Health Net 1999 Annual Report Download - page 17

Foundation Health Systems, Inc. (together with its subsidiar-
ies, the “Company”) is an integrated managed care organiza-
tion which administers the delivery of managed health care
services.The Company’s operations, excluding corporate
functions, consist of two operating segments: Health Plan
Services and Government Contracts/ Specialty Services.
Through its subsidiaries, the Company offers group, individ-
ual, Medicaid and Medicare health maintenance organization
(“HMO”) and preferred provider organization (“PPO ”)
plans; government sponsored managed care plans; and man-
aged care products related to administration and cost con-
tainment, behavioral health, dental, vision and pharmaceutical
products and other services.
The Company currently operates within two segments
of the managed health care industry: Health Plan Services
and Government Contracts/ Specialty Services. During
1999, the Health Plan Services segment consisted of four
regional divisions:Arizona (Arizona and Utah), California
(encompassing only the State of California), Central
(Colorado, Florida, Idaho, Louisiana, New Mexico,
Oklahoma, Oregon,Texas and Washington) and Northeast
(Connecticut, New Jersey, New York, Ohio, Pennsylvania
and West Virginia). During 1999, the Company divested its
health plans or entered into arrangements to transition the
membership of its health plans in the states of Colorado,
Idaho, Louisiana, New Mexico, Oklahoma,Texas, Utah and
Washington. Effective January 1, 2000, as a result of such
divestitures, the Company consolidated and reorganized its
Health Plan Services segment into two regional divisions,
the Eastern Division (Connecticut, Florida, New Jersey,
New York, Ohio, Pennsylvania and West Virginia) and the
Western Division (Arizona, California and O regon).The
Company is one of the largest managed health care com-
panies in the United States, with approximately 4 million
at-risk and administrative services only (“ASO”) members
in its Health Plan Services segment. The Company also
owns health and life insurance companies licensed to sell
insurance in 33 states and the District of Columbia.
The Government Contracts/ Specialty Services seg-
ment administers large, multi-year managed health care
government contracts.This segment subcontracts to affili-
ated and unrelated third parties the administration and
health care risk of parts of these contracts and currently
administers health care programs covering approximately
1.5 million eligible individuals under TR ICARE (formerly
known as the Civilian Health and Medical Program of the
Uniformed Services (“CHAMPUS”)). Currently, the Com-
pany provides these services under three TR ICAR E con-
tracts that cover Alaska, Arkansas, California, Hawaii, Okla-
homa, Oregon,Texas,Washington and parts of Arizona,
Idaho and Louisiana.This segment also offers behavioral
health, dental, and vision services as well as managed care
products related to bill review, administration and cost con-
tainment for hospitals, health plans and other entities.
This discussion and analysis contains “forward-looking
statements” within the meaning of the Private Securities
Litigation R eform Act of 1995. Forward-looking statements
involve risks and uncertainties detailed from time to time in
the Company’s filings with the Securities and Exchange
Commission (the “Commission”) which may cause actual
results to differ materially from those projected or implied
in these statements.The risks and uncertainties faced by the
Company include, but are not limited to, those set forth
under “Additional Information Concerning the Company’s
Business,” “Cautionary Statements” in Part I of Form 10-K
and other sections within the Company’s filings with the
Commission.
Consolidated Operating Results
The Company’s income from continuing operations for the
year ended December 31, 1999 was $147.8 million, or
$1.21 per diluted share, compared to a loss from continuing
operations for the same period in 1998 of $165.2 million,
or $1.35 per diluted share.The Company’s loss from con-
tinuing operations for the year ended December 31, 1997
was $67.8 million, or $0.55 per diluted share.
During the years ended December 31, 1999, 1998
and 1997, the Company recorded on a pre-tax basis asset
impairment, merger, restructuring and other charges total-
ing $11.7 million (the “1999 Charges”), $240.1 million (the
“1998 Charges”) and $286.5 million (the “1997 Charges”),
respectively.These charges are further described in the
“Asset Impairment, Merger, R estructuring and Other
Charges” section.
FOUNDATION HEALTH SYSTEMS, INC. 15
Management’s Discussion and Analysis of
Financial Condition and Results of Operations