PacifiCare Expects Earnings Under ‘Shared-Risk’ Payments

PacifiCare Health Systems, which operates the nation's largest Medicare HMO, announced yesterday it expects its earnings for the first quarter and the full year to "reach the high end" of "a wide range of analysts' predictions," the Los Angeles Times reports. In the midst of a "massive turnaround effort," the Santa Ana, Calif.-based firm expects to earn 35 cents a share in the first quarter and $2.94 in 2001. The Times reports that PacifiCare's earnings had been "sluggish" because of high medical costs and a change in its business strategy from a fixed payment system to a "shared-risk arrangement." Analysts' financial estimates for the company have varied from a loss of $2.18 a share to a profit of $3 a share. Lori Price, an analyst at J.P. Morgan Chase, said, "Even with an upbeat management presentation, we would expect to remain cautious on PacifiCare stock until visibility improves with respect to the company's true underlying medical cost trend and until PacifiCare is able to achieve a sustained turnaround" (Los Angeles Times, 4/6).