PHP Healthcare Corporation

views updated

PHP Healthcare Corporation

11440 Commerce Park Drive
Reston, Virginia 20191
(703) 758-3600

Fax: (703) 758-3650

Public Company
Incorporated: 1975
Employees: 3,328
Sales: $232 million (1997)
Stock Exchanges: New York
SICs: 8011 Offices of Physicians; 7363 Help Supply Services; 8063 Psychiatric Hospitals; 8051 Skilled Nursing Care Facilities

PHP Healthcare Corporation and its subsidiaries develop, consolidate, and manage the delivery of healthcare and related support services on a contractual basis to a wide variety of customers, including numerous commercial groups, corporations, and entities, and the entire spectrum of federal, state, and local government agencies. Comprised of two operating divisions, the Commercial Managed Care Division and the Government Managed Care Division, the former provides integrated healthcare delivery services through the companys HMOs in the District of Columbia and the state of Virginia, primarily to government-assisted Medicaid recipients, its statewide Integrated System of Care in the state of New Jersey that contracts services with local HMOs and insurance companies, and family healthcare centers or facilities that are contracted for large corporate employers, while the latter provides healthcare services to a diverse scope of government agencies, including medical staffing, ambulatory care, mental health services, long-term care, and total managed care. Prior to 1993, over 98 percent of the companys total revenues were derived from government-related contracts. However, by the end of fiscal 1996, approximately 60 percent of the firms total revenues came from the Commercial Managed Care Division. Operating primarily in the Northeast, Eastern, and Southeastern sections of the United States, in 1997 PHP Healthcare Corporation concluded a strategic alliance with HIP Health Plan of New Jersey that overnight more than doubled PHPs annual revenues.

Early History

The founder and driving force behind PHP Health Corporation from the time of its inception until 1995 was a man named Charles H. Robbins. Robbins, growing up in the state of Maryland within the modest means of American middle-class family life, knew from the time of his early manhood that he wanted to own and operate his own business. Yet Robbins, having spent his entire life on the East Coast of the United States, and most of that in the rural areas of the state of Maryland, was not able to decide on the exact type of business he wanted to pursue. Hence, after holding a variety of management positions in companies operating within the Middle Atlantic States, Robbins decided to establish his own consulting firm.

With another person working as a secretary, and Robbins himself providing management consulting services to a wide variety of businesses, the little firm established in the back of a beauty shop in Rockville, Maryland, suddenly began to grow. Robbins had become an expert in accounting methods and innovative management procedures during his journeyman days, and his new consulting firm started receiving requests for assistance from government sources within the state of Maryland to help sort out the difficulties involved in establishing medical care for Medicare and Medicaid recipients. However, this request soon blossomed into a source of work and profit that became one of the cornerstones of Robbinss business.

Growth and Development During the 1980s

No longer a two-person operation, and no longer working out of the back of a beauty shop, Robbins decided to concentrate on, and take advantage of, the need for comprehensive healthcare delivery systems needed by the various levels of local, state, and federal governments. By the early 1980s, revenues of the once small consulting firm had grown to over $25 million, and with a staff of over 300 the company began to expand even more rapidly than anticipated. In order to reflect the exclusive focus on providing integrated healthcare delivery systems, Robbins decided upon PHP Healthcare Corporation as the most appropriate and descriptive title for his burgeoning organization.

As PHP Healthcare Corporation grew, it garnered almost all of its contracts from government sources. Contracts with the federal government included such important agreements as the development of healthcare provisions for long-term care nursing home programs where injured or elderly former American serviceman were located, and numerous ambulatory care projects made in agreement with the United States Navy. At the local and state levels of government, the ever-expanding inmate population of the states of Maryland and Virginia provided PHP Health with long-term contracts for total managed care correctional facilities projects.

