New HMO Interest Boosts Maxicare

Wall Street’s sudden new interest in HMO stocks appears to be lifting one of the industry’s weakest players.

Shares of Maxicare Health Plans, a Los Angeles-based HMO and employee-benefits company whose stock hit a 52-week low of 75 cents a share just last month, have more than tripled over the last two weeks to close at $2.63 on Friday.

Nearly 1.7 million shares changed hands on Nasdaq on Friday as the stock rose as high as $3 before falling back.

Company Chief Financial Officer Richard Link refused to comment on the rise or on any other aspect of the stock price.

Maxicare is little-watched by health-care analysts. The company, which has 452,000 members, has been financially struggling for several years.

In May, Maxicare reported income of $50,000 for the first quarter, a significant improvement over the same period in 1999, when it lost $7.7 million.

Much of the gain was due to increased premiums received from commercial members and the federal government.

The company derives 27% of its income from Medicare, the federal program that covers the elderly. Many investors have shied away from HMOs that rely heavily on Medicare, because the government in 1997 cut back the premiums it pays for senior members, making it difficult to be profitable in that sector of the business.

But HMO stocks in general have rallied sharply since March, amid optimism about rising private-sector premiums and improving earnings. A Morgan Stanley index of 12 major HMOs has rocketed 51% since the end of February.

Maxicare still faces an image problem: In June, the company’s managed-care plan was voted worst in California by doctors groups, who rated it according to how well the plan interacted with--and paid--physicians contracted to take care of its members.

“When health plans fail to collaborate with health providers, it leads to inefficiencies in care, hassles for patients, lower patient satisfaction and, in turn, lower quality of care for patients,” Jim Lott, spokesman for the Healthcare Assn. of Southern California, one of the survey’s co-sponsors, said at the time.

The survey, which asked hospitals and physician groups to rate California health plans, looked at contracting practices and operations, claims, encounters and laboratory data, membership services, payment procedures and other areas. It was conducted jointly by the Healthcare Assn. of Southern California, the Pacific Business Group on Health and the California Assn. of Physician Organizations.

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Maxi Move

Shares of long-depressed health maintenance organization Maxicare Health Plans (ticker symbol: MAXI) suddenly rocketed this week, reaching their highest level since March, amid a general rally in HMOs. Weekly closes and latest:

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Friday close: $2.63, up 75 cents

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Source: Bloomberg News