Sierra Health Services’ earnings rise

The federal government's prescription-drug program for seniors helped propel second-quarter income and revenue for Nevada's largest managed-care insurer.

Sierra Health Services of Las Vegas reported Monday that its second-quarter net income was $39.4 million, or 67 cents a share, up from $33.5 million, or 54 cents a share, in the same quarter a year ago.

Quarterly revenue rose 13.6 percent to $482 million from $424.4 million.

The results bested analysts' forecasts, which called for earnings of 57 cents a share on $474.4 million in revenue, according to Reuters Estimates.

Sierra Health officials attributed the increase in net income to an upward retroactive rate adjustment on its Medicare Advantage program and better-than-expected earnings on its Medicare Part D prescription-drug offering. Revenue jumped in part on the company's addition in 2007 of an enhanced Medicare Part D program to supplement its basic Part D product line.

Sierra Health's cash flow from operations in the quarter ended June 30 was $24.3 million, compared with $10.5 million in the same quarter a year ago. Growing income from Medicare Part D also pushed up cash flow.

"While a number of uncommon items are impacting our earnings, Sierra's core operations continue to perform well," said Sierra Health Chairman and Chief Executive Officer Anthony Marlon, M.D. in a statement. "Revenue growth is within our targets and, despite the loss of three accounts at the beginning of the year, commercial HMO membership is solid."

Sierra Health's commercial membership rose 2 percent, or 4,800 people, in the second quarter.

The insurance company had 865,800 members as of June 30, compared with 824,300 members on the same day a year ago.

Marlon said the company continues to make progress on its acquisition by Minnesota-based UnitedHealth Group, the nation's largest managed-care insurer and owner of PacifiCare's Las Vegas operation.

Sierra Health agreed in March to a $2.6 billion buyout offer from UnitedHealth, which has more than 70 million customers nationwide.

Antitrust officials in the federal Department of Justice, as well as regulators in Nevada, California and Texas are investigating the competitive effects of a potential Sierra Health sale.

"The company continues to work through the state and federal regulatory processes required to close our proposed merger with UnitedHealth Group," Marlon stated. "I believe we are on track for an expected close in the fourth quarter of this year."

Sierra Health released its results after the markets closed Monday. Shares in the company fell 24 cents, or 0.59 percent, to close at $40.47 on the New York Stock Exchange.