UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 12b-25
Commission file number: 000-18839
NOTIFICATION OF LATE FILING
(CHECK ONE): [X] Form 10-K [ ] Form 20-F [ ] Form 11-K [ ] Form 10-Q
[ ] Form N-SAR
For Period Ended: June 30, 2002
[ ] Transition Report on Form 10-K
[ ] Transition Report on Form 20-F
[ ] Transition Report on Form 11-K
[ ] Transition Report on Form 10-Q
[ ] Transition Report on Form N-SAR
For the Transition Period Ended: N/A
If the notification relates to a portion of the filing checked above, identify
the Item(s) to which the notification relates: N/A
PART I. REGISTRANT INFORMATION
United American Healthcare Corporation
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Full Name of Registrant
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Former Name if Applicable
1155 Brewery Park Boulevard, Suite 200
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Address of Principal Executive Office (Street and Number)
Detroit, Michigan 48207
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City, State and Zip Code
PART II -- RULES 12b-25(b) AND (c)
If the subject report could not be filed without unreasonable effort or expense
and the registrant seeks relief pursuant to Rule 12b-25(b), the following should
be completed. (Check box if appropriate)
[X] (a) The reasons described in reasonable detail in Part III of this form
could not be eliminated without unreasonable effort or expense;
[X] (b) The subject annual report, semi-annual report, transition report on
Form 10-K, Form 20-F, 11-K or Form N-SAR, or portion thereof, will be
filed on or before the fifteenth calendar day following the
prescribed due date; or the subject quarterly report of transition
report on Form 10-Q, or portion thereof will be filed on or before
the fifth calendar day following the prescribed due date; and
[ ] (c) The accountant's statement or other exhibit required by Rule
12b-25(c) has been attached if applicable.
PART III -- NARRATIVE
State below in reasonable detail the reasons why Forms 10-K, 20-F, 11-K, 10-Q,
N-SAR, or the transition report portion thereof, could not be filed within the
prescribed time period.
Registrant did not yet obtain all information and actuarial determinations
necessary to complete the consolidated financial statements and the Management's
Discussion and Analysis of Financial Condition and Results of Operations based
thereon, and requires additional time to accomplish that.
PART IV-- OTHER INFORMATION
(1) Name and telephone number of person to contact in regard to this
notification
Gregory H. Moses, Jr. (313) 393-4570
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(Name) (Area Code) (Telephone Number)
(2) Have all other periodic reports required under Section 13 or 15(d) of the
Securities Exchange Act of 1934 or Section 30 of the Investment Company Act of
1940 during the preceding 12 months or for such shorter period that the
registrant was required to file such report(s) been filed? If answer is no,
identify report(s).
[X] Yes [ ] No
(3) Is it anticipated that any significant change in results of operations from
the corresponding period for the last fiscal year will be reflected by the
earnings statements to be included in the subject report or portion thereof?
[X] Yes [ ] No
If so, attach an explanation of the anticipated change, both narratively and
quantitatively, and, if appropriate, state the reasons why a reasonable estimate
of the results cannot be made.
Registrant expects to report a consolidated net loss in the range of
approximately $10.9 million to $17.1 million for the fiscal year ended June 30,
2002, depending on actuarial analyses not yet completed when Registrant's Form
10-K was first due, but which will be completed by October 15, 2002. This
compares to consolidated net earnings of $1.2 million for the fiscal year ended
June 30, 2001. This significant change in results of operations is attributable
to two primary factors:
First, OmniCare Health Plan, Inc. ("OmniCare-TN"), a health maintenance
organization in Tennessee which is a second-tier consolidated subsidiary of
Registrant, experienced a combination of circumstances in the fourth quarter of
fiscal 2002 which were unexpected and not foreseeable by management, related to
exceptionally high medical services expenses in relation to medical services
premiums received by OmniCare-TN, for which the State of Tennessee, doing
business as TennCare, is obligated (pursuant to a recent amendment to its
contract with OmniCare-TN) to pay OmniCare-TN up to $7.5 million retroactive to
fiscal 2002 (constituting a medical services revenues receivable of OmniCare-TN
as of June 30, 2002 for statutory accounting purposes, although required to be
recorded in the first quarter of fiscal 2003 under generally accepted accounting
principles) and the need for actuarial analyses to determine the accrual amount
of a liability for medical claims incurred by OmniCare-TN's enrollees but not
reported to it as of June 30, 2002.
