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HEALTHSOURCE, INC. REPORTS 36 PERCENT INCREASE IN THIRD QUARTER EARNINGS; NET INCOME ADVANCES 52 PERCENT

 CONCORD, N.H., Nov. 1 /PRNewswire/ -- Healthsource, Inc. (NYSE: HS), a leading operator of HMOs and managed health care services, today reported that net income for the three month period ended Sept. 30, 1993 was up 52 percent to $6.8 million from the $4.5 million earned in the three month period ended Sept. 30, 1992.
 Quarterly Earnings Per Share and Revenue Growth
 Earnings per share on a fully diluted basis for the quarter ended Sept. 30, 1993 increased 36 percent to 49 cents vs. 36 cents for the same period a year ago. Weighted average shares outstanding on a fully diluted basis increased 14 percent primarily as a result of the sale of 1.955 million shares of common stock in a public offering on Aug. 25, 1993. Last year's earnings per share have been adjusted to reflect a 3-for-2 stock split effected in the form of a 50 percent stock dividend on Dec. 15, 1992. Total revenues for the third quarter increased 53 percent to $77.8 million compared with $50.8 million for the third quarter in 1992.
 Nine Month Results
 For the nine month period ended Sept. 30, 1993, net income increased 48 percent to $18.3 million from $12.3 million for the same period in the previous year and earnings per share on a fully diluted basis increased 38 percent to $1.39 compared with $1.01 in 1992. Revenues for the period reached $209.6 million, up 67 percent from the $125.6 million for the comparable period of 1992.
 Norman C. Payson, M.D., president and chief executive officer of Healthsource, Inc. said today, "Enrollment growth and continued success in health care cost containment characterized the quarter's results. Overall membership in HMOs increased 27 percent to 286,100 from 225,600 for the same plans a year ago. Our consolidated medical loss ratio was 75.4 percent for the quarter and 75.2 percent year to date compared to 77.0 percent and 76.2 percent for the corresponding periods last year. The company's ability to improved medical loss ratios in an environment of very modest premium rate increases demonstrates our success in controlling health care cost.
 "In addition to the operating results we completed a $74 million equity offering enhancing our ability to be active in acquisitions and investments as the industry enters a period of likely rapid consolidation in an era of health care reform.
 "With strategic alliances and partnerships, we filed license applications to enter four new markets: Arkansas, Savannah, Ga., New York City and Worcester, Mass. Moreover, we continued our acquisition and investment activity."
 Acquisition and Investment Activity
 On Oct. 21, 1993, Healthsource announced a letter of intent to purchase the remaining 60 percent interest in its Maine HMO affiliate Healthsource Maine. The closing of the merger is expected in January 1994. On Sept. 7, 1993, Healthsource announced the purchase of a 40 percent ownership position in Patient's Choice Inc. effective Aug. 31, 1993. Patient's Choice is a 21,200 member HMO based in Syracuse, N.Y. for which the company has provided management support since 1990.
 Healthsource, Inc. is a geographically diversified provider of a broad range of managed health care services. Healthsource, Inc. owns HMOs operating in New England, the Midwest, and the Southeast and has minority ownership interests in and provides services to HMOs in New York, North Carolina and Maine. Healthsource, Inc. also offers point of service plans, preferred provider organizations and utilization review and managed care services to other health care payors, and owns one of the largest third party claims administrators in New England. Recently Healthsource began providing managed care services to Liberty Mutual for the New Hampshire workers compensation residual market and announced a joint venture with Chubb LifeAmerica to develop an HMO in New York City.
 HEALTHSOURCE, INC. (NYSE)
 Three Months Ended
 Sept. 30,
 1993 1992
 (unaudited) (unaudited)
 (in thousands, except per
 share data)
 Revenues:
 Medical premiums $70,096 $45,079
 Administrative and managed care fees 5,672 3,919
 Management fees 2,014 1,811
 Total revenue 77,782 50,809
 Expenses:
 Cost of medical premiums 52,854 34,693
 Premium tax 743 558
 Selling, general and administrative 15,275 9,974
 Depreciation and amortization 1,545 947
 Total expenses 70,417 46,172
 Operating income 7,365 4,637
 Interest income 1,657 1,215
 Income before provision for income taxes
 and equity items ? 9,022 5,852
 Equity in income of unconsolidated
 affiliates 924 693
 Provision for income taxes (3,182) (2,066)
 Minority interest in net earnings
 of consolidated entity (9) (24)
 Net income $6,755 $4,455
 Net income per share:
 Primary 49 cents 37 cents
 Fully diluted 49 cents 36 cents
 Weighted average number of common
 and common equivalent shares
 outstanding:
 Primary 13,878 12,198
 Fully diluted 13,919 12,232
 HEALTHSOURCE, INC. (NYSE)
 Nine Months Ended
 Sept. 30,
 1993 1992
 (unaudited) (unaudited)
 (in thousands, except per
 share data)
 Revenues:
 Medical premiums $188,241 $109,815
 Administrative and managed care fees 15,808 10,307
 Management fees 5,571 5,443
 Total revenue 209,620 125,565
 Expenses:
 Cost of medical premiums 141,562 83,625
 Premium tax 2,142 1,639
 Selling, general and administrative 41,581 25,966
 Depreciation and amortization 4,218 2,590
 Total expenses 189,503 113,820
 Operating income 20,117 11,745
 Interest income 4,307 3,516
 Income before provision for income taxes
 and equity items 24,424 15,261
 Equity in income of unconsolidated
 affiliates 2,266 2,130
 Provision for income taxes (8,370) (5,031)
 Minority interest in net earnings
 of consolidated entity (64) (51)
 Net income $18,256 $12,309
 Net income per share:
 Primary $1.39 $1.01
 Fully diluted 1.39 1.01
 Weighted average number of common
 and common equivalent shares
 outstanding:
 Primary 13,087 12,197
 Fully diluted 13,110 12,225
 HEALTHSOURCE, INC. (NYSE)
 SELECTED BALANCE SHEET DATA (in thousands)
 Sept. 30, Dec. 31,
 1993 1992
 (unaudited) (unaudited)
 Cash, cash equivalents, and
 current marketable securities $145,808 $67,103
 Current assets 163,697 77,313
 Long-term marketable securities 55,332 27,847
 Total assets 281,060 146,568
 Medical claims payable 34,290 19,600
 Current liabilities 45,075 25,541
 Shareholders' equity 232,249 119,480
 COMMONLY USED RATIOS
 Sept. 30, Dec. 31,
 1993 1992
 (unaudited) (unaudited)
 Book value per common shares
 outstanding (14,801,300 at
 Sept. 30, 1993 and
 12,036,000 at Dec. 31, 1992) $15.69/share $9.93/share
 Working capital $118.6 million $51.8 million
 Current ratio 3.6 3.0
 Days of health care expense
 in medical claims payable 59.7 days 51.0 days
 (medical claims payable divided
 by average daily health care
 expenses for the three months
 ended Sept. 30, 1993 and
 Dec. 31, 1992)
 -0- 11/1/93
 /NOTE TO EDITORS: Contact Healthsource for additional financial information./
 /CONTACT: Thomas Congoran, chief financial officer, or Tracey Turner, shareholder relations, of Healthsource, 603-225-5077; or Kerry Thalheim, 212-661-8030, or Kathy Brunson, 312-266-7800, of The Financial Relations Board for Healthsource/
 (HS)


CO: Healthsource, Inc. ST: New Hampshire IN: HEA SU: ERN

JL-DJ -- NE011 -- 9195 11/01/93 13:34 EST
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Date:Nov 1, 1993
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