Coventry Health 3rd-Quarter Net Falls 14% on Higher Patient Bills

   By Melodie Warner 
 

Coventry Health Care Inc.'s (CVH) third-quarter earnings fell 14% as the managed-care company spent more to cover patients' bills, though increased membership helped to improve its revenue.

The company also raised the low end of its full-year earnings estimate by 15 cents to between $3.25 and $3.30 a share and trimmed its revenue estimate to between $14.06 billion and $14.17 billion. Its July forecast was for revenue of $14.065 billion to $14.265 billion.

The performance of Coventry's profit has been mixed over the past year as higher claims costs and reduced membership have partially offset the positive impact from consumers cutting back on doctor visits amid a sluggish economy.

Coventry also was one of three insurers to win contracts last year to cover Kentucky's Medicaid population. The health program for the poor is jointly paid for by states and the federal government. But Kentucky's high health-care costs have overwhelmed incoming revenue from the state in recent quarters. Coventry has said it could see a reasonable profit in Kentucky next year.

Meanwhile, Aetna Inc. (AET) agreed in August to acquire Coventry in a $5.7 billion cash and stock deal that will make Aetna one of the largest providers of government-financed health care. Known more for commercial health insurance, Aetna on Thursday reported a surprise 1.8% increase in third-quarter earnings as higher premiums contributed to a 6% rise in revenue and masked a slight decline in medical membership.

Coventry reported a profit of $105.3 million, or 78 cents a share, down from $122.7 million, or 83 cents, a year earlier. Revenue jumped 16% to $3.46 billion.

Analysts polled by Thomson Reuters most recently forecast earnings of 73 cents on revenue of $3.5 billion.

Coventry's medical-expense ratio, or the percentage of premium revenue used to pay patient bills, was 84.4%, up from 81.5% a year earlier and down from 85.9% in the prior quarter. Total operating expenses climbed 19%.

Total membership grew 1.8% to 5.37 million from 5.28 million in the prior quarter.

Shares closed Thursday at $43.93 and were inactive premarket. The stock is up 45% so far this year.

Write to Melodie Warner at [e-mail]

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