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PacifiHistory Like many HMOs, PacifiCare started as a non-profit organization and later reorganized into a for-profit corporation. Started by the Lutheran Hospital Society in 1975, in 1978 the company federally qualified as an HMO. In 1981 PacifiCare started the Secure Horizons Medicare system, which is now the biggest group of Medicare HMOs in the country. After becoming a publicly traded company, PacifiCare expanded rapidly by moving into Oklahoma and Texas in the late 1980s. During the 1990s, PacifiCare continued its growth by entering the Miami market and acquiring several other small HMOs. The happy buyout... In August 1996, the company announced it would acquire FHS International Corp., a competing health care interest with a strong presence in California. The $2 billion buyout was favorably received by industry observers and investors, as it would make PacifiCare the fifth-largest health maintenance organization (HMO) in the country with nearly 4 million members in six states. Fortune went as far as to name PacifiCare one of America's "most admired" health care companies and a "big gainer." ...and its unhappy consequences Alas, like some of its competitors, PacifiCare found itself in 1997 foundering on the shoals of post-merger difficulties. First, although the two groups shared many characteristics, they differed in culture, as PacifiCare had always contracted with independent doctors and hospitals, while FHS had traditionally maintained its own hospitals and doctors on salary. Secondly, computer glitches caused havoc in the company's Utah operations by failing to accurately record and compensate for rising costs. At the beginning of 1998, the company announced its earnings would fall 75 percent below analysts expectations. Naturally, Wall Street, which by this time had cooled considerably to managed health care generally, reacted harshly, and the company's stock price plunged by 27 percent. One investor grumbled to Medical Data International that PacificCare had "bungled the merger." Cutting back on operations To regain its financial health, PacifiCare embarked on a selling spree, unloading money-losing operations in Illinois, New Mexico, and Florida. In July 1998, the company finally found a buyer for its troubled Utah subsidiary: an investment group led by the head of Brigham Young University's McDonald Health Center. PacifiCare also announced that in light of 1999 federal government Medicare HMO cutbacks it decided to stop offering its much acclaimed Secure Horizons Medicare HMO plan in many counties throughout all of its locations. The company's decision took effect in January 2000 and affected approximately 26,600 customers. Furthermore, the company announced that it expects Medicare premium payment rates to increase by 3.5 percent in 2000. Capitation PacifiCare contracts with its doctors using a process known as "capitation." Under such an arrangement, PacifiCare pays a medical group a set fee per patient per month, thereby pre-determining and mitigating the risks of rising costs. While the set-up has brought the company savings, it has lead to serious difficulties in Denver, Colorado. There PacifiCare pays for physician services with Columbine Medical Group. In summer 1998, Columbine Medical Group, facing rising costs, informed its physicians of pay cuts of as much as 45 percent. Infuriated, 84 doctors announced their intention to quit, and threatened legal action against both Colombine and PacifiCare. A doctor in Texas has recently filed a lawsuit against PacifiCare claiming he is owed money for services rendered. Expanding horizons PacifiCare is now concentrating on satisfying its customers while expanding into markets in demand such as its vision market. The company became a subscriber to Medical Data International Online in 1999, a web site that provides accurate medical information and news. In 2000 it agreed to a venture with Compaq to launch an Internet company, SeniorCo, aimed specifically at seniors. PacifiCare Dental & Vision also signed a contract with Omega Optical Company, the largest optical laboratory in the United States, and one with Vision Twenty-One as well to provide its customers with a new line of vision products and 13,000 vision providers in over 50 states. The company also introduced a Preferred Provider Organization dental health plan in 1999 and teamed up with the Dental Alliance of Los Angeles network to ensure that its customers were provided with properly certified doctors. PacifiCare's subsidiaries are also aiding the company in its quest to provide better customer service and increase its line of products. PacifiCare of Colorado purchased ANTERO Healthplans in 1999, adding 38,000 members to its current HMO members. PacifiCare Texas and Oklahoma also signed a contract with Alere Medical Incorporated to provide daily monitoring of members with heart failure. PacifiCare has eliminated 600,000 insurance holders in Kentucky and Ohio as it shifts its focus back to the west coast. Leading that shift will be new CEO Robert W. O'Leary who is replacing the retiring Alan R. Hoops.
