CareFirst's profit up 19% in quarter to $20.2 million

Gain in commercial rolls offsets financial losses for Medicare

May 16, 2000|By M. William Salganik | M. William Salganik,SUN STAFF

With gains in commercial membership more than offsetting financial losses in Medicare and Medicaid HMOs, CareFirst BlueCross BlueShield posted a profit yesterday of $20.2 million for the quarter ended March 31 - up 19.2 percent from $16.9 million in the first quarter of 1999.

CareFirst reported $1 million in losses for the first quarter in MediCareFirst, its Medicare HMO and $1.6 million in losses in the Medicaid managed-care program operated by its FreeState Health Plan.

G. Mark Chaney, executive vice president and chief financial officer, said CareFirst is reviewing all options - changing benefits and premiums in its MediCareFirst, changing the way it operates its physician networks - to stem the losses.

"I wouldn't want to suggest we're considering getting out," he said, "but we haven't pulled any options off the table."

Chaney said CareFirst is also looking at new ways to structure its FreeState commercial HMO. In addition to its losses in Medicare and Medicaid, FreeState, which has been running in the black, showed a $2.3 million loss on its commercial customers for the first quarter.

FreeState has operated by contracting with groups of doctors, paying them a fixed monthly fee per patient to provide care. But doctor groups have been losing money on the deal - several have gone out of business - and are reluctant to continue that type of contracting, Chaney said.

Capital Care, an HMO based in the District of Columbia that is also owned by CareFirst, has been more profitable and shown better membership growth by paying doctors on a fee-for-service basis.

Eventually, Chaney said, CareFirst will probably combine FreeState and Capital Care.

Overall, CareFirst booked $1.16 billion in revenue for the quarter, up 7.5 percent from $1.08 billion in the year-earlier period.

Increased membership helped drive the higher revenue. At 2.7 million, membership was up 8.7 percent for the year.

Also contributing to the revenue growth were premium increases in the 6 percent to 8 percent range, Chaney said.

Lately, a number of health plans have been getting double-digit premium increases. While publicly traded health plans are seeking higher profit margins, Chaney said, CareFirst decided to raise premiums by the amount care costs were expected to rise, seeking to hold and attract business through competitive pricing.

Health care costs rose 7.2 percent compared with the year-earlier quarter.

The bottom line was a profit margin of 1.73 percent. By comparison, Pulse, an industry newsletter, reported an average profit margin of 2.3 percent in the most recent quarter for publicly traded HMOs.

The figures for the quarter do not reflect the performance of BlueCross BlueShield of Delaware, which CareFirst took over in late March. The Delaware Blues posted an operating loss of $554,000 for the quarter, compared with a loss of $1.5 million in the first quarter of 1999. In addition, the Delaware Blues recorded $12.5 million in costs related to the affiliation with CareFirst.

Revenue for the Delaware Blues was $103.6 million, up 8.9 percent from the first quarter of 1999. Membership was up 6.6 percent, to about 200,000.

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