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Humana Projects Its First Loss in 15 Years

October 03, 1986|JUBE SHIVER Jr. | Times Staff Writer

Humana Inc., one of the nation's largest operators of hospitals, said Thursday it expects its first quarterly loss in at least 15 years as a result of heavy losses by its health insurance plan and clinics.

The health-care giant said it expects to record a loss of between $106 million and $111 million for its fourth quarter ended Aug. 31, due to charges against earnings of $131 million. That compares to net income of $52.3 million in the fourth quarter a year ago.

The loss, which Humana officials attribute to poor performance by the new health-care insurance and walk-in medical centers, will be the first since at least 1971, said Charles Teeple, vice president of investor relations.

Humana said that for the year, it expects that after the charges it will show net income of between $53 million and $58 million, on revenue of $3.4 billion. For the fiscal year ended Aug. 31, 1985, Humana had net income of $216.2 million on revenue of $2.2 billion.

The company said it plans to report full fourth-quarter results during the week of Oct. 20.

Unfulfilled Hopes

The preliminary figures do not augur well for Humana and many other companies that had sought to become fully integrated health-care concerns with interests in health insurance, hospitals, medical supplies and allied health-care services.

Several major hospital chains have attempted to construct such a conglomerate, including Hospital Corp. of America, which failed in its attempt a year ago to create the nation's largest health-care company when it was rebuffed by American Hospital Supply. But most have since given up on trying to be a one-stop, integrated health-care company.

National Medical Enterprises, a large hospital chain which entered the health insurance field by acquiring health maintenance organizations, has now changed its mind.

"We began having second thoughts about the health maintenance organization as a business . . . a year ago, which led us to put our expansion plans in this business on hold," Chairman Richard K. Eamer said Wednesday at the company's annual meeting.

But Humana said it remains committed to maintaining substantial interests in health-care fields outside hospital management.

"Humana is committed to the concept of vertical integration and is actively pursing that goal," said Thomas Noland, a Humana spokesman. Despite the fourth-quarter results, he added, "we are going forward."

Has Been Costly

Pursuing its goal has proved costly.

Humana said its fourth-quarter charges included a $70-million provision to bolster premium reserves for its long-term health insurance contracts, which cover about 600,000 policyholders and their dependents; $40 million for expected losses on the sale of up to 50% of its 150 MedFirst walk-in medical facilities, and $21 million for an unprofitable hospital in Mexico City.

"They've taken an important first step" as a result of the charges, said Larry N. Feinberg, a health-care analyst at Dean Witter Reynolds Inc. in New York. "But by no means do I think all their problems are behind them."

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