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A big fall in the cost of providing medical care powered



to a 43% year-over-year earnings increase in the third quarter that wiped out analysts' estimates.

The Cypress, Calif., health-maintenance organization earned $67.5 million, or $1.72 a share, in the latest quarter, compared with earnings of $43.8 million, or $1.20 a share, last year. Revenue was $2.74 billion in the latest period compared with $2.78 billion a year ago.

Analysts surveyed by Thomson First Call were forecasting earnings of $1.46 a share on revenue of $2.76 billion. Pacificare now expects to earn $6.52 to $6.57 in all of 2003 compared with the consensus estimate of $5.65 a share. After being halted in after-hours trading, the shares recently crossed on Island at $61.96, up from the 4 p.m. EST close of $59.25.

The earnings increase was driven by a 360-basis-point drop in Pacificare's so-called private-sector medical-loss ratio, which measures the cost of medical care to the provider.

The lower revenue reflected a 10% decrease in total medical membership, offset by higher per-patient revenue yields. The company's commercial membership at Sept. 30, 2003 was 6,500 higher than at the end of the second quarter but down 9% from the Jan. 1 due to the loss of a big contract with Calpers.