Monday, Feb. 16, 2004 | 11:50 a.m.
PacifiCare Health Systems Inc. reported a 15 percent decline in profit in the fourth quarter because of a reduction in membership and a charge for an early debt repayment.
The Cypress, Calif.-based provider of health maintenance organizations and preferred provider organizations last week reported a profit of $31.5 million, or 36 cents per share, down from the year-ago quarter of $37 million, or 50 cents per share. The per-share results were adjusted to reflect a 2-for-1 stock split that took effect Jan. 20. The company took a charge of $17.5 million, or 19 cents per share, for its early debt repayment.
Revenue rose 2 percent in the fourth quarter to $2.8 billion because of an 18 percent increase in commercial premiums per member per month and a 5 percent increase in senior premiums per member per month.
While the company's profit declined from the year-ago quarter, the company was optimistic about its 2004 and 2005 membership and financial outlooks. PacifiCare announced plans to further diversify its health plans with additional products and a new strategy to focus on all market segments: individuals, small groups, large groups, unions and federal accounts.
The company said Nevada is a key market for growth and will continue to play an important role in the company's business even though it only represents about 4 percent of the state's insured population. Commercial membership rose 20 percent in 2003 to 33,258. Medicare + Choice members declined 6 percent to 25,300 members.
"Nevada is one of our largest growth opportunities," said Mike Clark, vice president of commercial sales in Arizona and Nevada. "It definitely creates a huge opportunity for PacifiCare."
Nationally, commercial membership declined 7 percent in the fourth quarter to 2.9 million members and the company posted a 10 percent reduction in its Medicare + Choice members to 682,300.
PacifiCare Chief Executive Howard Phanstiel said the Medicare + Choice program will grow in 2004 for the first time in several years with a projection of reaching 736,000 members.
The new Medicare law provided an average of 9.7 percent in additional Medicare reimbursements to PacifiCare, which means additional benefits and reduced premiums for its members.
Nationally and locally, PacifiCare has ramped up its sales staff and plans to increase commercial membership in 2004 by between 3 percent and 5 percent and its Medicare + Choice membership by between 7.5 percent and 8 percent.
In Nevada, commercial membership is projected to grow 30 percent to 47,368 members, Clark said.
PacifiCare plans to meet with union representatives in Nevada this week to expand its relationships with local unions, Clark said. He declined to comment on which unions were negotiating with the insurer.
For 2004, PacifiCare projects net income of between $280 million and $290 million, or between $2.95 and $3.05 per share.
The company announced in January it could lose thousands of members in Southern California because of a labor dispute between the United Food and Commercial Workers union and several grocery chains. Despite the potential losses, membership numbers were up in January, Phanstiel said.
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