An already tough year has gotten a whole lot tougher for Molina Healthcare Inc.
The Long Beach-based Medicaid health maintenance organization saw its share price dive 43 percent in one day last week after the company slashed its profit estimate for the second quarter because of high medical costs.
The decline chopped some $600 million off its market value, and reflected investors' depleted confidence in management, especially after the company lost a $111 million Med-Cal contract earlier this year because of a clerical error on an application form.
Analysts surveyed by Thomson First Call were expecting Molina to report earnings of 56 cents per share, but the company said July 20 it expected a loss of 15 cents to 20 cents a share, driving shares down to $26 from $46 .
Molina attributed its problems to higher hospital charges in Washington State and New Mexico, an unusually high numbers of births in Michigan, more catastrophic cases nationwide and flu-related treatment in Washington State.
"We've been doing this for 25 years, and we've seen surges in healthcare utilization, but not to this extent before," said J. Mario Molina, the company's president and chief executive.
Molina said the higher costs would continue for the rest of the year, adding $12 million to its liability estimates. He said the company was trying to rein in costs by renegotiating contracts with hospitals and seeking lower-cost providers.
Molina went public in 2003, raising $115.5 million at $17.50 per share. It has 788,000 members.The Molina family controls about 45 percent of outstanding shares.
Molina had been performing well since the IPO, hitting a 52-week high in January of $53.23, but then came the loss of the Med-Cal contract, which covered 96,000 people in Riverside and San Bernardino counties.
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