Mag­el­lan Health Ser­vices’ 4th-quar­ter profit tum­bles as rev­enue rises

Modern Healthcare - - REGIONAL NEWS - —Rachel Lan­den

De­spite a boost in rev­enue, Mag­el­lan Health Ser­vices re­ported that its fourth-quar­ter earn­ings were cut in half as the Avon, Conn., health­care man­age­ment com­pany’s costs soared dur­ing the quar­ter.

Ad­di­tion­ally, a re­cent con­tract loss to pro­vide be­hav­ioral-health and sub­stance-abuse treat­ment ser­vices to men­tally ill chil­dren and adults in the Phoenix area threat­ens to cut a seg­ment of Mag­el­lan’s fu­ture earn­ings. Since Sept. 1, 2007, Mag­el­lan has held a con­tract with Mari­copa County to pro­vide those ser­vices, which gen­er­ated net rev­enue of $755 mil­lion in 2013. But in March of last year, as the con­tract was set to ex­pire, the state of Ari­zona awarded the men­tal health con­tract to an­other ven­dor.

Mag­el­lan has since filed a protest and sev­eral ap­peals, chal­leng­ing the way in which the Ari­zona Depart­ment of Health Ser­vices scored the con­tract pro­pos­als and awarded it jointly to Mercy Care Plan and Mari­copa In­te­grated Health Sys­tem. But the state is mov­ing ahead with the new con­tract, which could mean a hit to Mag­el­lan’s rev­enue as early as the first quar­ter of this year.

Mag­el­lan’s rev­enue climbed all through 2013, but in the fi­nal three months of the year, its net in­come fell.

Ac­qui­si­tions ac­counted for rev­enue reach­ing $1.01 bil­lion, com­pared with $830.3 mil­lion in the year-ago quar­ter. Mag­el­lan added Part­ners Rx Man­age­ment, a phar­macy ben­e­fits man­age­ment com­pany, and Al­phaCare of New York, a Med­i­caid man­aged-care, longterm-care HMO and Medi­care plan to its port­fo­lio.

“Mag­el­lan Health Ser­vices is a very dif­fer­ent com­pany to­day than it was a year ago,” Chair­man and CEO Barry Smith told in­vestors dur­ing a Mon­day morn­ing call. “While our core businesses con­tinue to per­form ad­mirably, we’ve made sig­nif­i­cant ad­vance­ments in our two strate­gic ini­tia­tives.”

But the ex­pan­sion of its busi­ness and de­vel­op­ment of new prod­uct and ser­vice lines, along with an in­crease in other costs, con­trib­uted to the yearend slash in prof­its. Cost of care rose by 15% and cost of goods sold more than dou­bled. As a re­sult, Mag­el­lan re­ported fourth-quar­ter net in­come of $18.5 mil­lion, down from $37 mil­lion a year ago.

Even as Mag­el­lan ended the year on a dis­ap­point­ing earn­ings note, Smith ex­pressed op­ti­mism for the com­ing year. “Al­though 2014 will be a tran­si­tional year af­ter the progress we made in 2013 on our strate­gic ini­tia­tives, we are poised for fu­ture longterm growth,” Smith said. “We are a more com­pet­i­tive com­pany, bet­ter pre­pared to serve our cus­tomers and share­hold­ers in the dy­namic and chang­ing health­care mar­ket.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.