Health Net 1998 Annual Report Download - page 13

F O U N DAT IO N HEALT H SYSTEMS, I N C . 1 1
How did the Specialty Services Division perform in 1998?
Overall, the Division exceeded performance expectations in 1998.This is really attributable to
two key factors.First, we have a strong management team in place at each of our core specialty
companies.Second,our core companies have succeeded in finding their market niche.This is
particularly evident with Managed Health Network,which in just a few short years has become
one of the nation’s leading behavioral health care companies.
W hat did MHN’s performance look like in 1998?
MHN turned in a strong performance in 1998.Covered lives grew by more than 17 percent,
with most growth coming from FHS health plans in the Northeast and in California.We also
experienced significant growth from our “non-family” business,particularly in the area of
Employee Assistance Programs (EAPs).
MHN’s clientele include many Fortune 500 companies that are continually looking for ways to
retain good employees by providing valuable employment services.These companies are turning to
MHN to design and enhance EAPs that improve the quality of life for their employees and their
employees’families.
How is Integrated Pharmaceutical Services (IPS) doing?
Several mergers and acquisitions within the industry really changed the dynamics of the pharmacy
benefit management business.IPS’business,however, remained unchanged in 1998.It still per-
formed well,primarily by focusing its resources on FHS health plan operations, where IPS experi-
enced most of its growth in 1998.
Does IPS have any external growth opportunities?
IPS’opportunities for external growth have always been somewhat limited,mainly because
other health plans do not want to partner with a pharmacy benefit management company owned
by a competitor.We responded to this and the changing dynamics of the industry in 1998 by
developing plans to reorganize the services IPS provides to FHS health plans and external clients.
In February of 1999, we reached a definitive agreement with Advance Paradigm, Inc.to sell certain
pharmacy management services that did not fit with FHS’core operations.This will allow IPS to
concentrate its efforts on providing key pharmacy benefit services to FHS health plans.
How does IPS help FHS health plans?
In light of the more than $1.3 billion FHS spent in 1998 on pharmaceuticals, we are focused on
helping FHS health plans best manage pharmacy benefits,formularies and rising pharmacy costs.
This helps FHS provide consumers a benefit that is both comprehensive and affordable, giving
our members greater access to medications through new benefit plans and increased
manufacturer discounts.
How did dental and vision do in 1998? Are there future opportunities in these markets?
Both DentiCare of California and AVP Vision Plan operated profitably in 1998.While their
growth was modest, they focused on profitable business and did quite well.
We think there is great opportunity in both of these markets for FHS.We are viewing these
businesses the same way we viewed the opportunities in mental health in the early 1990s.Like the
dental and vision industry today, the mental health market was ve ry fragmented, l a c k ed competition
and was based on an unorganized delivery system.We’ve applied the lessons we learned in mental
health to our dental and vision business model, and the results have been positive so far.