Comprehensive Care Expected to be Profitable in Second Quarter

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Comprehensive Care owns the largest and only NCQA accredited behavioral health provider network servicing the Medicare population in Puerto Rico.

Comprehensive Care (CHCR – $0.19) is on a roll. Although the second quarter just recently ended, the Company already felt confident enough to give revenue and earnings guidance for it.

Revenues for the second quarter, for the period ending June 30, 2012, are expected to come in around $18 million, slightly lower than the $18.6 million in the same period last year. This is consistent with the first quarter of 2012, in which revenues dropped about 2% compared with the first three months of 2011. An earnings estimate for the second quarter wasn’t provided, but the Company did mention that it expects to be profitable whereas it posted a loss of almost $4 million in the second quarter of 2011.

If these numbers are realized, it will be the first time in many years that the Company is profitable for two consecutive quarters.

Road to Profitability

The major contributing factor to CompCare’s expected profitability is its Pharmacy Management Program. The Company expects to realize a profit in its current at-risk pharmacy operations for the month of April, and preliminary numbers for May indicate that the trend will continue. The profits thus far realized from the Company’s at-risk pharmacy operation are, in part, due to the Company getting traction by reason of tighter management of the Pharmacy Management Program, and utilization management from the Company-owned clinics. None of the profits thus far realized reflect the Company’s newly-designed, at-risk Pharmacy Management Program which has the added feature of being specifically designed to reduce the Company’s clients’ pharmacy spend by “as much as 10%” and create an additional profit center for the Company. The Company is looking to realize profits from this phase of its pharmacy program in Q1 of next year.

A second contributing factor to the Company’s financial improvements is the cost containment program, which it initiated early 2012. CompCare thus far has reduced its monthly general and administrative expenses by approximately 12 percent. Also salaries and benefits, and other items like travel expenses, are being closely monitored and cut back where possible. General and administrative costs may be reduced by as much as $1.35 million this year.

Puerto Rico Amendment

Next to the improved profitability in the Pharmacy Management Program and the general cost containments, CompCare’s second quarter also benefits from a contract amendment with a major Puerto Rican client. As a result of the amendment, the Company received a $2.2 million, retroactive, positive cash adjustment to pharmacy prescriptions, which were originally charged to the Company. Additionally, the amendment shifted the financial responsibility for a significant number of prescriptions that were previously being charged to the Company to the client for the remainder of the contract. This re-alignment of expenses should result in a material reduction of the Company’s pharmacy expenses and further enhance the Company’s profitability trend in its pharmacy operations for the remainder of 2012.

This is the same client as where CompCare, earlier this year, extended the initial two-year term of the contract by an additional three months to December 31, 2012 and negotiated an 11% rate increase, equating to an annual revenue increase of $3.7 million.

Conclusion

It’s very good news that CompCare continues the trend of higher profits as we’ve seen in the first quarter, where it doubled its earnings to $80,000. Moreover, it helps that no taxes are due on any profits in the foreseeable future because of the Company’s net operating loss carryforward of approximately $34 million.

Second quarter results are expected to be released around August 14th. In the meanwhile, with its at-risk Pharmacy Management Program now gaining momentum, keep CompCare on your radar screen and if you haven’t bought any shares yet, this may be an ideal time to buy an initial position.


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