PacifiCare Posts First-Quarter Loss on Charge But Sees Boost in Operating Profit
PacifiCare Health Systems Inc. announced yesterday that it lost $858.8 million in the first quarter following a $897 million charge that "overshadowed an improvement in operating earnings," the Wall Street Journal reports (Rundle, Wall Street Journal, 5/2). The writedown, resulting from an accounting change, lowered the company's net income to 24 cents a share, down from a profit of $13.2 million, or 39 cents a share, in the same period a year ago. Revenue fell 5.5% to $2.86 billion from $3.03 billion (Bloomberg News/Los Angeles Times, 5/2). However, the company said that excluding accounting charges, first-quarter earnings from continuing operations increased to $30.1 million, or 87 cents a share, from $6.9 million, or 79 cents a share, a year earlier. This improvement "reflects higher payments from customers, better health care cost controls" and exits from unprofitable lines of businesses, the company said (Wall Street Journal, 5/2). PacifiCare CEO Howard Phanstiel said that the company's current strategy is to "focus on increasing profit margins rather than chasing market share" (Wolfson, Orange County Register, 5/2). PacifiCare reported that it had 3.3 million members at the end of quarter, down 13% from a year ago and down 4% since the end of 2001. It added that premiums in the first quarter rose 15% for employer health plans and 10% for Medicare and Medicare supplemental plans (Bloomberg News/Los Angeles Times, 5/2). Phanstiel said that once profit margins increase, PacifiCare plans to "rebuild its membership base" by offering "more diversified" health plans, including new PPO plans and mental health, dental and prescription drug management programs (Orange County Register, 5/2).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.