Group Health's dismal finances lead to $250M in cuts

Seattle-based HMO Group Health needs to shed $250 million from its annual expenses and, therefore, will initiate better cost controls, company reorganization and employee layoffs.

CEO Scott Armstrong told his employees Friday that since Group Health's financial results have declined over the last three years, some major changes are needed within the next 16 months to return the company to a 3 percent operating margin, reported The News Tribune.

"We will identify areas where we must eliminate some jobs that are currently filled," Armstrong wrote in a memo to employees. "We don't know where or how many, but we will be focused, respectful and strategic about any reductions. And we will act decisively because we recognize that uncertainty about change is as disruptive as the change itself."

Armstrong told The Seattle Times he hopes these changes will help Group Health become the "model for the future." He noted that Group Health's overall financial strength was still "very, very strong," adding that the company has "so much to prove, and we have this huge opportunity as the industry reforms itself. The one place we need to improve is financial performance."

One major change already in the works before Armstrong's letter is the resignation of Richard Magnuson, Group Health's CFO. As the company started overhauling its organization, including eliminating some of Magnuson's duties, the CFO decided to resign, according to the Puget Sound Business Journal.

To learn more:
- read the News Tribune article
- see the Puget Sound Business Journal article
- check out the Seattle Times article