According to insiders, PacifiCare tends to focus less on campus recruiting, preferring to hire through direct solicitation of resumes, from within, and through employee referrals. The company has replaced its job hotline with an extensive employment web page that allows jobseekers to search a job openings database, and submit an online resume. Resumes may also be emailed to mailscan@phs.com, and sent by regular mail. Our contacts also indicate that the company's hiring procedures will vary between offices and state operations. Nevertheless, job seekers can expect up to two rounds of interviews, and technical interviews for some positions. The company seeks individuals that are computer literate, and insiders indicate that candidates should have a familiarity with Windows, Microsoft Office, and, of course, any software particularly related to one's field.
Improving morale Like the hiring process, insiders note that corporate culture at PacifiCare will vary from state to state. Their comments, however, indicate some recurring themes. First, insiders acknowledge merger-related anxieties: "PacifiCare is quite hectic right now. With its recent acquisition of FHP PacifiCare is still scrambling to integrate the two companies." They nonetheless remain confident. One contact says "I know the company is good, that is why I am willing to hang in there and see if things will improve," says one. Another agrees: "They will be around for a long time." Communicative culture The positive perceptions of the company's prospects are perhaps related to another aspect of life at PacifiCare: open relations between management and employees. One contact notes: "Senior management makes a very visible effort to stay in touch with what's going on at all levels of the company." Another explains: "It is certainly not a traditional insurance company culture. There is no army of dark suits and deep layers of vice presidents." Still another concurs: "Management is approachable for the most part. We just had a "Thank-Q BBQ" for our excellent performance during the first quarter 1998, and our California regional president... was standing at the front gates, handing each of us peanuts from a cowboy hat!" Another puts it in terms of work requirements: "At least in my area, managers and upper management are reasonable/realistic in [their] expectations of workers. So the workflow is almost always constant, but rarely overwhelming." Positive perceptions of diversity The "open" management style at PacifiCare seems to positively affect perceptions of diversity on many levels. "I'm gay and out and no one seemed to care as long as I helped the organization," one contact tells us. Regarding ethnic and gender diversity, insiders frequently note that women and members of minority groups make up three-quarters of the company. One notes that "Women are well represented at the management and executive levels. For example, where I work in IS development, five out of six directors are women, as well as the VP over IS development." Another agrees, but qualifies: "The company does do a reasonably good job of treating women and minorities fairly, but it's not as family-friendly as it used to be, because few lead balanced lives." On ethnic diversity, one insider frames the issue in terms of the FHP deal: "Although I would say that FHP was much more racially integrated, and that to some extent, a 'good old boys' network still does exist at PacifiCare, as an Asian-American myself, I have never felt discriminated because of the color of my skin." Not so dressy PacifiCare employees don't seem too preoccupied with fashion. "The dress code is business casual during the week and casual on Fridays. Business casual is not quite shirt and tie, but more khaki's and a polo shirt look. Casual is jeans and button shirt - tennis shoes." Healthy compensation With annual salary increases of 4 to 5 percent, insiders aren't exactly jumping up and down about pay. "Average," says one. Another deals out strong criticism in noting that "the company is perpetually understaffed and seriously slaves out their employees. Prepare for serious overtime (no extra pay)." Benefits, however, draw praise. One contact says: "the health and retirement benefits are substantial." Another agrees and explains that "They give the employee a certain amount to cover 'average' health care (in their paycheck) - so in essence, health care is free." For job seekers, one of our insiders offers the following advice: "If you do decide to interview, negotiate hard for as much pay to start as you can." Low turnover confirms high job satisfaction PacifiCare employees are generally satisfied with their jobs. "All things considered, it's a great place to work, and I wish I had started here 10 years ago." Some get this wish. "We do have a lower turnover rate, one of my former employees has been there 15 years, my boss has been there 10 years."
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