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MedPartners Posts Quarterly Gain, but Profit Margin Still Slim

Net income meets analysts' expectations. The company says success of its new core business helped boost revenue.

May 05, 1999|SHARON BERNSTEIN | TIMES STAFF WRITER

MedPartners Inc., the company whose troubled managed-care business was taken over by California regulators in March, on Tuesday posted an increase in net income for the first quarter, but its profit remains slim at a margin of 1.4%.

The profit, which does not include any losses from its physician-practice management operations or elsewhere because they are being discontinued, is based on income from the company's new core business, Caremark Inc., which manages pharmaceutical benefits for employers.

The Birmingham, Ala.-based company's net income from continuing operations, chiefly its Caremark division, rose to $10.8 million, or 6 cents per share in the quarter ended March 31, from $6.4 million, or 3 cents, in the year-ago period.

The net income is relatively small compared with the company's revenue of $785 million for the quarter and its stock market value of more than $1 billion.

But it marks a 69% increase over the same quarter last year and in line with analysts' expectations. MedPartners posted revenue of $620.2 million in the year-ago quarter.

The company credits the increase to its success in winning new customers for Caremark and to the jettisoning of its physician-practice management business.

Since announcing that the business would be discontinued, the company has sold clinics and networks in several states for about $625 million, said Mac Crawford, MedPartners' chairman and chief executive.

"We are . . . gratified by the substantial progress made during the first quarter toward transforming our business," Crawford said.

The company remains mired in negotiations with the state of California over the remaining clinics and the firm's wholesale managed-care plan, MedPartners Provider Network Inc. The plan was seized in March by state regulators and subsequently filed for bankruptcy protection.

A deal that would require the company to pay off all of its California debts in exchange for release from the state seizure is pending.

MedPartners stock closed at $5.88, down 25 cents, in New York Stock Exchange trading.

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