CareFirst earnings up 11 percent in 3rd quarter

Increase is attributed to dumping of Medicare, Medicaid organizations

November 16, 2001|By M. William Salganik | M. William Salganik,SUN STAFF

CareFirst BlueCross Blue- Shield posted earnings yesterday of $24.3 million for the third quarter, which ended Sept. 30 - up 11 percent over the third quarter of last year.

All of the improvement, however, came from dropping out of its money-losing Medicare and Medicaid HMOs, which together were responsible for more than $5 million in red ink in the third quarter of 2000.

"If you pull out the public sector programs, on a sort of same-store basis, we're basically flat," said G. Mark Chaney, executive vice president and chief financial officer.

Overall, Chaney said, it was "a solid quarter." He said CareFirst was expecting some improvement as it revamps its HMO products but was concerned about the impact a declining economy might have on whether employers would cut back or drop health coverage.

CareFirst's operating margin was 1.6 percent, about where it has been for several years. "Given our size," Chaney said, "that narrow operating margin leaves very little room for unexpected situations or to have the capital we need to invest in service improvements we need to stay competitive against the big, for-profit health care companies."

CareFirst is not for profit. It told state officials early this year it was considering converting to for-profit status but has not taken any action to file for the change.

Revenue for the quarter was $1.5 billion, up 9.2 percent from $1.4 billion in the year-ago quarter.

Membership grew to 3.1 million, up 4.2 percent from just under 3 million on the rolls a year earlier.

Despite leaving Medicare and Medicaid, CareFirst continued to show losses on its Maryland HMOs, FreeState and Delmarva, although they were somewhat narrower than in the third quarter of 2000. The Maryland HMO loss was $3.4 million this year, compared with $4.3 million last year.

CareFirst is beginning to merge FreeState and Delmarva with its profitable Washington-area Capital Care HMO into a new product called BlueChoice. It has begun offering BlueChoice but is seeking regulatory approval to complete the process. Capital Care posted $5 million in profit for the quarter, up from $4.3 million a year ago.

Another CareFirst unit, BlueCross BlueShield of Delaware, increased membership and profitability. The Delaware Blues earned $6.5 million, nearly six times the $1.1 million of last year's third quarter. Delaware membership, at 277,000, was up 27 percent.

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