Md. Blue Cross posts 4% gain in quarter profit Insurer helped by rising profitability in its HMOs

revenue up 17.5%

Health care

March 04, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

Buoyed by increasing profitability in its HMOs, Blue Cross Blue Shield of Maryland yesterday reported an $8.2 million profit for the last quarter of 1997, up 4 percent from $7.9 million in the last quarter the previous year.

Revenue for the quarter was $571 million, up 17.5 percent from $486 million in the corresponding period a year earlier. That pushed Blue Cross to its first $2 billion year, with annual revenue of $2.2 billion, up 11.4 percent from $1.96 billion in 1996. The increase was driven by a 6.6 percent increase in enrollment, to 1.5 million, and some premium increases.

Profit for the year was $30.4 million, up 2.7 percent from $29.6 million the previous year. That amounts to a margin of 1.4 percent -- just below the 1.5 percent Blue Cross had set as a target.

G. Mark Chaney, chief financial officer, said Blue Cross would have hit its profitability target if it were not for two unusual expenses -- $2.6 million in the last quarter for costs associated with its business combination with the District of Columbia Blue Cross plan, and $1.1 million throughout the year to prepare its computers for the year 2000.

"We're very pleased with the performance, given the very competitive environment we're in," Chaney said.

Publicly traded managed care companies are reporting extremely slim margins, said Douglas B. Sherlock, senior health care analyst at the Sherlock Company in Gwynedd, Pa., a company that tracks the industry. In fact, Sherlock said, for the most recent quarter reported, publicly traded companies averaged a negative 1.4 percent, but that included troubled Oxford Health Plans Inc., whose large losses pulled down the average.

For Maryland Blue Cross, the HMO side of the business reported a profit for the year of $10 million on revenue of $713 million, compared to $3.6 million on revenue of $536 million the previous year.

The traditional indemnity side of the business reported a profit of $20.5 million on revenue of $1.5 billion, down from $26.0 million on revenue of $1.4 billion in 1996.

Membership in HMOs was up 28 percent, to 442,825. Chaney said the most rapid growth was in the Medicare and Medicaid managed care programs. Indemnity enrollment was down 2.3 percent, to 986,354. While all insurers continue to see a migration from indemnity to HMO plans, Chaney said, "a lot of people are stopping in the middle," opting for managed care plans that allow more choice than strictly managed HMOs.

The D.C. plan, Blue Cross Blue Shield of the National Capital Area, reported profit of $9 million for the last quarter. In the last quarter of 1996, it reported a $13.3 million profit, but that included $6.8 million from the sale of a subsidiary. Revenue was $251.7 million for the quarter, up 11.2 percent from a year earlier.

Its reported numbers cannot be compared directly with those for the Maryland plan because D.C. regulations call for different accounting methods.

In January, the two Blue Cross plans affiliated under a new holding company, called CareFirst Inc.

Pub Date: 3/04/98

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