PacifiCare May Bid for Oakland HMO

Eager to expand into Northern California, PacifiCare Health Systems Inc. said Wednesday that it is considering making an offer to buy Oakland-based HEALS Health Plan, a cash-strapped health maintenance organization with 96,000 members that has been courting suitors for months.

Privately held HEALS would not comment directly on negotiations with PacifiCare, but Wayne Lowell, chief financial officer of PacifiCare, said: “We are very interested. We have had quite a few visits with them.”

Cypress-based PacifiCare, which has built its HMO network through internal growth, has made it clear that it wants to expand through acquisitions. The company recently was rebuffed in an attempt to buy bankrupt Maxicare Health Plans of Los Angeles.

PacifiCare’s health and acquisition muscle was demonstrated by its second-quarter financial results, which were reported Wednesday. The company is flush with cash for a buyout. It reported that on March 31 it had $190 million available in cash and short-term investments.

The company posted second-quarter earnings of $3.9 million, up 88% from a year ago, on a revenue increase of 59% to $246.76 million.

Investors apparently were pleased with the results. The price of the company’s stock rose $1.25 to close at $18 a share Wednesday.

HEALS has been looking for a buyer that could provide it with much needed working capital. Even in more need of cash is HEALS IPA (Independent Practice Assn.), a network of physicians that provides care to HEALS members and is heavily in debt. While the IPA operates as a separate organization, it owns 40% of the HEALS HMO that’s for sale.