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Second, Registrant has recorded an approximately $2.4 million impairment loss
equal to the remaining carrying value of its patient care software system, which
was not in use at and since fiscal 2002 yearend.
Registrant provides a fuller explanation of both factors as follows.
CONCERNING OMNICARE-TN
Fiscal 2002 was a year of significant changes for managed care organizations
("MCOs") having contracts with TennCare, a State of Tennessee program that
provides medical benefits to Medicaid and working uninsured and uninsurable
recipients. In a climate of continually rising medical costs, several of
TennCare's major MCOs ceased doing business in fiscal 2002. In contrast,
TennCare has regarded OmniCare-TN as one of TennCare's viable MCOs, and on
February 15, 2002 TennCare assigned to OmniCare-TN 40,000 members from a
significant competitor which had ceased doing business.
At June 30, 2001, OmniCare-TN was licensed in and served Shelby and Davidson
Counties in Tennessee (which include the cities of Memphis and Nashville,
respectively). Effective July 1, 2001, OmniCare-TN received approval from
TennCare to expand its service area to western Tennessee and to withdraw from
Davidson County. OmniCare's approximate total membership increased from 55,500
at June 30, 2001 to 120,000 at June 30, 2002.
OmniCare-TN's TennCare contract which was in effect on July 1, 2001 had been
renewed on July 1, 2000 for a 42-month term, expiring December 31, 2003. The new
contract provided for increased capitation rates, but eliminated the earlier
practice of providing retroactive payments to MCOs for high cost chronic
conditions of their members ("adverse selection") and payments earmarked as
adjustments for covered benefits.
In June 2001, TennCare developed new risk-sharing options for its MCOs,
including OmniCare-TN. OmniCare-TN entered into its changed contract with
TennCare effective July 1, 2001.
Beginning in February, March and April 2002, OmniCare-TN noticed increases in
its claims payments, investigated, and found that approximately 9,500 new
members added in September-December 2001 represented children with special needs
with medical costs over 100% of the premiums received, and that many members
transferred to OmniCare-TN from failed MCOs also had exceptionally high medical
costs in relation to OmniCare-TN's premiums received. Beginning in April 2002,
OmniCare-TN wrote to TennCare seeking risk adjustments and reimbursements to
compensate OmniCare-TN for certain of these medical expenses.
TennCare responded to its MCOs' situation generally and in some instances
individually. For all its contracted MCOs generally, TennCare changed its
reimbursement system to an administrative services only ("ASO") program for an
18-month stabilization period (July 1, 2002 through December 31, 2003), during
which the MCOs - including OmniCare-TN - have no medical cost risk (i.e., no
risk for medical losses), earn fixed administrative fees, are subject to
increased oversight, may earn limited additional administrative fees based on
certain performance measures as an incentive to manage medical costs below the
targets, and may incur financial penalties for not achieving certain performance
requirements. TennCare has stated it intends to return to a full-risk system
after the end of the 18-month stabilization period at January 1, 2004.
TennCare responded to OmniCare-TN's situation individually as well. TennCare
amended its contract with OmniCare-TN in September 2002, retroactive in some
respects to July 2001 or to May 2002. Pursuant to the contractual amendment, (i)
OmniCare-TN retroactively elected a certain shared risk option
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effective July 1, 2001 through April 30, 2002, (ii) TennCare agreed to reimburse
OmniCare-TN on a no-risk ASO basis for medical services effective beginning May
1, 2002, and (iii) TennCare agreed to pay OmniCare-TN up to $7.5 million
retroactive to fiscal 2002 as necessary for its required statutory net worth as
of June 30, 2002.
In August 2002, in connection with Registrant's preparing its fiscal 2002
financial statements, Registrant took into account OmniCare-TN's claims payments
through mid-August 2002 for service dates on or before June 30, 2002 and
concluded that the accrual of a liability for medical claims incurred by
OmniCare-TN's enrollees but not reported to it as of June 30, 2002 should be
significantly greater than previously determined. Subsequently, Registrant has
additionally taken into account OmniCare-TN's claims payments through September
25, 2002, but the resulting actuarial analyses were not completed when
Registrant's Form 10-K was first due. Based on actuarial analyses that will be
concluded before October 15, 2002, Registrant will be able to determine that
accrual amount and in all other respects complete its fiscal 2002 financial
statements. The ultimate settlement of medical claims may vary from the
estimated amounts reflected in the accrual.