With government contracts continuing to increase throughout the decade of the 1980s, PHP Healthcare Corporation expanded dramatically. Revenues seemed to double nearly every two years, and the amount of work required hundreds of new employees. Under the direction of Charles H. Robbins, the company incorporated and managed these vast and overwhelming developments with a professionalism not seen very often in the corporate sector. Robbins gathered a top-notch management team to help him administer the growing business of the company, as well as financial experts in the healthcare industry to help devise a strategy for continued success in the highly competitive and confusing American system of health providers and customers. It was not until the early 1990s, however, that PHP Healthcare Corporation matured into a fully integrated healthcare system provider, and took its place alongside the most successful of the companies within the industry.

The Early 1990s

During the early 1990s, Robbins conferred with his management and strategy team, and created what was termed an Integrated System of Care (1SOC), the companys own highly innovative version of vertically integrated healthcare. This strategic approach includes four primary components, Practice Management Services, Network Management Services, Traditional Insurance Functionality, and Change Agent Services. Practice Management Services included the development of and improvement upon such activities as billing support, accounts receivable management, personnel recruitment, facilities management, information services, and additional practice-oriented skills which were designed and implemented to assist physicians in maximizing both the clinical and the economical value of their practice (in whatever area that might be) within the healthcare setting.

The second important component within the companys Integrated System of Care included the development of systems that would provide assistance to those who provided healthcare services so that they could efficiently manage the financial and clinical responsibilities designated to them by HMOs and other payers such as Medicare and Medicaid. The ability to engage in contracting and reimbursement services, utilization management, quality assurance, and credentialing were the kinds of network-based skills which PHP Healthcare Corporation helped healthcare providers develop in order to become more adept and successful at patient care management.

Healthcare providers or delivery systems, whether a small physicians group or large hospital, have to be efficient in the areas of claims payments, subrogation, member services, customer support, and the coordination of benefits if an HMO delegates these types of services to the providers or delivery systems. As a result, within its ISOC Robbins and his team developed a set of skills termed Traditional Insurance Functionality, an integrated system that assists provider-based delivery systems to become more efficient in these areas. The final component within the Integrated System of Care was designated Change Agent Services, where PHP Healthcare Corporation would assist a provider-based delivery system in its strategic planning, managed care education, training in integrated delivery system functionality, and all the necessary procedures for a delivery system to make the difficult transition from a traditional healthcare provider that operated on a fragmented, fee-for-service basis to an Integrated System of Care.

This Integrated System of Care approach to working with healthcare delivery systems, and the strategy for its implementation, led to increased levels of activity and dramatically skyrocketing revenues for the company. In 1993, PHP Healthcare Corporation purchased D.C., Chartered Health Plan, the first HMO that offered managed care to Medicaid recipients in the Washington, D.C. area. In what was one of the last major acquisitions of his tenure at the company, Robbins supervised the expansion of Chartered Health Plan into additional geographic areas and, more importantly, the improvement of its services. Home visits and an extensive phone-calling system were expanded without losing the personal touchan element of its business that Chartered Health Plan had developed over the yearsas well as transportation arrangement for its members, a wellness van that expanded its activities to include free health screenings and patient education, and a comprehensive health education program for teenagers and young adults arranged through the public school system.

Growth During the Mid-1990s

By any measure, 1995 and 1996 were banner years for the company. The expectations that first arose when Chartered Health Plan was purchased in 1993 quickly came to fruition. One of Chartered Health Plans affiliates, Virginia Chartered Health Plan (VACHP), was incorporated in 1995 as a full partnership between PHP Healthcare Corporation and the Medical College of Virginia, which held a 30 percent interest in VACHP. Operating as an individual practice association (IPA), Virginia Chartered Health Plan included more than 1,000 physicians in and around Richmond, and working at two major hospital systems within the state. With PHP Healthcare Corporations assistance to rely upon, VACHP grew and expanded rapidly into the second-largest provider of Medicaid managed care in the entire state, with an enrollment surpassing 14,500 people. As a result, total revenues for Virginia Chartered Health Plan increased by $13.9 million from the end of fiscal 1995 to 1996. Chartered Health Plan itself grew rapidly when it was awarded a contract to be the default plan for Medicaid managed care in the District of Columbia. More than doubling its enrollment in the District, it is estimated that more than 80,000 recipients of Medicaid services will ultimately be registered with one of the managed care programs operated by Chartered Health Plan.

