The vital signs of long-ailing Maxicare Health Plans Inc. are suddenly strengthening. But is it just a short-term fix so the L.A.-based health plan can be sold, or is it part of a long-term growth strategy?

It depends on whom you ask.

Company officials insist that the restructuring which includes the sale of unprofitable operations outside the state, renegotiation of physician contracts, raising of premiums, and boosting of California enrollment is a long-term growth strategy.

Some analysts, however, call the strategy short sighted, and say it’s aimed at quickly sprucing up the company to make it more attractive to a potential acquirer.

“The other, larger health care companies are so strong in California that they say, ‘What do we need that small plan for?’ ” said Steve Valentine, a health care consultant with the Camden Group in El Segundo. “Since (Maxicare officials) know they can’t unload it (the California operations), they know they have to turn it around.”

Warren Foon, vice president of Maxicare’s California operations, confirmed that Salomon Smith Barney has been retained to help sell off operations. But he denied an outright sale is being pursued, or considered.

“We have no intention of selling our California operations,” he said. “That is the furthest from the truth.”

In fact, Foon said, the California operations have been profitable, and Maxicare is going to focus its attention on beefing up its market share in the state. The HMO currently has about 300,000 enrollees in California, having added about 40,000 members this year.

Meanwhile, Maxicare has already divested its unprofitable Wisconsin and Illinois operations, and has been attempting to sell its money-losing health plans in the Carolinas.

If those Carolina plans can’t be sold for an acceptable price in the near future, Maxicare will be forced to cease operations in those states, Foon said.

Regardless of the intended purpose of the restructuring, it appears to be working. After four consecutive quarterly net losses, Maxicare reported net income for the third quarter ended Sept. 30 of $634,000 (4 cents per share), compared with a loss of $18 million ($1 per share) in the year-earlier period.

Its stock has responded somewhat, doubling from $3 a share in late October to about $6 as of last week. Still, it’s well off its October 1997 high of $18.

Greg Crawford, an analyst for Fox-Pitt, Kelton in New York, said what really hurt Maxicare was its operations outside California. “They are profitable in California and do have the potential for growth,” said Crawford. “The reason the stock was trading down was because the company had to reorganize to stop the bleeding. People were afraid they were going out of business. You will see people come back to the stock. Right now investors are still apprehensive, but Maxicare is heavily discounted right now and that will help.”

But health care analyst Mike Dwyer of BDO Seidman in Los Angeles is skeptical about Maxicare management’s real intentions. “If you look at what they are doing, they are trying to increase market share to look more valuable,” said Dwyer. “That is the first indicator a potential buyer looks at to assign value to a company.”

A New York-based analyst who follows the company, but declined to be named, echoed Dwyer’s sentiments.

“Smith Barney has had them on their book forever,” he said. “No one has bought. The company has a lot of Medi-Cal members. (Medi-Cal) is too unpredictable and low margin. As soon as the government sees that a company is making money, they slash reimbursements. Companies don’t want to hassle with it. If (Maxicare) can diversify themselves with more market share, they will be more attractive to a buyer.”

Asked if they had been retained to prepare Maxicare for outright sale, Salomon Smith Barney officials declined comment.

Foon disputed the contention that Medicare and Medi-Cal patients are undesirable for managed health plans, adding that the company has been making a profit on these members since 1993.

“That is a market we take very seriously,” he said. “There is a huge aging population and there is still a lot of potential in that market.”

Of its 300,000 Califorinia members, about 130,000 are Medi-Cal members and 6,000 Medicare members. Foon said Maxicare plans to expand its Medicare base by 20 to 25 percent, and that the company recently negotiated a 5 percent increase on its Medi-Cal contract for Sacramento-area members and a 3 percent to 4 percent increase for Southern California members.

Pursuing growth by adding Medicare members is a risky venture, said Dwyer. The company may get more premium dollars up front, but such older patients often require considerably more care. Also there are no guarantees the government will raise reimbursements anytime soon.

“It is an incredible risk,” he said. “A company has to have a significant war chest to be able to move in this direction, which is something they don’t have.”

Another challenge is that Maxicare is competing against considerably larger competitors.

“More and more companies like Maxicare, that are not in the top five or six in the state, are finding it very difficult to gain market share,” said John Edelston, a health care consultant for HealthPro Associates in Woodland Hills. “You don’t get considered by larger employers and don’t get invited into the same circles. The smaller plans are finding it very difficult to increase enrollment.”