Comprehensive Care Reports Positive Net Income for First Quarter 2012

The number of inpatient days declines thanks to CompCare's program

After CompCare takes over a Care Management program, the number of inpatient days per member on average decline from 11.12 to 1.02, resulting in cost savings of $10,131 per member.

During the first quarter, ended March 31, 2012, Comprehensive Care’s (CHCR – $0.20) earnings almost doubled to $80,000, compared with $41,000 in the same period last year. Revenues reached $17.89 million, slightly down versus sales of $18.28 million in the first quarter of 2011.

After increasing the Company’s sales fivefold between 2009 and 2011, CompCare’s management team is now taking the time to digest this growth to return to profitability. As a result, the trend of higher earnings, coupled with more-or-less equal revenues, may be seen the remainder of the year.

Focus on Increasing Profitability

Since the current management team took a controlling position in CompCare, it has built the foundation to substantially grow the Company. In less than 2 years, management got rid of money-loosing contracts, renewed the IT infrastructure, streamlined operations and started offering their services in 46 U.S. states, the District of Columbia and Puerto Rico, versus only a handful in 2009.

The service provider network was expanded from 10,000 healthcare participants in 25 states to 35,000 providers in 46 states, Puerto Rico and the District of Columbia. The Company also hired more personnel, including some top level management executives, to handle the expected growth. This growth showed for the first time in 2010, when revenues increased to $35.2 million, up from $14.2 million the previous year. And in 2011, they again were able to double revenues to $71 million.

Late 2011, management decided that after increasing sales, it was time to become profitable. That was immediately achieved in the first quarter of 2012, in part, thanks to severe cost containment. General and administrative costs, for example, decreased to $515,000 in the first quarter of 2012, compared to $1,161,000 in the same period in 2011. Costs are most likely to be reduced even further the following quarters.

Amounts in $000’s
03/31/12
03/31/11
Revenues
17,890
18,282
Cost of Revenues
16,644
16,529
S, G & A Expenses
515
1,161
Income From Operations
635
376
Interest Expense
563
434
Other Non-Operating Income
11
136
Income Tax Expense
3
137
Net Income
80
41
Shares Outstanding – Diluted
62,552
67,959
Earnings Per Share
0.00
0.00
Most important income statement data for the quarters ending March 31, 2012 and March 31, 2011. Source: Company Filings

Services

Comprehensive Care Corporation provides managed care services in the behavioral health, substance abuse, and psychotropic pharmacy management fields to Medicare, Medicaid, Children’s Health Insurance Programs and other commercial health plans.

Typically, a health plan engages CompCare on an annual basis to provide managed behavioral healthcare, substance abuse and psychotropic pharmacy management services to its members. In return, CompCare receives a fixed fee paid on a so-called “per-member-per-month” (PMPM) basis. The agreements fall into two broad categories:

  • At-risk agreements where the PMPM fee includes the costs paid out to the providers and for pharmaceuticals. In exchange for the fee, which is set at the beginning of the contract, CompCare bears all costs associated with providing these services. Its profit, or loss, will depend on the utilization level of the care.
  • Administrative Services Only (ASO) agreements where the PMPM fee excludes the cost of care and where CompCare essentially provides Administrative Services Only, such as clinical care management, provider network development, and claims processing. In such a case, CompCare doesn’t assume a financial risk and is not at risk of over/under utilization.

With its Managed Behavioral Healthcare service, CompCare ensures members of a health plan that they are matched to the most appropriate behavioral healthcare provider when they call for routine/non-urgent care. This is accomplished through a systematic triage process that obtains enough information to screen for specific clinical need(s) and potential risk, to identify provider requested or required specialty, and to refer to the appropriate provider. These services are essential to contain healthcare costs.

Operating revenues in the first quarter from at-risk Managed Behavioral Healthcare agreements decreased by 21.9%, or approximately $2.1 million, to $7.5 million for the three months ended March 31, 2012, compared to $9.6 million for the three months ended March 31, 2011. The decrease was primarily attributable to the loss of customers in Missouri, Texas and Wisconsin during the fourth quarter of 2011 that accounted for $3.1 million of revenue for the three months ended March 31, 2011. The decrease was offset by approximately $1.1 million in additional revenues from new and previously existing customers.

Revenues from ASO agreements increased by 16.4%, or approximately $0.1 million, to $0.8 million for the three months ended March 31, 2012, due primarily to additional revenue from the expansion of business of previously existing ASO customers.

Amounts in $000’s
03/31/12
03/31/11
At-Risk Behavioral Contracts
7,479
9,569
Administrative Services Only (ASO) Contracts
817
702
At-Risk Pharmacy Contracts
9,597
8,011
Total
17,890
18,282
Comprehensive Care’s revenues segregated per service category for the quarters ending March 31, 2012 and March 31, 2011. Source: Company Filings

CompCare’s Behavioral Pharmacy Management service is designed to alleviate two common problems. The first one is the lack of coordination that often occurs when multiple physicians prescribe medications to a member and neglect to communicate with each other. Secondly, the program addresses the frequent prescription of medications outside of recommended guidelines.

CompCare manages psychotropic pharmacy services for certain health plans’ members and is responsible for the cost of drugs dispensed. In accordance with the contracts, the health plan’s pharmacy benefit manager (“PBM”) performs drug price negotiation and claims adjudication.

Revenues from at-risk Pharmacy management contracts increased by 19.8% to $9.6 million for the three months ended March 31, 2012, from approximately $8.0 million for the three months ended March 31, 2011, attributable primarily to a 9.9% increase in membership and a contract rate increase effective January 1, 2012 from our major customer in Puerto Rico.

Conclusion

CompCare’s management delivers on its promises. The past couple of years, they’ve managed to significantly increase the Company’s revenues. Now they’ve turned their attention to becoming profitable, and they’re succeeding again.

We expect Comprehensive Care in 2012 to focus on digesting its 2011 growth and returning to profitability. At the same time, we foresee substantial growth in the following years thanks to a Pharmacy Management Program, which CompCare recently launched in cooperation with the largest retailer in the US. When you want to learn more about this innovative Pharmacy Management Program, make sure to read our initial Company Report on Comprehensive Care. We reiterate our buy recommendation with a price target of $0.40, which is double today’s stock price.


For important disclosures, please read our disclaimer.

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