Magellan HQ leaving Howard for Connecticut

Less than 200 of 700 jobs affected, company says

Move will be to CEO's home state

Call centers, processing of claims are to remain

October 14, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

Magellan Health Services, the mental health insurance giant, told its employees yesterday that it is moving its corporate headquarters from Columbia to Connecticut - home of the chief executive who joined last year to help turn the company around from heavy debt that drove it into bankruptcy.

Of the 700 people the company employs in Columbia, the company said, fewer than 200 jobs are likely to be affected, at least initially.

The move will involve less than half of the 400 jobs related to the corporate staff, said Erin S. Somers, vice president for public relations and communication. While top executives go north, other corporate functions, such as claims processing, will stay.

Another 300 Magellan employees at two call centers in Columbia will be unaffected by the move, although the company is planning to close some of its 35 call centers around the country to cut costs. It hasn't said which call centers will close.

Steven J. Shulman, the chief executive officer who came to financially stressed Magellan in December, has been commuting to Maryland from his home in Avon, Conn. Under Shulman, the company filed for bankruptcy reorganization in March and won approval for its restructuring plan from bankruptcy court last week.

"It is not uncommon for this sort of change in location to accompany a change in the executive leadership of a company," Shulman said in a message yesterday to Magellan employees.

Magellan, which has about 4,700 employees nationally, has annual revenue of about $1.6 billion. It contracts with HMOs, employers, unions and government agencies to provide mental health coverage to nearly 60 million Americans; when they receive care, Magellan pays claims to therapists and hospitals.

Aris Melissaratos, Maryland secretary of business and economic development, said the company had not spoken with him about its plans, although the state has programs to retain companies thinking of moving.

He said Magellan would not be "a huge loss," but that attracting and retaining corporate headquarters is important "for image-building" and to attract other companies. "People like to be where other CEOs are," he said.

Magellan's headquarters moved to Columbia in 1999. In a kind of symmetry with its move to Connecticut now, the company originally came to Maryland from Atlanta because its then-CEO was based here.

In 1995, it bought a controlling interest in the mental health managed care unit of BlueCross and BlueShield of Maryland, then called Green Spring Health Services. In 1997 and 1998, it bought two other large mental health insurers, combining them under Henry T. Harbin, who had been CEO of Green Spring - and who remained in Columbia.

Harbin eventually became CEO of the parent company, which sold its hospitals. He moved it to Maryland in 1999, along with about 50 jobs.

Magellan got $2.8 million from the state Department of Economic Development's Sunny Day Fund and was expected to add 600 jobs over time to the 600 in Columbia at that time.

However, Magellan ran into trouble trying to cover payments on more than $1 billion in debt it ran up in buying competitors. The company filed voluntarily for bankruptcy reorganization in March. The company expects to emerge from bankruptcy officially within the next three months.

Somers said Magellan had not met the job goals set out in its agreement with the state, as it needed to trim operations "to try and address the issues with whether this could be a viable business." Magellan was supposed to pay back more than $2 million to the state - a debt that became part of the company's bankruptcy claim. As did other unsecured creditors, the state got 53 cents to 55 cents on the dollar in cash, stock and notes, Somers said.

In his announcement to the employees, Shulman said that he and "other members of the executive team" would work in the new Connecticut headquarters, but Magellan would retain "many important corporate functions" in Columbia and at another corporate office in St. Louis. Somers said no decisions have been reached on how many jobs will move, or on how much office space Magellan will need in Columbia.

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