FOOL CONFERENCE CALL SYNOPSIS*
By Greg Markus (MF Boring)

OXFORD HEALTH PLANS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OXHP)") else Response.Write("(NASDAQ: OXHP)") end if %>
800 Connecticut Ave.
Norwalk, CT 06856
(203) 851-2308

ANN ARBOR, Mi., November 6, 1996/FOOLWIRE/ --- Oxford Health Plans reported this morning that third quarter earnings per share increased 65% on a revenue gain of 69% when compared with the year-ago quarter. Third quarter revenues reached $811.3 million, versus $480.2 million a year ago. Fully-diluted EPS of $0.33 easily topped analysts' consensus estimate of $0.31. Fully-diluted EPS in 1995's third quarter was $0.20.

STRONG MEMBERSHIP GROWTH. During the quarter, Oxford's membership increased by 9.2%, to 1,442,200. Growth was solid in all segments: Freedom Plan (Oxford's premium POS option), HMO, Medicare, and (less so, intentionally) Medicaid. During October, another 58,000 net new members enrolled, bringing total membership to approximately 1,500,000 as of November 1, 1996.

IMPROVED BUSINESS OPERATIONS. Oxford's operating margins improved, administrative costs dropped as a proportion of revenues, and the medical-loss ratio declined slightly (to 80.2%). Administrative expenses were 15.4% of operating revenue for the third quarter of 1996, compared with 18.0% for the third quarter of 1995 and 18.7% for the full year of 1995. Oxford's transition from a mainframe database system to a distributed system is almost complete. Some inevitable transitional inefficiencies occurred but are being resolved. Oxford has been able to maintain (and now expand) its profit margins because it declined to cut rates earlier in the year as competitors were doing in an effort to capture market share. Now that competitors have been compelled to raise their rates to more reasonable levels, Oxford believes its competitive position in the marketplace is further strengthened.

RECENT CHANGES IN NEW YORK LAW. A significant part of the conference call with analysts was devoted to a discussion of recent changes in New York state regulations affecting hospitals and insurers. Prior to the enactment of the New York Healthcare Reform Act (NYHCRA), hospitals in New York covered costs of medical education and charity treatment and passed along those costs to insurers and HMOs in the form of a surcharge on bills. Under NYHCRA, the state taxes insurers directly for these costs.

HOW THE LAW AFFECTS OXFORD. On its face, the change in New York law would appear to cut into the profits of Oxford Health and other insurers and HMOs. In Oxford's case, however, the company has largely completed negotiations with key hospitals (mostly large teaching hospitals and medical centers) so that the hospitals will pass their new savings directly along to Oxford. In negotiating with hospitals, Oxford has two sources of leverage that many other HMOs lack: first, with 1.5 million members provide the company with substantial clout; second, because Oxford historically has utilized the larger (and slightly more expensive) medical centers for its members rather than low-cost community hospitals, Oxford can offer the hospitals a more compelling rationale for why they should cooperate with the company. Unlike Oxford, smaller HMOs that do not have a history of working with teaching hospitals could find their profitability under increased pressure as a result of the new law.

PRICING GOING FORWARD. In any event, Oxford has already built into its new pricing plans a 2 to 3 percent increase to cover any costs of the new law that are not recovered directly from hospitals. Should Oxford not require the full rate hikes to cover the costs, it could roll back the increases and further enhance its competitive position in the market. CEO Stephen Wiggins was of the opinion that the company's growth could accelerate in 1997 should the cost differential between Oxford and competitors (which is currently between 8 to 15% in New York) continue to shrink -- and he thought there were reasons to believe it would shrink.

MEDICAID COVERAGE. Oxford has no intention of entering businesses it cannot make money in. Oxford will reduce its emphasis on Medicaid patients in New York until the company is convinced that the state will be a "responsible partner." So far, Oxford is not entirely convinced of that.

NEW DEVELOPMENTS. Oxford continues to break new ground in the healthcare industry. It continues to develop specialty management programs for acute care and management of members with certain diseases. It is extending its practice of sharing risks with physician groups ("pods"), to align physicians' interests with the company's. It currently has 35,000 members linked individually to specific Direct Service Managers, who handle all customer service matters for the member and serve to coordinate among the member, physicians and healthcare staff, and the customer service department; feedback from customers and doctors has been very positive. The company is expanding Oxford On-Call, which enables members to call at any time and speak directly to a specially-trained nurse who can triage members or provide self-help advice; the nurses have access to an extensive database information system that has been evaluated by a major hospital.

CLOSING COMMENTS. In closing, CEO Wiggins noted that Oxford is moving toward a new level of healthcare company, using intelligent systems for managing medical costs and engaging in conversations with leading medical researchers about optimal treatments for individual diseases and disease prevention strategies. In that sense, the company is doing much more than being an insurance and marketing business. The company continues to acquire a deeper understanding of the medical side of the work in which they are engaged.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.