PacifiCare Stock Falls 17% After Report to SEC Reveals Gains, Charges
PacifiCare Health Systems' stock fell 17% yesterday after a quarterly financial report filed with the Securities and Exchange Commission revealed gains and charges not announced in the insurer's third-quarter earnings report, the Los Angeles Times reports. Two weeks ago, the Santa Ana-based managed care company announced that its third-quarter profits had more than tripled to $17 million, or 50 cents per share -- "handily beating Wall Street's expectations." In the week after the announcement, the value of PacifiCare's stock increased by almost 40%. But yesterday's report disclosed $33 million in one-time gains, including rebates from pharmaceutical companies and money from contract settlements with other providers and vendors, and $34 million in special charges from the bankruptcies of two of the company's medical groups in Texas. Although the gains and losses "virtually offset each other," PacifiCare's "failure to detail the gains and charges in the quarterly earnings ... raised investors' hackles." The stock dropped $3.58 per share to $16.92 (Ballon, Los Angeles Times, 11/15). In its third-quarter earnings statement, PacifiCare alluded to "charges relating to terminated contracts with insolvent Texas physician groups" and "other changes in estimates for the quarter," but did not say how much the charges were and did not mention the credit settlements (Kelly, Reuters, 11/14). Suzanne Shirley, a spokesperson for PacifiCare, said that the company "disclosed the most important issues" in its earnings announcement and addressed the "Texas problems" in a call with analysts the next day. She called the difference between the charges and the credits "immaterial" (Los Angeles Times, 11/15).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.