Molina Healthcare Inc. (MOH) reported third-quarter earnings of 33 cents per share, which was well below the Zacks Consensus Estimate of 53 cents. The company earned 60 cents in the year-ago quarter. The decline in profit for the quarter was attributable to the higher operating expenses coupled with losses from the company’s California health plan. The California health plan lost approximately 19 cents per share in the reported quarter. 

Total operating revenues for the quarter came in at $916.51 million compared to $796.33 million in the year-ago period. Premium revenues increased 16% to $914.80 million while investment income decreased 64% to $1.70 million due to lower interest rates. Membership increased 14% with Florida, California, Washington and Ohio gaining the most members. However, profitability suffered due to rising medical care costs. 

Total expenses for the quarter increased dramatically to $900.23 million from $765.90 million with more reported cases of H1N1 influenza. Medical care costs rose to $792.77 million from $669.35 million, general and administrative expenses came in at $97.63 million as against $88.03 million in the year-ago quarter, while depreciation and amortization charges rose to $9.83 million from $8.51 million in the prior-year period. 

Physician and outpatient costs increased 9% on a per-member per-month (PMPM) basis while pharmacy costs rose 4% PMPM and capitated costs rose 9% PMPM. However, in-patient facility costs decreased approximately 5% PMPM compared to the year-ago quarter. Pharmacy utilization increased approximately 5% compared to the year-ago quarter while unit costs, excluding rebates, fell approximately 1%. 

Management stated that it is unlikely to achieve its 2009 earnings guidance of $2.15 per share due to the 2009 H1N1 flu pandemic, higher utilization associated with new members and state budgetary shortfalls. Furthermore, the company withdrew its fourth quarter guidance. 

Molina Healthcare, which operates as a multi-state managed care organization participating in government-sponsored health care programs, competes with players such as Centene Corp. (CNC) and WellPoint Inc. (WLP).
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