PacifiCare Profit Drops 53% Amid Managed-Care Slump

SANTA ANA — PacifiCare Health Systems Inc. said Wednesday that fourth-quarter profit tumbled about 53% as the managed-care company struggled to boost premiums to keep pace with rising medical costs. Profit before charges dropped to $15 million, or 30 cents a share, from $31.8 million, or $1 a share, a year earlier. Results met the company’s most recent forecast. Revenue rose 91% to $2.36 billion from $1.23 billion.

PacifiCare joined Oxford Health Plans Inc. and Kaiser Permanente Group as casualties of an industry-wide slump as competition forced managed-care providers to keep premiums down even as health costs were rising.

“Just about every major company has blown up,” said Greg Crawford, an analyst with Fox-Pitt, Kelton Inc., who has a “hold” rating on PacifiCare. “Any mistake or error in there is magnified by the fact that you’re in a very competitive operating environment.”

PacifiCare Class B shares rose 50 cents to $66.75.

The Santa Ana company in November said losses on the Utah operations of FHP International Inc., which PacifiCare acquired last year, would hurt fourth-quarter profit and trim earnings until the unit is sold. PacifiCare Chief Executive Alan Hoops said the company is negotiating the sale of the Utah operation with several potential buyers. The company has said it will shut down the unit if it can’t sell it.

In the latest quarter, PacifiCare also recorded charges of $129 million, or $3.18 a diluted share, resulting in a loss of about $114 million, or $2.78. The charges were mostly related to losses in Utah, with the rest linked to cost increases reported by its Northwest division, including Oregon, Washington and Nevada.

For the year, profit before charges fell 22% to $107 million, or $2.43 a share, from $138 million, or $4.36, in 1996. Revenue rose 87% to $8.98 billion from $4.81 billion.