oxford said.
"It was a matter of not being able to keep track of premiums, to handle bills," said Joel M. Ray, an analyst with Wheat First Butcher Singer. "They grew real fast."
Ray lowered his rating on Oxford Health to "neutral" from "buy" after Chairman Wiggins said in August that he was stepping down from the chief executive's spot.
Oxford's premiums rose to $3.02 billion in 1996 from $1.73 billion in 1995 as membership swelled to 1.9 million from 1.3 million.
Fourth-quarter earnings will be about 25 cents to 27 cents a share, Oxford said, not including the expected 50-cents-a-share gain from an expected sale.
Pub Date: 10/28/97