CareFirst reports earnings of $18 million in quarter Parent of Md., D.C. Blues posts decline despite revenue gain

Health care

November 17, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

CareFirst Inc., the parent of the Maryland and District of Columbia Blue Cross plans, reported essentially flat earnings yesterday of $18 million for the quarter that ended Sept. 30, down from $18.5 million in the corresponding quarter last year.

The slight decline in profitability came despite record revenue as increases in medical costs offset top-line gains.

Revenue for the quarter was $976.4 million, up 12.5 percent from $867.9 million in the third quarter of 1997. But while revenue was up $108 million, medical claims were up by $123 million. Care costs totaled $897 million, 15.9 percent higher than $773.8 million in the year-ago quarter.

G. Mark Chaney, executive vice president and chief financial officer of CareFirst, said, "We look on the results as a continuation of good, solid performance, given the circumstances under which we're operating."

He said the profit margin, 1.85 percent for the quarter and 1.83 percent for the year to date, "compares favorably with publicly traded managed care companies and with other Blues plans." The industry newsletter Pulse, which tracks the publicly traded companies, reported they were, on average, slightly in the red for the most recent reporting period.

Chaney said the company had generally worked hard at managing medical costs -- hospital days per 1,000 members, for example, remained essentially flat -- but that unit costs were increasing.

"Generally, we're finding that those products which give us less ability to manage care costs are facing more problems with profitability," he said. Margins were down in indemnity insurance, but that was essentially canceled out by improved profitability in HMOs.

Chaney said the company is seeking approval from insurance regulators for rate increases for two of its major indemnity product lines, Medicare supplemental policies and indemnity insurance for small employers.

Also, he said, profitability improved more for the D.C. plan, which is able to negotiate discounts with hospitals, and declined for the Maryland plan, which pays hospital rates set by state regulators.

CareFirst came into being in January, as a holding company controlling Blue Cross and Blue Shield of Maryland and its D.C. counterpart, Blue Cross and Blue Shield of the National Capital Area.

Chaney said the combination had resulted in "synergies" that brought down administrative costs, to 9.3 percent of revenue for the first three quarters this year, from 10 percent in the same period last year.

Pub Date: 11/17/98

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