CareFirst worries despite 25% gain

3rd-quarter income, revenue up but costs are rising faster

November 16, 1999|By Robert Little | Robert Little,SUN STAFF

CareFirst BlueCross Blue-Shield reported a 25 percent increase in third-quarter income yesterday, but company officials remain concerned that the cost of providing health services is rising faster than revenue from it.

Maryland's largest health insurer reported net income of $22.6 million for the three months that ended Sept. 30, up from $18 million during the third quarter last year.

Revenue in the quarter rose 16.3 percent to $1.1 billion, while health care costs rose 13.9 percent to $1.021 billion.

Despite the third quarter's numbers, company officials said revenue has not grown as fast as expenses so far this year.

Following a trend that has strained the health care industry nationwide, CareFirst's revenue for the first nine months of 1999 is up 14.2 percent, while costs have risen 14.6 percent.

"I think the numbers for the quarter fall very much in the category of good, solid performance," said G. Mark Chaney, executive vice president and chief financial officer for CareFirst. "But we're still in the situation of seeing growth in care costs offsetting revenue gains."

The company's increased revenue and expenses came mostly from a 10 percent rise in enrollment in its health plans.

CareFirst, which manages Blue Cross Blue Shield health plans in Maryland and the District of Columbia, reported membership of 2.54 million people during the third quarter.

A dominant source of CareFirst's growing imbalance between revenue and expenses was its Medicare and Medicaid programs, which continue to lose money, Chaney said.

CareFirst had already announced that on Jan. 1 it will stop offering its Medicare HMO in rural counties where the federal reimbursement rate is lower than the rate in metropolitan counties.

The company is watching a bill passed two weeks ago by the House of Representatives that would increase Medicare payments, Chaney said, but has no plans to change its decision.

CareFirst also has dealt with rising health care costs by keeping administrative expenses low relative to growth, Chaney said -- a strategy that has been successful but cannot continue indefinitely.

So far this year, administrative costs at CareFirst account for about 8.9 percent of the company's revenue, compared with 9.3 percent last year.

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