NU Online News Service, Nov. 2, 2004, 12:44 p.m. EST

A company that manages mental health care for one-quarter of the U.S. population is continuing to improve its financial performance.[@@]

Magellan Health Networks Inc., Farmington, Conn., is reporting $27 million in net income for the third quarter on $458 million in revenue, up from a $50 million net loss on $374 million in revenue for the third quarter of 2003.

Magellan, which manages addiction treatment and other forms of mental health care for about one-quarter of the entire U.S. population, emerged from Chapter 11 bankruptcy court protection in late 2003.

Magellan faced some questions about its ability to hold on to 2 major behavioral health management contracts with a program that covers uninsured Tennessee residents and members of Tennessee’s Medicaid program. The company announced in October that it has persuaded Tennessee officials to extend the contracts to Dec. 31, 2005.

Magellan says it expects the Tennessee contracts to generate about $440 million in revenue.

Magellan’s main lenders have responded to the improved earnings by cutting the interest rate on some of Magellan’s debt by 1.25 percentage points.