Nevada business growing for PacifiCare

Michelle Swafford

Monday, Nov. 10, 2003 | 11:07 a.m.

PacifiCare Health Systems Inc. beat Wall Street expectations last week in announcing its profit increased 54 percent in the third quarter. Company officials said the Las Vegas Valley will play an important role in company growth because of its population influx.

The Cypress, Calif.-based managed care organization reported a profit of $67.5 million, or $1.72 per share, up from the year-ago quarter of $43.8 million, or $1.20 per share. Revenue dropped 1 percent in the third quarter to $2.74 billion from $2.78 billion because of a 10 percent decline in medical membership.

PacifiCare attributed its overall improvement to staying ahead of rising health care costs.

Nationally, PacifiCare had about 2.9 million members in its commercial and Medicare programs as of Sept. 30, down from 3.2 million members a year earlier.

PacifiCare lost some of its members earlier this year including California state employees, but enrollment and retention are improving.

There was a 20 percent net increase in commercial membership in Nevada, bringing the Nevada membership to 31,500 in the third quarter, said Mike Clark, vice president of commercial sales in Arizona and Nevada.

The company handles about 4 percent of Nevada's insured population. PacifiCare members in Nevada can choose from various commercial and Medicare insurance plans including Health Maintenance Organizations, Preferred Provider Organizations, self-directed, dental and vision.

"In Nevada, we have some fairly aggressive goals," Clark said. "We see it as one of our largest opportunities for growth." Nevada is one of the company's smaller markets overall, but Clark said the rapid growth of Summerlin and Henderson creates lots of opportunities.

The majority of PacifiCare's Nevada members are enrolled in HMOs, but interest in PPOs is increasing, Clark said. Nationally and in Nevada, the company has shifted its focus from Medicare plans to individual markets. "We no longer underwrite accounts where the cost of care is not being compensated by the rates we receive," company spokesman Tyler Mason said.

So far, the company has been able to stay ahead of rising health care costs, but large hospital operators say insurance and Medicare reimbursements aren't keeping pace with their costs, which hurt hospitals' profits. Clark said PacifiCare is concerned about hospitals' profitability because if they close it limits access for its members.

"There is a finite amount of money a member is wiling to pay in premiums," Clark said. "It's not just a matter of the hospitals saying, 'I want more money,' it's a matter of saying 'how much is someone willing to pay."'

In Nevada, PacifiCare is looking to unions for additional membership because they are one of the bigger growth opportunities. Going after unions has been a successful strategy in California, Clark said.

The company expects moderate commercial membership growth nationally. PacifiCare increased its 2003 earnings-per-share projections to between $6.52 and $6.57. The previous projection was for earnings of between $6.45 and $6.55.