Kaiser Permanente is but one managed-care company that enjoyed a good first quarter. A number of other large national or regional plans, including Aetna U.S. Healthcare, Foundation Health Systems, Oxford Health Plans and PacifiCare Health Systems, have posted dramatically improved first-quarter financial results, leading some analysts to say higher premiums are boosting almost all managed-care companies.
"It's all variations on the same theme: HMOs and other health insurers got very attractive rate increases in 1999, and that's what we're seeing a reflection of," said Rob Mains, a Saratoga Springs, N.Y.-based healthcare analyst at the Advest investment firm.
Health plans' big premium increases and enhanced profit margins could lead to increased tension with providers, including hospitals, Mains said. Hospitals and integrated systems eager for a bigger piece of the premium pie could take aggressive stances in contract talks with managed-care organizations. "(The increases are) going to make negotiations with providers prickly," said Mains.
In the short run, at least, results are good.
* Oxford, based in Norwalk, Conn., posted net earnings of $3.2 million, or 4 cents a share, for the quarter ended March 31, compared with a loss of $45.3 million, or 57 cents a share, in the first quarter of 1998. Oxford expects to be profitable this year, Chief Executive Officer Norman Payson, M.D., said. However, Oxford will probably lose money in the second quarter, due to "seasonal increases in healthcare costs," Payson said.
It had tallied losses of $987 million over the past year and a half.
Because of exits from some Medicare, Medicaid and commercial markets, Oxford's enrollment dropped to 1.69 million as of March 31 from 1.88 million on Dec. 31, 1998. That lowered the plan's revenues to $1.06 billion from $1.23 billion. But by trimming high-cost enrollees from its roster, Oxford's financial picture improved.
* Aetna's healthcare unit saw operating earnings for the first quarter jump to $116 million from $91.7 million in the year-ago period. Revenues for the quarter skyrocketed 34% to $4.44 billion from $3.3 billion a year earlier. Additional data for the healthcare unit of Hartford, Conn.-based Aetna were not available.
Aetna Chairman and CEO Richard Huber said in an April 28 statement that higher premiums, increased HMO membership and "intensified" efforts to control operating expenses and medical costs contributed to the strong results.
* PacifiCare, based in Santa Ana, Calif., said first-quarter earnings jumped to $74 million, or $1.61 a share, from $41.7 million, or 90 cents a share, a year earlier. Revenues for the same period jumped to $2.45 billion from $2.38 billion.
The company, one of the biggest players in the Medicare-risk market, expects "strong operating performance" for the rest of the year, CEO Alan Hoops said in a May 5 written statement.
* Foundation, based in Woodland Hills, Calif., reported that first-quarter earnings rose 59.8% to $41.9 million, or 34 cents a share, from $26.2 million, or 22 cents a share a year earlier. Revenues increased 4.6% to $2.28 billion, compared with $2.18 billion in the first quarter 1998. Officials said the sale of Foundation's pharmacy benefits processing operations to Advance Paradigm bolstered the quarterly results.
Jay Gellert, FHS' president and CEO, said that the company expects to see "sequential improvement in earnings" throughout the year.
Companies like Aetna, Foundation, Kaiser, Oxford and PacifiCare are pricing their health-insurance products appropriately and working aggressively to control costs, according to Greg Crawford, a healthcare analyst at Fox-Pitt, Kelton in New York.
"The recovery in the managed-care industry is genuine," Crawford said. "The outlook for profitability in the industry is finally improving."