Based on OmniCare's significant membership growth, certain cost savings which
OmniCare-TN has implemented, the TennCare program's change to ASO effective May
1, 2002 for OmniCare-TN and OmniCare-TN's recently amended TennCare contract,
Registrant's management believes that OmniCare-TN has weathered the unusual
circumstances of fiscal 2002 and expects OmniCare-TN to have positive net
earnings for fiscal 2003.
CONCERNING IMPAIRMENT LOSS FOR SOFTWARE SYSTEM
Pursuant to its strategic information technology plan, Registrant purchased a
patient care software system from OAO Health Care Systems, to replace the claims
processing and payment system it has been using for OmniCare Health Plan
("OmniCare-MI"), a Michigan health maintenance organization administered by
Registrant under a management agreement. This purchase was intended to fulfill a
requirement of the State of Michigan's Office of Financial and Insurance
Services ("OFIS") to implement such a system for OmniCare-MI.
Registrant intended to use the new system for OmniCare-TN initially, but will
not do that after its OmniCare-TN management agreement terminates effective
November 1, 2002.* The system was not in use by Registrant at and since fiscal
2002 yearend. Management therefore has determined it was prudent to record as of
that date an impairment loss equal to the remaining carrying value of the
system.
Registrant now expects that the system will be utilized for OmniCare-TN, which
has been outsourcing its claims processing function to a third party by contract
since the third quarter of fiscal 2001. Registrant is evaluating the
capabilities of the new patient care software system for all functions required
for OmniCare-TN. It expects to spend much of fiscal year 2003 adapting the
system for compliance with Tennessee's laws and regulations, with the intent to
implement it for OmniCare-TN by early fiscal 2004. Management believes that when
implemented for OmniCare-TN, the system will fulfill OmniCare-TN's patient care
information system needs, presently as well as for any significant expansion of
membership or territory in Tennessee.
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* Registrant has received notice from OmniCare-MI that the management agreement
will be terminated effective November 1, 2002. The notice was given pursuant to
OmniCare-MI's amended rehabilitation plan, which a Michigan circuit court judge
approved on July 29, 2002. Registrant previously announced that it anticipated
the eventual termination of the OmniCare-MI management agreement back in March
2002, after the Commissioner of OFIS filed a rehabilitation plan for
OmniCare-MI.
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United American Healthcare Corporation
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(Name of Registrant as Specified in Charter)
has caused this notification to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: October 1, 2002 By: /s/ Gregory H. Moses, Jr.
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Gregory H. Moses, Jr.
President and Chief Executive Officer
INSTRUCTION: The form may be signed by an executive officer of the registrant of
by any other duly authorized representative. The name and title of the person
signing the form shall be typed or printed beneath the signature. If the
statement is signed on behalf of the registrant by an authorized representative
(other than an executive officer), evidence of the representative's authority to
sign on behalf of the registrant shall be filed with the form.
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Intentional misstatements or omissions of fact constitute Federal
criminal violations (see 18 U.S.C. 1001).
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GENERAL INSTRUCTIONS
1. This form is required by Rule 12b-25 (17 CFR 240.12b-25) of the General Rules
and Regulations under the Securities Exchange Act of 1934.
2. One signed original and four conformed copies of this form and amendments
thereto must be completed and filed with the Securities and Exchange Commission,
Washington, D.C. 20549, in accordance with Rule-3 of the General Rules and
Regulations under the Act. The information contained in or filed with the form
will be made a matter of public record in the Commission files.
3. A manually signed copy of the form and amendments thereto shall be filed with
each national securities exchange on which any class of securities of the
registrant is registered.
4. Amendments to the notifications must also be filed on form 12b-25 but need
not restate information that has been correctly furnished. The form shall be
clearly identified as an amended notification.
5. Electronic filers. This form shall not be used by electronic filers unable to
timely file a report solely due to electronic difficulties. Filers unable to
submit a report within the time period prescribed due to difficulties in
electronic filing should comply with either Rule 201 or Rule 202 of Regulation
S-T (ss.232.201 or ss.232.202 of this chapter) or apply for an adjustment in
filing date pursuant to Rule 13(b) of Regulation S-T (ss.232.13(b) of this
Chapter).
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