Foundation Plans Shift to Boost Profit

Foundation Health Systems Inc. said managed health-care companies need to change their business models to produce sustainable profits. Health-maintenance organizations have been operating as the start-up companies they once were, chasing new membership to boost revenue and using capital inefficiently, said Foundation Health President Jay Gellert. As a result, many HMOs are now facing lower earnings or losses. The managed-care industry must focus on profit, consolidation and more efficient use of capital, Gellert said. The company will focus on major urban areas, where it has had the most success. Woodland Hills-based Foundation will probably retain its pharmacy and mental-health operations, Gellert said, and is considering selling operations such as its dental, vision and workers’ compensation units. Foundation shares were unchanged at $25.94 on the New York Stock Exchange.