Secure Horizons, the nation's largest Medicare HMO, said Thursday it will freeze membership next year in 41 counties nationwide, most of them in California.
The announcement that new members will not be accepted in 24 California counties, among them Riverside, San Bernardino, Santa Barbara, Kern, Alameda and Contra Costa, came as Secure Horizons' parent company reported disappointing results for the third quarter, though they beat estimates.
Santa Ana-based PacifiCare Health Systems Inc. also said it would implement dramatic premium hikes in 2001, ranging from 10% to 25%, for its 3 million non-Medicare members.
PacifiCare, which had originally been projected to earn $1.90 a share in the third quarter before issuing a profit warning, instead reported net income of $5.2 million, or 15 cents a share. And that figure was inflated slightly by the inclusion of a one-time credit, without which income would have been $1.4 million, or 4 cents, said acting President and Chief Executive Howard Phanstiel.
Revenue rose 14% to $2.9 billion from $2.5 billion. In the year-ago third quarter, the company earned $69.3 million, or $1.54 a share.
"We're obviously very disappointed with our third-quarter results," said Phanstiel, who had been serving as chief financial officer before the abrupt departure of the company's CEO, Robert O'Leary, last month.
In October, PacifiCare signaled that it would either break even for the quarter or lose up to 10 cents a share as a result of rising medical costs, news that sent the company's stock plunging and prompted the resignation of O'Leary after just three months on the job.
On Thursday's news, which showed earnings slightly better than those October projections, PacifiCare's stock gained 15% in after-hours trading to $12.25. The results were released after the close of regular U.S. trading. The shares had finished the regular session up 44 cents at $10.69 on Nasdaq.
In the weeks since O'Leary's departure, remaining officials have been scrambling to develop a turnaround plan for the company, which is struggling to reinvent itself after the health-care market forced expensive changes to its business model.
PacifiCare, which relied for years on a system that forced hospitals and doctors' groups to absorb all of the financial risk of caring for patients, now must switch to a new approach, in which PacifiCare absorbs the risk and providers are paid for each procedure they perform.
