Metropolitan Health Networks Inc Reports Operating Results (10-Q)

Author's Avatar
Aug 05, 2009
Metropolitan Health Networks Inc (MDF, Financial) filed Quarterly Report for the period ended 2009-06-30.

Metropolitan is a growing healthcare organization in Florida that provides comprehensive healthcare services for Medicare Advantage members and other patients in South and Central Florida. Metropolitan Health Networks Inc has a market cap of $104.9 million; its shares were traded at around $2.25 with a P/E ratio of 11.3 and P/S ratio of 0.4.

Highlight of Business Operations:

We rely upon insurance to protect us from many business risks, including medical malpractice, errors and omissions and certain significantly higher than average customer medical expenses. For example, to mitigate our exposure to high cost medical claims, we have reinsurance arrangements that provide for the reimbursement of certain customer medical expenses. For 2009, our deductible per customer per year for the PSN is $40,000 in Miami-Dade, Broward and Palm Beach counties and $200,000 in the other counties in which we operate, with a maximum annual benefit per customer of $1.0 million. Although we maintain insurance of the types and in the amounts that we believe are reasonable, there can be no assurances that the insurance policies maintained by us will insulate us from material expenses and/or losses in the future.

Net income for the second quarter of 2009 was $3.2 million or $0.07 per basic and diluted share compared to net income of $3.7 million or $0.07 per basic and diluted share for the second quarter of 2008.

Our net income for the second quarter of 2009 and the second quarter of 2008 was impacted by a change, in both years, of our estimate of the first quarter s retroactive Medicare risk adjustment (“MRA”) premium and changes in our estimate of medical claims payable. In 2009, we over estimated the first quarter s retroactive premium adjustment by $1.3 million, which reduced revenue in the second quarter of 2009, and over estimated medical claims payable at March 31, 2009, which reduced total medical expense in the 2009 second quarter, by $1.4 million The net impact of these two items increased gross profit and income before income taxes in the second quarter of 2009 by $100,000. In 2008, we under estimated the first quarter s retroactive MRA premium adjustment by $2.9 million, which increased revenue in the second quarter of 2008, and under estimated medical claims payable at March 31, 2008, which increased total medical expense in the 2008 second quarter, by $1.1 million The net impact of these two items increased gross profit and income before income taxes in the second quarter of 2008 by $1.8 million.

In July 2009, we were notified by Humana of the amount of the retroactive mid-year MRA premium increase from CMS for 2009 based on the increased risk scores of our customer base. This increase is effective July 1 and was retroactively applied to all premiums paid in the first half of 2009. The retroactive mid-year adjustment totaled $10.5 million of which approximately $5.5 million relates to premiums earned in the first quarter of 2009 with the balance relating to premiums earned in the second quarter of 2009. At March 31, 2009, we had recorded a receivable for the estimated retroactive premium earned during the first quarter of 2009 of approximately $6.8 million. As a result, our revenue in the second quarter of 2009 was reduced by the $1.3 million being the difference between the originally estimated $6.8 million of retroactive premium adjustment recorded during the first quarter of 2009 and the $5.5 million of retroactive premium payments actually received for that period. The 2009 mid-year MRA premium increase of $10.5 million is included in the Due from Humana at June 30, 2009 and is expected to be paid to us in August.

In July 2008, we were notified of the amount of the retroactive mid-year MRA premium increase from CMS for 2008. This increase was effective July 1, 2008 and was retroactively applied to all premiums paid in the first half of 2008. The retroactive mid-year adjustment totaled $6.6 million of which approximately $3.4 million relates to premiums earned in the first quarter of 2008 with the balance relating to premiums earned in the second quarter of 2008. At March 31, 2008, we had recorded a receivable for the estimated retroactive premium earned during the first quarter of 2008 of approximately $500,000. Our revenue in the second quarter of 2008 was increased by the $2.9 million difference between the estimated $500,000 of retroactive premium adjustment recorded during the first quarter of 2008 and the$3.4 million actually received for the period.

The average per customer per month (“PCPM”) premium we received on a consolidated basis in the 2009 second quarter was approximately $822 as compared to $827 in the second quarter of 2008. Adjusting for the impact of the first quarter s retroactive premium revenue on the second quarters of 2009 and 2008, the PCPM for the second quarters of 2009 and 2008 was $834 and $799, respectively. The adjusted PCPM increase in the second quarter of 2009 is primarily a result of the approximate 3.5% premium increase in the base premium paid by CMS in 2009 and a 9.9% increase in the average Medicare risk score of our customers between the second quarter of 2008 and the second quarter of 2009. These increases were partially offset by a reduction in the percentage of the CMS premium we receive for customers of our former HMO under the IPA Agreement.

Read the The complete Report