Aetna's Financial Woes Could Spell Trouble Down the Road By John Millrany - August 10, 2001If your shoes are feeling like they’re being squeezed, and you have an Aetna Inc. self-insured health-care product, you might sense an urge to grit your teeth because the other shoe just could drop.
Mixed metaphors aside, the nation’s largest health insurer posted a larger-than-expected second-quarter loss as it struggles with a welter of problems stemming from "rapid expansion and underpriced insurance plans," according to a report Aug. 8 by Reuters.
The company’s financial woes comes at a time when the Patients’ Bill of Rights under consideration by Congress has raised profound questions over the high price of health plans, along with right-to-sue issues in cases where medical care goes awry.
The newswire said, "Hit by rising medical costs its biggest rivals have been able to overcome," Aetna reported an operating loss more than twice as much as its first-quarter hemorrhaging.
"To be frank," said Aetna CEO/Chairman John Rowe, "things have been harder than I expected them to be. The performance of the company is significantly less than I expected.
"We have found about 100 problems here, each of which is contributing about 1% of the total problem. We just didn’t have the kind of discipline in respect to operations," he added.
The firm, which has been in the health care business for nearly 150 years, reported a second-quarter operating loss of $95.9 million (67 cents a share), compared with operating earnings of $36.4 million (25 cents a share) the previous year.
Reuters said analysts polled by researchers Thompson Financial/First Call expected Aetna to post a loss of 20 cents a share, with estimates ranging from a profit per share of 7 cents to a loss of 36 cents.
The company’s stock is off 28% since the company issued a profit warning April 9 and underperformed Standard & Poor’s managed health-care index, which is down 3% over that period. Aetna’s stock fell 36 cents (1.3%) to close at $25.99 on NYSE Aug. 8.
Reuters said the widening loss, on the heels of the first quarter’ s $36.6 million loss, caught analysts by surprise.
"Most people expected some modest deterioration in quarter results compared with the first quarter, but no one expected a loss of this magnitude," said Todd Richter, a securities analyst. |