Kaiser Loses $20 Million in 2nd Quarter

Kaiser Permanente Group, the No. 1 U.S. health maintenance organization, reported a second-quarter operating loss, blaming weakness at health plans it seeks to sell or close.

The company, which reported its first profit since 1997 in its first quarter, had a second-quarter loss from operations of $20 million, compared with $25 million a year ago. Operating revenue rose 12% to $4.2 billion.

Kaiser had $881 million in operating losses in 1997 and 1998 because it failed to raise premiums as medical costs soared. The nonprofit company replaced some senior executives last year, implemented a large premium increase and moved to cut costs to turn around its operations.

Kaiser’s troubles have benefited competitors in California, the largest U.S. health insurance market. When Kaiser raised rates, it gave competitors such as PacifiCare Health Systems Inc., WellPoint Health Networks Inc. and Foundation Health Systems Inc. room to do so as well.

The second-quarter loss came as conditions worsened at money-losing Kaiser plans in Massachusetts, New York, Vermont, Connecticut and North Carolina. The company plans to either sell or shut those HMOs.

Rising drug costs, referrals to non-Kaiser physicians and high hospitalization costs also hurt the company’s financial performance outside of the troubled markets in the East, a Kaiser spokesman said.

At a Glance

Other earnings, excluding one-time gains and charges unless noted:

* Cardinal Health Inc. said its profit from operations rose 28% to $163.2 million, or 58 cents a share, in the fiscal fourth quarter, as the drug wholesaler benefited from new contracts and rising demand for pharmaceuticals. Revenue rose 17% to $5.65 billion.

* Tommy Hilfiger Corp. said its profit jumped 35% in the fiscal first quarter to $38.7 million, or 40 cents a share, 3 cents higher than expected, on strong sales of its women’s and children’s clothing lines. The maker of casual clothing and accessories said total sales grew 25% to $419.1 million.