Foundation Health Quarterly Profit Falls 45%

Foundation Health Systems Inc. said first-quarter profit, excluding a workers’ compensation unit it’s selling for $290 million, fell 45% as medical costs rose faster than revenue. Profit fell to $26.2 million, or 22 cents a diluted share, from $47.6 million, or 38 cents, a year earlier. The Woodland Hills-based company was expected to earn 22 cents a share. Foundation said it will sell its workers’ compensation unit to Superior National Insurance Group Inc. for about $290 million in cash after taxes and reinsurance costs. Foundation said in February it wanted to sell the unit to focus on managed-care services, where it’s been struggling to deal with increased medical costs. Foundation shares rose $2.63 to close at $32.13 on the New York Stock Exchange. Revenue rose 23% in the first quarter, to $2.18 billion from $1.77 billion. Health plan premium revenue rose 30% to $1.84 billion from $1.42 billion, while revenue from government contracts fell 13% to $213.6 million from $246 million. Foundation said it expects the sale of the workers’ compensation unit, which reported a loss for 1997, to close in the third quarter. Foundation plans to retire about $121 million in debt with the proceeds from the sale.