PacifiCare’s Profit Falls After Acquisition of FHP
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SANTA ANA — PacifiCare Health Systems Inc.’s second-quarter profit fell, as expected, on higher-than-expected medical costs resulting from its acquisition of FHP International Inc.
Profit from operations dropped to $25 million, or 54 cents a share, from $36 million, or $1.15, a year earlier. But revenue doubled to $2.38 billion from $1.19 billion.
In the latest period, the company posted net income of $18 million, or 39 cents a share, after a charge of $7 million, or 15 cents a share to cover a backlog of claims that resulted from converting the company’s computer system. In the year-earlier period, net income totaled $8.58 million, or 27 cents a share, after charges of $27.4 million, or 88 cents a share.
FHP wasn’t as profitable as PacifiCare expected. The company said it didn’t have full access to FHP’s books before it bought FHP in February for $2.1 billion. PacifiCare discovered that FHP was paying doctors more and charging customers less than PacifiCare had expected.
Membership in PacifiCare’s managed-care plans doubled to about 4 million from the year-earlier period. Most of the new members came from FHP’s plans.
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