Writedowns Lead to First-Quarter Loss at PacifiCare

PacifiCare Health Systems Inc., the biggest operator of Medicare health plans, said it lost $858.8 million in its first quarter as it wrote down the value of acquisitions, as expected.

The loss was $24.86 a share, contrasted with net income of $13.2 million, or 39 cents, a year earlier, the company said. Revenue fell 5.5% to $2.86 billion from $3.03 billion.

Profit would have been $30.1 million, or 87 cents, without the $897-million writedown of assets related to a change in how mergers are accounted for, the company said.

On that basis, PacifiCare was expected to earn 72 cents, the average estimate of analysts surveyed by Thomson Financial/First Call.

Shares of the Santa Ana-based company rose $1.44 to a 52-week high of $31.70 on Nasdaq before the results were announced. The stock eased to $30.55 in after-hours trading.

PacifiCare said it will issue almost 421,000 shares to hedge fund Acqua Wellington Asset Management today at an average price of $21.39. The share issue is part of a $150-million equity line of credit agreement the company reached last year. PacifiCare said it will get $9 million from the deal.

PacifiCare has struggled to meet medical costs that rose when it renegotiated contracts with California doctors to pay them based on the cost of care. PacifiCare in January cut 1,300 jobs, or 15% of its work force, to reduce expenses. The company also faces a lawsuit in Texas over unpaid medical claims.

The company had 3.3 million customers when the quarter ended, down 13% from the year-ago quarter and 4% from the end of the year as PacifiCare closed some Medicare health plans.

Premiums rose 15% for employer health plans and 10% for customers in Medicare and Medicare supplement plans.

Health-care costs fell to 88.8 cents of every premium dollar, from 90.2 cents a year earlier, after the company left unprofitable markets and ended contracts with costly providers.

PacifiCare agreed last month to pay $87.3 million to settle accusations that it overbilled the U.S. government for insurance payments under a health insurance program for federal employees. A whistle-blower lawsuit said the inflated claims were submitted between 1990 and 1994 by a health maintenance organization PacifiCare bought in 1997.