Oxford Health Plans named a new chairman and chief executive on Tuesday in a turnaround effort led by a Texas group that will invest $350 million in the troubled HMO.
Former Healthsource Inc. head Norman Payson will become chief executive officer and Fred F. Nazem, who headed the executive committee on Oxford Board, will replace founder Stephen Wiggins as chairman, the Norwalk-based health maintenance organization said.
Wiggins will remain on the board.
Texas Pacific Group, a private partnership with $2.5 billion in capital, will get four seats on the board in return for its investment, Oxford said. One day earlier Kohlberg Kravis Roberts & Co. pulled out of a joint agreement with Texas Pacific that would have infused more than $600 million in debt and equity into Oxford, The New York Times reported Tuesday.
"While Oxford's superb innovation has led to exceptional growth, unfortunately its systems and operations capabilities could not keep pace," said Jonathan Coslet, a Texas Pacific partner.
"With new capital and leadership, we believe we are investing in an excellent turnaround opportunity," he said.
Oxford has more than 2 million members, most in the New York metropolitan area. New Hampshire-based Healthsource has operations in 16 states and more than 1 million members.
Payson, 49, of Hopkinton, N.H., spent 12 years at Healthsource before selling the company last year for $1.7 billion to Cigna. He replaces William Sullivan, who was recently demoted to president, as CEO.
Payson, who will serve as a consultant to Oxford until the Texas Pacific deal closes, agreed to invest $10 million of his own money in Oxford's common stock.
He said he will spend the next 30 to 60 days evaluating Oxford's problems before implementing a turnaround plan.
Oxford reported a fourth-quarter loss of $285 million, or $3.58 a share, more than double the loss it had forecast just two months ago.
The company has said its computerized billing system delayed payments to doctors and impeded collection of premiums from patients. Oxford also said it had overestimated how much it was owed.
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