The retaking of a Md. company Nicholas group buying Corporate Healthcare, which he sold in 1993

Health care

September 02, 1998|By Mark Guidera | Mark Guidera,SUN STAFF

A management group led by Baltimore entrepreneur Louis J. Nicholas expects today to conclude a deal to buy back Corporate Healthcare Financing Inc., which manages self-funded health care plans for companies, from struggling United American Healthcare Corp. in a deal worth an estimated $23 million.

"We see this company as having unlimited opportunities in this market; that's why we're buying it back," Nicholas said yesterday. He founded the company in 1987 and in 1993 sold it to publicly held United American, based in Detroit, for $15 million.

Baltimore-based Corporate Healthcare designs and manages group health plans for employers, catering strictly to corporate America. It contracts much of the back-office administrative duties, such as billing and claims administration, to specialists.

United American's specialty is operating health maintenance organizations and managed-care programs in Michigan and four other states. Its fortunes have flagged in the last two years as profits have dropped. After years of profitability, it reported a $3.4 million loss on $110.5 million in sales last year. In June the company announced a restructuring plan that includes laying off 18 percent of its employees, and the resignations of some senior management. Shares in United American have fallen 72 percent since last September. They closed yesterday at $1.50.

Nicholas, 59, who has served as chairman and chief executive officer of Corporate Healthcare Financing since selling it, said United American was interested in the sale as part of its restructuring plan and as a way to raise cash.

The deal includes $18 million in cash, a $1 million debt write-off, and giving up $4 million in management "golden parachute" retirement packages.

Gregory H. Moses, president and chief operating officer of United American declined comment yesterday.

Nicholas said the management group, which includes president Keith Sullivan and executive vice president Pamela Lee, suggested the buyback as part of United American's efforts to restructure and focus on becoming profitable again in the managed care sector.

"If we had to do it all over again, I'd say we would," Nicholas said. "It's been a good relationship."

Corporate Healthcare has been on a fast growth track since it was purchased in 1993. At the time, it had 40 employees, offices in five cities and annual revenue between $5 million and $6 million.

Today it employs 240 -- 200 of them in offices in Baltimore and Towson -- and has offices in eight cities, and annual revenue of about $30 million. The majority of the employees -- 200 of them -- work at the Baltimore headquarters and an office in Towson.

Nicholas credited the growth to strong expansion of its client base and a move into the management of workman compensation plans.

Its clients list is made up for the most part of small- and medium-size companies which have, on average, 400 employees. Clients include Interstate Hotels and units of General Motors.

Nicholas said yesterday that retaking control of the company would give his management team flexibility in designing and managing plans for clients and access to capital for expansion and growth that it didn't have under United American.

He said the company would continue to emphasize value, efficiency and flexibility in the health care plans it designs and manages. Nicholas does not anticipate any major changes in the management or employee structure of Corporate Healthcare after the sale.

"We are in a service industry which is very dependent on top management skills," the executive said. "We can't operate well without the people we have. We're very fortunate to have so many highly skilled employees."

Pub Date: 9/02/98

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