Healthy Developments at PacifiCare Have Firm at Peak Fiscal Fitness : HMO: Acquisition of a competitor last year and reduction in hospital costs boosted bottom line, and Clinton’s managed-care policies could bring boom.

PacifiCare Health Systems Inc., Orange County’s largest health maintenance organization, said Wednesday that its acquisition of a competitor last year and a reduction in hospital costs have spurred record membership, profit and revenue.

The overall operating increases may be a harbinger of an economic boom for PacifiCare and other HMOs, whose focus on managed care was one of President-elect Bill Clinton’s main campaign planks.

Indeed, PacifiCare’s chief executive, Terry Hartshorn, said that Wall Street has already indicated that it thinks good times are ahead for PacifiCare. The company’s stock has risen significantly in the past year, from $11.13 in November 1991 to $45.50 on Tuesday.

PacifiCare’s stock was off Wednesday, however, losing 25 cents a share to close at $45.25 on the NASDAQ market.

“The stock has reacted because Clinton is talking very aggressively about health care reforms,” Hartshorn said. “We are positioned very well for President Clinton and his policies.”

For instance, Hartshorn said, the company has decreased the length of hospital stays by 10% in the past year, thanks to its increased use of outpatient surgery centers and in-home health care as a way to cut costs.

Because of a shift away from hospital utilization, the company’s total medical care expenses dropped 2.2%, even though there was a 32% growth in membership and therefore a growth in the number of claims. The company added 130,000 members, many of them in Northern California, when it bought Health Plan of America in December.

“Instead of admitting everybody to hospitals, we care for them on an outpatient basis,” Hartshorn said. “That’s less expensive.”

Profit for PacifiCare’s 1992 fiscal year, which ended Sept. 30, was $43.6 million, or $1.78 a share, a 69% jump from earnings of $25.7 million, or $1.10 a share, for the previous 12 months. Annual revenue was $1.7 billion, a 36% increase from $1.24 billion for the previous fiscal year, the company reported.

Hartshorn also said that the HMO raised $97 million through public stock offerings last year as a “war chest” for further acquisitions. That money has not been used yet, Hartshorn said, but a purchase may be in the offing. He would not comment further.

PacifiCare has more than 720,000 members and operations across California and in parts of Oklahoma, Oregon and Texas.

PacifiCare Reports Year-End Results

PacifiCare Health Systems Inc. reported a 36% increase in revenue for the fiscal year ended Sept. 30. The company said its revenue jumped $460 million to $1.7 billion. Profit increased nearly 70% to $43.6 million for 1992. Figures in thousands of dollars, except per-share data:

4th qtr 4th qtr 12 months 12 months 1991 1992 1991 1992 Revenue $342,252 $454,569 $1,242,357 $1,686,314 Net income 7,944 12,140 25,702 43,590 Per share 0.35 0.47 1.10 1.78

Source: PacifiCare Health Systems Inc.