PACIFICARE: Payment Boost Plan Receives Mixed Reviews
In a controversial move, PacifiCare Health Systems Inc. will raise payments to doctors and hospitals providing patient care, spurring cheers from health care providers and jeers from Wall Street, the Los Angeles Times reports. PacifiCare shares tumbled 14.3% on the Nasdaq market Thursday, even though it posted earnings late Wednesday that topped projections for the quarter. According to Bear Stearns health care analyst John Rex, PacifiCare has "enter[ed] a period where we're going to see higher volatility on medical costs." While he supported the policy shift "strategically," Rex contended that the change caused PacifiCare to dole out about a penny more for each premium dollar and predicts that the amount will rise even higher by the end of the year. However, PacifiCare President Robert O'Leary believes that the company can still "make money" under the new system. "We have to prove to Wall Street that we can do it. We are going to have to demonstrate to the Street over time that we can effectively manage not only our transition, but the additional (financial) model as well," he said (Bernstein, 8/4).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.