PacifiCare System’s Earnings Rise 71%

Powered by strong membership growth and aggressive control of medical costs, PacifiCare Systems Inc. earned a record $10.9 million for the year ended Sept. 30, up 71% from $6.3 million in 1988.

The health maintenance organization, the fourth-largest in California, said Monday that its membership increased more than 70%, to 553,165 enrollees in the fiscal year.

Wayne Lowell, PacifiCare’s chief financial officer, said the burgeoning membership substantially increased its administrative costs.

However, that added expense was successfully offset by the company’s efforts to reduce medical costs as a percentage of revenue, Lowell said.

In a prepared statement, Terry Hartshorn, PacifiCare’s president and chief executive officer, said: “The earnings increase is primarily attributable to our ongoing cost-control efforts and our case-management program.

“Our health-care costs as a percentage of revenue are down, compared with a year ago. Our hospital costs--measured by days per thousand members--are among the lowest in our history and are even lower today than they were a year ago.”

PacifiCare’s revenue for the 1989 fiscal year was $650.2 million, up 52% from $428.5 million. Net income for the fourth quarter stood at $4.1 million, up 78% from $2.3 million for the same period of fiscal 1988. Revenue was $190.6 million for the quarter, up 60% from $119 million a year ago.

PacifiCare Health Systems owns and operates HMOs in California, Oregon, Oklahoma and Texas and an insurance subsidiary licensed in 33 states.

Todd Richter, senior vice president and health services analyst with Dean Witter Reynolds in New York, said PacifiCare’s bright year-end financial report comes as no surprise.

“These numbers are very strong and show the strength of PacifiCare as a dominant player,” he said. “And we should see a continuation of very strong results in 1990 and 1991.”

PACIFICARE PERFORMANCE

(In millions of dollars)

4th Qtr. 4th Qtr. 12 Mo. 12 Mo. 1989 1988 1989 1988 Revenue $190.6 $119.0 $650.2 $428.5 Net Income 4.1 2.3 10.9 6.3

Source: PacifiCare Health Systems Inc.