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Spokane, Washington  Est. May 19, 1883

Pacificare Earnings Up 14 Percent

Associated Press

PacifiCare, one of the nation’s largest health maintenance organizations, beat Wall Street’s expectations and reported a 14 percent rise in quarterly earnings Monday, reflecting efforts to hold down medical costs.

The company, based in the Los Angeles suburb of Cypress, Calif., earned $31.8 million, or $1.00 per share, in its first fiscal quarter, compared with $28.0 million, or 88 cents per share in the same period in 1995. Analysts had predicted earnings per share of 98 cents.

Revenues grew 16 percent to $1.23 billion, from $1.06 billion in 1995.

“When compared to the same period a year earlier, the results for the December quarter this (fiscal) year demonstrate stability in health care costs and overhead expenses,” said Alan Hoops, president and chief executive officer.

Managed care companies struggled to keep up their previously fast pace of profit increases in 1996 as medical costs rose while heavy competition forced many to keep premiums stable or lower. PacifiCare has been among the HMOs moving most quickly to try to reduce increases in costs.

PacifiCare reported that its medical loss ratio - the percentage of premium revenue spent on providing health care - rose slightly to 85.1 percent during the quarter, from 85 percent in 1995.

The company had lower physician costs in its health care plans purchased by corporate employers. This was partly offset by higher physician costs, enhanced benefits and lower premiums in its programs serving patients on Medicare, the government-paid insurance program for the elderly. Prescription drug costs rose in all plans, the company said.

PacifiCare’s enrollment grew 13 percent compared with the previous year to 2.05 million people, mostly in California.

The company is awaiting regulatory approvals for its buyout of another big HMO, FHP International Corp., also California-based.

While the Federal Trade Commission has approved the deal, consumer groups have asked California authorities to kill it, charging that it will lead to less competition, higher prices and poorer service. PacifiCare denied the allegations.

The company has said the merger will allow it to cut administrative costs, but acknowledged Monday that completion of the deal has been delayed, reducing the estimated cost savings in 1997.