Arthur M. Southam
President and CEO
Health Net
Dr. Arthur M. Southam has had his hands full lately, presiding over the integration of Health Net with Foundation Health Systems Inc. following the recent merger of the two big health plans.
And he appears to be succeeding at his goal of minimizing disruptions to members and provider partners. At least that’s the opinion of the Pacific Business Group on Health, an influential health insurance-purchasing consortium, which last month rated Health Net and PacifiCare as the best HMOs in California.
Now, Southam wants to play a leadership role in reducing the number of uninsured Californians and improving health care delivery statewide.
“I am very involved in the legislative arena, trying to define the legislative agenda,” Southam said. “There are more than 13 pieces of legislation supported by the HMO industry, so I’m meeting with assemblymen, senators; I’m meeting with lobbyists. Last night was a dinner with (U.S. Rep.) Bill Thomas from Kern County.”
Health Net is certainly large enough to influence industry-related issues. The plan the largest network model plan in the state has 2.2 million members, 36,000 providers, and generates revenues of $3 billion a year.
Despite the big revenue number, Health Net’s margins, like those of most of its competitors, are thin. And that makes financial management especially challenging.
“We are in a very narrow-margin business,” Southam said. “What’s left (after paying expenses) is a small fraction of what you started with. If I am wrong in projecting my health care costs by even 5 percent, then there is no bottom line at all.”
Furthermore, financial commitments are being made far into the future, when market conditions are uncertain. “I am making promises for one and two years into the future with the government and employers,” he said.
He’s no newcomer to the rigors of HMO leadership, having come to Health Net in 1996 from CareAmerica, where he also served as president and CEO.
Southam earned his M.D. from the UCLA School of Medicine and served his residency at Cedars-Sinai Medical Center. In addition, he holds a master’s degree from the UCLA School of Public Health and another in business administration from Pepperdine University. He’s also immediate past president and a current board member of the California Association of Health Plans and serves on L.A. Mayor Richard Riordan’s Commission on Healthy Kids.
One area in which the company may be retreating is senior care, having cut 60 positions from its Seniority Plus program this spring. Seniority Plus is the state’s third-largest Medicare HMO for seniors and disabled people, but the niche’s growth potential is considered by some as less than that of other sectors.
