MAMSI profitable for 3rd quarter in a row Net of $4.7 million gained by Mid Atlantic Medical Services Inc.

November 14, 1997|By M. William Salganik | M. William Salganik,SUN STAFF

Mid Atlantic Medical Services Inc. of Rockville posted its third consecutive positive quarter for the three months ending Sept. 30.

The return to profitability comes after three consecutive negative quarters last year, and at a time when some other managed care insurers are continuing to experience losses.

Profit for the quarter was $4.7 million, a mirror image of the $4.7 million loss in the same quarter of 1996. Earnings were 10 cents a share, in line with analysts' estimates, and continuing the trend of gradual improvement, with two cents a share in the first quarter this year and six cents in the second.

Revenue for the quarter was $269.9 million -- down 6.3 percent from $288.0 million in the third quarter of 1996.

This reflected a decision by MAMSI to move out of the Medicare and Medicaid business in regions it felt were unprofitable. Enrollment losses in those areas were offset by gains in MAMSI's preferred-provider organization (PPO) product, which now serves more than 1 million people. However, MAMSI receives only an administrative fee for PPO members, so revenue from that product is lower than from HMO members.

Beyond cutting back on unprofitable lines of business, MAMSI was able to improve its bottom line by better controlling medical costs. Medical expenses were $113.61 per member per month -- down 4.9 percent from $119.52 in the third quarter last year.

That dropped MAMSI's medical loss ratio, the share of premiums spent on care, to 89.0 percent, from 94.4 percent in the third quarter last year. With administrative costs around 10 percent, managed care insurers need to keep the loss ratio below 90 percent to run in the black.

"On the case management side, we made some system improvements," reflected in the lower care costs, said Elizabeth Sammis, senior director for MAMSI. She said the company has been identifying potential high-cost subscribers, such as people with asthma or diabetes, and assigning case managers to make sure they receive the preventive care that would reduce costly hospitalizations.

In line with other managed care companies seeking to improve their top line, MAMSI has already put into place premium increases averaging 5 percent to 6 percent for commercial HMO members whose contracts begin in January, Sammis said.

MAMSI's third quarter results were released after the stock market closed Wednesday. Yesterday, shares in MAMSI closed at $13.8125, unchanged on the New York Stock Exchange.

Pub Date: 11/14/97

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