PacifiCare Posts 62% Jump in Earnings : Health care: Net income increased to $17.6 million in fiscal 1990; revenue grew by 50%.
Benefiting from membership growth, higher prices and cost-cutting measures, PacifiCare Health Systems Inc. said its earnings jumped 62% to $17.6 million for fiscal 1990 from $10.9 million a year earlier.
Revenue for the year ended Sept. 30 increased 50% to $975.9 million from $650.2 million a year ago.
The Cypress-based health maintenance organization has reported 11 consecutive quarters of increased earnings.
The company cautioned, however, that it expects its rapid growth to slow in the current year because of increased price competition for employee benefit plans and changes in federal reimbursements for Medicare patients.
“Fiscal 1990 was a very successful year for PacifiCare,” said Terry Hartshorn, president and chief executive. “Increased membership and premium revenue and a reduction in total health care expenses as a percentage of premium revenue were all contributors to PacifiCare’s achievement.”
PacifiCare’s membership grew 22% to 673,359 enrollees in 1990, with group medical plans representing 75% of that total and the firm’s Medicare program making up the other 25%.
The company said that the physicians with which it contracts were able to save money primarily by reducing the length of hospital stays. But some of that saving was offset by higher prescription drug prices.
Marketing and administrative costs rose moderately as a percentage of revenue, reflecting PacifiCare’s rapid growth.
Todd Richter, senior health-care analyst with Dean Witter Reynolds in New York, said PacifiCare’s earnings were “outstanding” and slightly better than anticipated. PacifiCare is “one of the best-managed” HMOs in the industry, he said.
Moreover, he noted that the HMO industry, which provides lower-cost health care for a set monthly fee, has been making “dramatic” gains in winning market share from more traditional insurance carriers that reimburse patients a percentage of the cost of treatment.
Hartshorn said he anticipates “very strong” revenue growth of 15% to 20% in 1991, while acknowledging that growth would be much lower than last year’s 50% rate.
“Our challenge next year . . . will be to become more efficient as a company to reduce overhead,” he said.
Hartshorn cautioned that the company’s growth will be slower in 1991, in part because of increasing price competition from larger health-care providers such as Kaiser Permanente, HealthNet and Blue Cross. Another factor will be reduced federal Medicare reimbursements, which Hartshorn said will not keep pace with rising medical costs.
For the fourth quarter, PacifiCare reported net income of $5.9 million, compared to $4.1 million in the year-earlier period. Revenue was $272.8 million, up from $190.6 million a year earlier.
PACIFICARE’S PERFORMANCE
In the fourth quarter ended Sept. 30, PacifiCare Health Systems Inc. reported net income of $5.9 million as its revenue jumped 43%. The company attributed the gain to membership growth, higher premium prices and cost-cutting measures.
Figures are in thousands, except per-share data.
4th Qtr 4th Qtr 12 Months 12 Months 1990 1989 1990 1989 Revenue $272,815 $190,579 $975,849 $650,242 Net income (loss) $5,916 $4,076 $17,638 $10,859 Per share (loss) $0.49 $0.36 $1.48 $0.96
Source: PacifiCare Health Systems Inc. MEDIAN HOME PRICES IN AREAS OF STATE
%Change % from Region Oct.1990 Oct.1989 Change Sept.1990 Orange County $236,240 $248,670 -5.0% -1.7 Los Angeles $210,240 $218,280 -3.7 +2.6 San Francisco $247,190 $262,100 -5.7 -1.4 San Diego $179,530 $187,340 -4.2 -3.9 Sacramento $134,900 $115,000 +17.3 -2.3 Riverside/San Bernardino $130,060 $129,920 +0.1 +0.3 Ventura $239,620 $251,360 -4.7 -0.7 California Average $188,060 $193,730 -2.9 -1.2
Source: California Assn. of Realtors
