Oxford's News Only Sounds Bad

CEO Wiggins quits--but will stick around to run a new unit

It has been a spectacular run for Oxford Health Plans Inc. In 13 years under founder Stephen F. Wiggins, the managed-care company has racked up 1.9 million members, nearly 100% annual profit growth, and a $6.2 billion market capitalization. Wiggins has a stake now worth $240 million.

No wonder Oxford's stock dropped 4%, to 82 1/8, on Aug. 4, even as it reported earnings well above expectations. The bad news: Wiggins, 41, was giving up the CEO's office at Oxford, staying on only as chairman. President William M. Sullivan, 34, was named chief executive.

SPECIALISTS. Yet investors missed the point. Wiggins will give up day-to-day management responsibilities to focus on a new operation that could have a much bigger payoff for Oxford--and for managed care. He will oversee Oxford Specialty Management, which he says will become "far bigger than the health-plan business."

The new venture addresses the problem of unmanaged specialist care. Today, most specialists receive fees for each service they provide. Under Oxford's plan, teams of specialists will bid a fixed price to provide comprehensive care for a specific condition. Doctors will retain control over medical decisions--but will be paid more if their patients get well. "It could lower costs and increase productivity. Anything that does that is a good idea," says Kenneth S. Abramowitz, an analyst at Sanford C. Bernstein & Co.

Wiggins says Oxford will eventually spin off the unit into a separate company, so it can sell the service to other HMOs. He will stay on at Oxford but also head the new company--and pursue a second fortune.

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