Health Firm Posts Scant Profit Increase
Foundation Health Systems Inc., one of California’s biggest health insurers, said Tuesday that second-quarter earnings rose slightly as it shed troubled units to focus on more profitable businesses.
The Woodland Hills-based company said profit from operations rose 1.6% to $31.4 million, or 26 cents a share, from $30.9 million, or 26 cents, a year ago. Revenue fell 1.9% to $2.13 billion from $2.17 billion. The company’s total medical membership fell to 5.51 million from 5.8 million as it sold some plans and lost some members after raising premiums.
Foundation has been struggling since it was created in 1997 through the $1.3-billion merger of Foundation Health Corp. and Health Systems International Inc. Medical costs have risen faster than forecast, and the company has lost members to competitors.
“It appears that we’re still in the midst of a turnaround story,” said John Rex, an analyst with Bear Stearns.
Foundation shares fell $1.38 to close at $14.56 on the New York Stock Exchange.
The company last year appointed new executives, who sold unprofitable businesses, raised premiums and moved to control cost increases. During the most recent quarter, Foundation finished selling health plans in the South and Texas and made plans to sell others.
Even so, the company said it expects medical costs for its commercial health plans, which include HealthNet, to rise by about 7% next year. To offset that increase, Foundation said it plans to raise commercial-plan premiums by 7% to 8% on average.
At a Glance
* McKesson HBOC Inc., the U.S.’ leading drug wholesaler, said fiscal first-quarter profit rose about 8% after it restated past earnings upon discovering accounting improprieties at its software unit. Profit from operations for the quarter ended June 30 rose to $86.4 million, or 30 cents a share, from $80.1 million, or 28 cents, a year earlier. The San Francisco-based company was expected to earn 34 cents. Revenue excluding sales to customers’ warehouses rose 22% to $6.54 billion in the quarter, from $5.36 billion.
McKesson is trying to rebuild investors’ faith since it slashed fiscal 1999 earnings by $152.2 million, or 53 cents, because of improperly booked sales at HBO & Co., the Atlanta software maker it bought in January for $13.9 billion.
* Total Renal Care Holdings Inc., a Torrance-based operator of dialysis centers, reported a second-quarter net loss, excluding extraordinary items, of $21.0 million, or 26 cents a share, contrasted with a net income of $7.9 million, or 22 cents, for the period a year ago. Revenue rose to $352.9 million from $288.6 million.
Total Renal warned last month that its results would trail forecasts, for reasons that include higher operating costs and less-than-expected revenue for U.S. dialysis treatments. Its chief executive and chief financial officer resigned in July.
* Chad Therapeutics Inc. of Chatsworth, producer and distributor of medical oxygen systems, reported a fiscal first-quarter net loss of $154,000, or 2 cents a share, contrasted with a net income of $107,000, or 1 cent, a year ago. Sales fell to $3.6 million from $4.2 million.
