Despite a boost in revenue, Magellan Health Services reported that its fourth-quarter earnings were cut in half as the Avon, Conn., healthcare management company's costs soared during the quarter.
Additionally, a recent contract loss to provide behavioral-health and substance-abuse treatment services to mentally ill children and adults in the Phoenix area threatens to cut a segment of Magellan's future earnings. Since Sept. 1, 2007, Magellan has held a contract with Maricopa County to provide those services, which generated net revenue of $755 million in 2013. But in March of last year, as the contract was set to expire, the state of Arizona awarded the mental health contract to another vendor.
Magellan has since filed a protest and several appeals, challenging the way in which the Arizona Department of Health Services scored the contract proposals and awarded it jointly to Mercy Care Plan and Maricopa Integrated Health System. But the state is moving ahead with the new contract, which could mean a hit to Magellan's revenue as early as the first quarter of this year.
Magellan's revenue climbed all through 2013, but in the final three months of the year, its net income fell.