Maxicare Earns First Quarterly Profit Since ’86
On the verge of officially emerging from federal Chapter 11 bankruptcy proceedings, Maxicare Health Plans on Monday reported its first quarterly profit in four years.
The Los Angeles-based health-maintenance organization said it earned $22.1 million in the third quarter, contrasted with a $9.8-million loss in the year-ago period. Most of the profit in the recent quarter was a $21.4-million gain from the sale of the company’s Michigan health plan, a Maxicare spokesman said.
Still, the $696,000 profit before the gain is the first sign that the company is turning around after its March, 1989, Chapter 11 filing. Maxicare’s last profit came in the third quarter of 1986. But that was before it acquired HealthAmerica Corp., one of two acquisitions that plunged Maxicare into the red as debt mounted and operating problems in some of the newly acquired units became apparent.
In the reorganization, Maxicare has sold or closed many of its units.
Third-quarter revenue fell to $95.6 million, down 12% from $109 million a year ago. For the first nine months, Maxicare reported a net income of $18.9 million. Revenue for the first three quarters declined 29% to $292.2 million, from $412.3 million in the first three quarters of 1989.
The company said its operating performance has been improving in 1990. “We were able to achieve profitability the same way we have rebuilt the company,” Peter J. Ratican, chairman and chief executive, said in a statement. “We have continued to contract with quality-oriented medical providers, and reduced our corporate overhead to 11.9% of total revenue in the third quarter of 1990, compared to 17% in the same period of 1989.”
Ratican also said the company has “enjoyed significant success” in marketing the plan to employers for 1991. Companies offering Maxicare next year are Bank of America, GTE, Sears, Roebuck & Co. and the Motion Picture Industry Health and Pension Plans, Maxicare said.
The company said it expects a larger gain when it emerges from Chapter 11 proceedings. The U.S. District Court in Santa Ana has approved Maxicare’s reorganization plan, but it awaits approval from regulators in various states before the reorganization is official.
