Maxicare Sees $11-Million Loss Looming for Quarter

Maxicare Health Plans said Monday that it expects to report an $11-million net loss in the second quarter due to continued problems at the Nashville, Tenn., health maintenance organization it acquired last year.

However, Maxicare said that it expects to reduce its pretax losses and break even by the end of the year. Maxicare lost $21 million in the first quarter. It earned $9.1 million in the second quarter last year.

Once among the most successful in the industry, Los Angeles-based Maxicare is the nation’s largest for-profit health maintenance organization with 2.3 million members in 26 states. Its history of profitability was shattered after it purchased loss-plagued HealthAmerica and problems there turned out to be greater than expected.

Despite the announcement, Maxicare’s stock rose 25 cents, closing at $14 a share on Monday in over-the-counter trading. Several health-care industry analysts said Monday’s announcement was actually good news, since they had expected Maxicare to lose as much as $15 million.

Randall S. Huyser, an analyst with Montgomery Securities in San Francisco, estimated that Maxicare had operating earnings of $6 million in the second quarter, compared to a $5-million operating loss in the first quarter. “That’s a good swing,” he said.

Larry Selwitz, an analyst with Bateman Eichler, Hill Richards in Los Angeles, said Maxicare’s narrowed losses suggested the company was recovering. “What everyone is waiting for is to see whether a trend is emerging and we won’t know that until the third quarter,” he said.

Maxicare said amortization and depreciation expenses accounted for $9 million of the company’s anticipated $11-million loss.

A spokesman said in response to a question that Maxicare isn’t for sale, but that the company has held discussions with several firms about a joint venture.