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Updated from 3:27 p.m. EDT

Oxford Health Plans

(OXHP)

, the managed care company that fell into deep financial trouble a few years ago, reported earnings on Wednesday that surpassed expectations by 8 cents and sent its shares by as much as 21%. The company attributed the performance to a capital restructuring and lower-than-expected medical and administrative costs.

The company's stock closed up 3 7/16, or 22% to 19 5/16. (Oxford Health closed up 3 7/16, or 22%, at 19 5/16.)

For the first quarter ended March 31, net income rose to $28.8 million, or 34 cents a diluted share, from $3.2 million, or 4 cents a share a year earlier. The consensus estimate of analysts polled by

First Call/Thomson Financial

was 26 cents.

Revenue fell to $1.02 billion from $1.06 billion a year ago.

Membership in the Trumbull, Conn.-based HMO dropped 4%, to 1.52 million from 1.59 million a year earlier. The company attributed the decline to the withdrawal from

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Medicare

in New York's Suffolk County on Long Island and the discontinuation of certain products.

Oxford beat expectations mainly by controlling costs. Its medical loss ratio, a barometer of medical expenses, came in at 81.7%, an improvement over 84.9% a year ago. The administrative loss ratio, which measures administrative costs, was 12.1% for the quarter compared with 14.5% a year ago. Excluding $3 million in severance costs, the ratio in the latest quarter was 11.8%.

Earnings also benefited from "a contribution from a recently-redeemed portion of outstanding preferred stock, which is an expensive piece of equity," said Lori Price, an analyst with

Chase H&Q

. She has no rating on Oxford and her firm has done no underwriting for the company. Oxford also said that it will retire an additional $131 million of bank debt in the second quarter, with the potential make additional debt reductions during the year.

Total expenses dropped 8%, to $950.6 million from $1.04 billion a year ago.

Oxford is the largest provider of health plans to employers and individuals in the tristate region of New York, New Jersey and Connecticut.

The company's financial health seriously deteriorated in 1997 on account of computer problems, overdue payments to providers and fines by insurance regulators in New York. However, the company's situation has improved since the end of 1998.

"The combination of efforts to deleverage, which has a meaningful impact on cashflow and earnings, and real accomplishments, such as clearing up the book of business, culling unprofitable employer groups and repricing the remaining book of business, has set the stage for improved performance from here," Price said.