LOS ANGELES: Foundation Health Systems Turning Around

      Los Angeles-based Foundation Health Systems, Inc., announced yesterday "continued improvement" in operating results for the third quarter ending Sept. 30. Operating cash flow grew stronger, and FHS added claims reserves of more than $145 million, while reducing debt by more than $320 million. "In the past 12 months FHS has made enormous strides and this successful quarter is yet another milestone in our turnaround effort," Jay Gellert, president and CEO, said, noting, "We have virtually completed our divestiture program, have significantly strengthened the balance sheet and restored positive cash flow." Although overall revenues rose by 1.2% since last year, premium revenues for the system's health plans fell by less than 1% in the third quarter, as overall membership dropped by 6% from last year. The company's recent exits from counties "where reimbursement rates from the government do not adequately reflect the trends in cost of health care" has sparked a 17% decline in enrollment for FHS' Medicare plans. The company plans additional Medicare exits by year's end. In contrast, led by California and Connecticut, FHS Medicaid membership soared by 22% for the third quarter. Enrollment for FHS' commercial plans also fell 9%, "primarily due to disciplined pricing and divestitures," Gellert said. "We continue to believe that we must charge a fair price for our services to be certain our members have access to the high quality health care they need. Commercial premium yields, year-over-year, were up 10% thanks to our discipline and some mix issues," he added. Health plan services costs decreased by 3% for the quarter. FHS is the fourth-largest publicly traded managed care company in the nation and provides coverage for about 5.5 million people in 17 states (FHS release, 11/4).