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GHA FACES DECLINING REVENUES; SEEKS $10 MILLION IN EXPENSE REDUCTIONS BY ELIMINATING 200 POSITIONS AND REDUCING ADMINISTRATIVE COSTS

 WASHINGTON, June 29 /PRNewswire/ -- In response to a worsening financial condition, Group Health Association (GHA), the oldest HMO in the Washington area, announced today it is taking immediate steps to reduce personnel and administrative expenses by $10.4 million.
 The cutbacks will include the elimination of the equivalent of up to 200 full-time positions, many of which are vacant, for a savings of $9 million and a $1.4 million reduction in administrative expenses.
 Officials said the cutbacks will not change the access to or quality of care that GHA's patients receive, since they are being made in part to reflect GHA's decline in membership. Enrollment in GHA, which decreased by 21,700 in the last 17 months, now stands at 134,300.
 The layoffs will be implemented beginning July 14 at GHA's nine medical facilities in Washington, Maryland and Virginia. Although the exact number of people and actual positions to be eliminated have not yet been finalized, the full-time equivalent positions include doctors, nurses, technical, administrative and clerical personnel and non-union jobs.
 In keeping with company policy, employees will receive severance pay and access to outplacement services.
 This afternoon GHA informed officials of the five labor unions who represent the workers of the cutbacks in positions and expenses. Actual staff layoffs will be implemented in accordance with applicable union contract provisions. Within the next two weeks GHA will identify the employees who will be laid-off.
 GHA President and CEO Robert P. Pfotenhauer said the decision to lay off the employees "is sad, painful and difficult. Although GHA's long- term financial prospects may remain in doubt, today's decision is absolutely necessary to help ensure our immediate stability."
 "The 14 percent decline in GHA's membership over the last several months has led to a dramatic drop in revenues. Our current and projected financial situation clearly requires us to take immediate steps to tighten our belt. Failing to take action now would only make matters worse in the future," Pfotenhauer said.
 Today's announcement represents the sixth layoff in GHA's 56-year history. The other layoffs occurred in 1991, 1986, 1982, 1978 and 1974.
 In 1991, GHA eliminated 106 positions and reduced the salaries of 40 top executives by 10 percent. In addition, 200 middle managers had their salaries reduced by 5 percent and all staff participated in a furlough program from September 1991 through June 30, 1992.
 Last September, a membership referendum to convert GHA to a for- profit company failed by less than 1,000 votes. The conversion was recommended by GHA's member-elected board of trustees. The measure received 61 percent of the membership vote, but a two-thirds vote of approval was required for passage. The proposal received 10,114 votes in favor of the plan and 6,413 votes against it.
 Pfotenhauer indicated that the need for a long-term infusion of capital that led to the conversion recommendation a year ago remains a significant issue today.
 "We now are competing with national companies that have significant capital reserves and corporate support. Although prospects for HMOs playing a key role in national health reform are quite good, only those companies with significant financial resources will be able to effectively compete. Group Health needs to find a way to remain a force," he said.
 -0- 6/29/93
 /CONTACT: Edward Segal of Edward Segal Communications, 202-333-7966, for Group Health Association/


CO: Group Health Association ST: District of Columbia IN: HEA SU: PER

DC-DS -- DC016 -- 6784 06/29/93 14:50 EDT
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Date:Jun 29, 1993
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