Although Charles H. Robbins, the founder and chairman of PHP Healthcare Corporation, resigned in 1995, the company did not lose a step. Jack M. Mazur, an employee of the firm for over 20 years, replaced Robbins and continued his predecessors strategy and managerial approach which had proved such a success. In May 1996, the Maryland Department of Public Safety and Correctional Services reached a $50 million contract with PHP Healthcare to provide comprehensive healthcare services to inmates in correctional facilities located around Baltimore, Maryland. During the same month, the company was also awarded a large contract to provide psychiatric services to members of the military, both active and retired, at the William Beaumont Army Medical Center located at Fort Bliss, Texas. One month later, the Army extended the companys contract to provide primary care services at military health units throughout northern Virginia.

In July 1996, PHP Healthcare Corporation reported an astounding 800 percent increase in profit over the previous year. Surprisingly, this dramatic upswing in profitability was no fluke, as lucrative contracts continued to pour into the companys coffers. PHP Healthcare Corporations reputation was growing nationally, and the state government of Arkansas awarded the firm an extension of a contract to provide healthcare services for prisoners within its statewide correctional facilities. By August 1996, the companys total number of government contracts reached a backlog of over $400 million. In September of the same year, the company was contracted once again by the U.S. Army to establish patient care services at both Fort Bennings, Georgia, and Fort Knox, Kentucky. Later in the fall, PHP Healthcare was contracted by the Federal governments Health and Human Services Department to design, develop, and implement multi-state, community-based, fully integrated healthcare provider systems.

In spite of its success with government contracts, management decided to lessen its reliance on such agreements and focus more on the commercial managed care market. This reorientation was immediate as the company completed a major agreement with New Jersey Blue Cross and Blue Shield to acquire numerous centers and physician services in the state for a cost of approximately $30 million. In 1997, this reorientation strategy continued as PHP Healthcare added Stamford Hospital and the Connecticut Health Enterprises Network as a partner, and also agreed to purchase a majority of the assets of HIP Health Plan of New Jersey for $73 million. Under a 20-year contract, PHP Healthcare will acquire 18 of HIPs health centers, including its pharmacy and optical services. The acquisition doubled PHP Healthcares annual revenues by the end of fiscal 1997.

PHP Healthcare Corporation, with more than 90 healthcare projects in 28 markets, and with locations spreading throughout the United States, is clearly one of the most successful healthcare companies in the United States. With savvy management, a thorough understanding of the marketplace, and an astute sense of timing, the company is looking forward to the opportunities that will present themselves in the next century.

Principal Subsidiaries

Connecticut Health Enterprises, L.L.C.; Georgia Health Enterprise, L.L.C.; Virginia Chartered Health Plan, Inc.; D.C. Chartered Health Plan, Inc.

Further Reading

Greeme, Jay, Contracts Are Catching On, Modern Healthcare, January 31, 1994, pp. 29-37.

Kenkel, Paul J., Delivering Corporate Healthcare Services, Modern Healthcare, June 7, 1993, pp. 24-27.

Kertesz, Sandy Lutz, and Sloane, Todd, Sorting Out the Stories That Mattered, Modern Healthcare, August 26, 1996, p. 44.

Pallarito, Karen, New Network a First for Connecticut, Modern Healthcare, February 12, 1996, pp. 20-22.

PHP Healthcare Plans Purchase, Wall Street Journal, December 20, 1996, p. A4(E).

PHP Healthcare to Buy Assets from HIP Health Plan, New York Times, July 25, 1997, p. C3(N).

Super, Kari E., Wellness Plans Trying Incentives to Reduce Company Healthcare Costs, Modern Healthcare, January 2, 1987, pp.84-86.

Weissenstein, Eric, and Gardner, Jonathan, Medicare Managed Care Weighed As Federal Budget-Balancing Tool, Modern Healthcare, February 13, 1995, pp. 52-56.

Thomas Derdak