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Mobilization Helps Increase Sierra Net Income 58%

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NU Online News Service, Oct. 23, 2003, 11:37 a.m. EDT – The Iraq war helped Sierra Health Services Inc., Las Vegas, increase its third quarter net income 58%.

The managed care company is reporting $22 million in net income for the latest quarter on $389 million in revenue, up from $14 million in net income on $331 million in revenue for the third quarter of 2002.

One contributing factor was a decrease in the ratio of medical claims expenses to medical premiums. The medical expense ratio fell to 75.9%, from 79.3% for the third quarter of 2002. Many managed care companies have medical expense ratios over 80%.

Another factor was an increase in military contract revenue to $133 million, from $100 million.

Sierra earns military contract revenue by participating in TriCare, a program that provides health coverage for military retirees, military dependents and active-duty military personnel who seek care away from military medical facilities.

The recent increase in third quarter military contract revenue is “due primarily to change orders and to increased health care premium revenue as a result of the mobilization of reservists,” Sierra says.

The U.S. Department of Defense has announced a decision to cut Sierra out of the TriCare program. Sierra is protesting that decision, but, if the protest fails, Sierra might have to start phasing out TriCare activities starting in September 2004, the company says.