Shares in Mid Atlantic Medical Services Inc. (MAMSI), the Rockville managed health care company, gained 87.5 cents, or 7.3 percent, to $13 yesterday, the first day of trading since the company's embattled boss, George T. Jochum, gave up his fight to hold onto his job.
Jochum's resignation as chairman, president and chief executive officer ended a court battle over whether he should be removed.
In November, the company disclosed that its board had split evenly in a confidence vote on Jochum, creating "a dispute as to whether the board of directors' vote operates to terminate Mr. Jochum's employment." In December, five board members filed suit to force Jochum out.
Analysts said the run-up in stock price reflected a belief that Jochum's departure, announced late Friday, could allow new management to improve the company's performance or that MAMSI might be acquired by a larger HMO operator.
"The company has had relatively modest goals, and hasn't been able to achieve those goals," and Jochum's management was blamed, said John Arege, a managed care analyst with Standard & Poor's. "Mid Atlantic Medical has been a less-than-exciting story in terms of its membership growth and earnings growth."
In fact, the stock price has been rising since the board dispute became public. Shares have risen 54.9 percent from their $8.3125 close Nov. 5, just before the announcement of the split vote on Jochum.
Some stocks rose more
By contrast, the Morgan Stanley Health Care Payor Index, comprised of 12 managed care stocks including MAMSI, increased 7.4 percent over that period.
If the new management is interested in selling the company, "There's always a strong market for healthy regional competitors" in managed care, said Kenneth S. Abromowitz, an analyst with Sanford C. Bernstein.
MAMSI would be attractive as a company with "a good market share in a pretty good metropolitan market," Arege said.
Both Arege and Abromowitz said, however, that the company is also positioned to continue as a medium-sized regional operator.
1.7 million clients
MAMSI covers 1.7 million people in an area reaching from Pennsylvania to North Carolina. Its two HMOs in Maryland are Optimum Choice and MD-IPA.
The board chose an interim team to run the company. They are: Dr. Mark D. Groban, interim chairman, Thomas P. Barbera, interim chief executive officer and president, and Robert E. Foss, who was promoted to senior executive vice president.
Neither the three executives nor Jochum was available for comment yesterday.
'Not supposed to talk'
"We're not supposed to talk. Part of the agreement is that everybody stand by that press release," said Michael Carvin, Jochum's attorney.
Elizabeth Sammis, a MAMSI spokeswoman, said the interim management team has yet to indicate what changes it will make, beyond expressing "a commitment to enhancing shareholder value."
Sammis added: "This just happened on Friday -- it's not fair to ask them to have a full plan by Monday."
Groban, 57, one of the directors who sought Jochum's ouster, joined MAMSI in 1990 after practicing psychiatry privately. He was president of the company's two preferred-provider organizations and medical director for behavioral health and quality improvement.
Barbera, 48, was vice chairman and the No. 2 executive under Jochum.
A former deputy insurance commissioner in Maryland who joined the company in 1993, he has been responsible for dealing with regulators as well as underwriting and rate-setting.
Foss, 48, also retains his post as chief financial officer, a title he has held since joining MAMSI in 1994.
Sammis said the search committee had not indicated a timetable.
"I assume it will look at current management as well as outside candidates," she said.
MAMSI is about equally likely to keep the interim management, replace them with new top management, or sell the company, predicted Abromowitz, the Sanford C. Bernstein analyst.
Pub Date: 1/12/99