Record quarterly profits reported by HMO operator

April 26, 1995|By John Fairhall | John Fairhall,Sun Staff Writer

Striving to overcome doubts about the future profitability of the HMO industry, Mid Atlantic Medical Services Inc. yesterday reported record first-quarter earnings.

Earnings for the first three months of 1995 were $16.9 million, or 36 cents per share, up from $13.5 million, or 29 cents a share, in the same period a year ago. Revenue was $221 million, a 23 percent increase.

The Rockville-based company, the largest Maryland-based operator of health maintenance organizations, also announced a 12 percent increase in subscribers in the first three months of the year, from 1.21 million to 1.35 million.

Mid Atlantic's stock yesterday closed at $17.875, up 37.5 cents.

The stock had fallen sharply earlier this year on the heels of analysts' concerns about the ability of HMOs to increase prices and profits while holding down medical costs.

Kurt Funderburg, an analyst with Ferris, Baker Watts Inc. in Baltimore, said Mid Atlantic's first-quarter results "look pretty good." He said that he's "cautiously optimistic in the short term" and that the stock "represents a much better value" now.

Although "enrollment growth is quite strong," Mr. Funderburg said, he's concerned that the company's commercial HMO subscriber total grew only 6 percent.

"That's a little bit of a concern going forward because your commercial line is typically your most profitable," he said.

Mid Atlantic's Medicaid HMO growth increased 22,500 to 50,500, an 80 percent increase. George T. Jochum, chairman, president and chief executive of the company, said that is "one example of how well the marketplace is accepting" its products.

Mr. Funderburg said he doubts that the company can meet its goal of adding another 100,000 HMO subscribers this year.

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