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Maxicare Lays Off 26 in New Cost-Cutting Move

December 03, 1987|BRUCE KEPPEL | Times Staff Writer

In a further cost-cutting move, Maxicare Health Plans laid off 26 of its 7,700 employees, including one of two medical directors at company headquarters near Los Angeles International Airport, a spokesman confirmed Wednesday.

The layoffs, announced in a notice dated Nov. 27, took effect Dec. 1. Eight were in Los Angeles, said spokesman Tobi Nyberg.

Maxicare, the nation's largest investor-owned health maintenance organization, a form of prepaid health insurance, has been running in the red since its 1986 acquisitions of two financially troubled HMOs--second-ranked HealthAmerica Corp., based in Nashville, Tenn., and third-ranked HealthCare USA, which was headquartered in Orange, Calif.

For the first nine months of the year, Maxicare accumulated a net loss of $28.4 million on revenue of $1.38 billion. It lost $6.4 million in the third quarter ended Sept. 30, but predicted improvement in the present quarter.

Maxicare's common stock closed at $5.375, up 12.5 cents; it traded at $14 last July.

Any improvement in the year-end results will come partly from elimination of the 26 jobs, including that of Daniel Fink, a vice president and medical director. Nyberg said Fink's layoff and the others were made in the name of economy and efficiency.

"These layoffs were part of a consolidation," she said.

Employees received no advance warning, Nyberg said, calling that normal procedure in the case of layoffs. However, she added, each received two weeks' severance pay, plus an additional week's pay, for each full year of service.

The layoffs were not the first--and certainly were not the largest--since the 1986 acquisitions. A little more than a year ago, for example, the company laid off 20% of the employees of HealthCare USA--192 in all. Chairman and founder Fred W. Wasserman said at the time that each laid-off employee represented annual savings of "about $32,000, including benefits."

On the other hand, the acquisitions extended the HMO's presence into 52 markets in 26 states, up from 13 states, and swelled the number of persons enrolled in its health plans to 2.3 million nationwide.

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