Health Net shares surge

Shares of Health Net Inc. surged Tuesday on better-than-expected first-quarter earnings and on news that it was getting turnaround advice from WellPoint Inc.’s former chief financial officer.

The Woodland Hills-based health insurer posted a net income of $22 million, up from a $35.7-million loss a year ago. Excluding one-time charges, that translated into earnings of 41 cents per share, higher than the 35 cents analysts expected.

Health Net’s swing to profit came despite a decline in enrollment to 3.6 million. That’s down 288,000 members, or 7.5%, from a year ago. Health Net blamed the attrition on the downturn in the economy.

Shares closed at $16.55, up $2.07 or 14.3%, at the close of trading on the New York Stock Exchange.

Chief Executive Jay Gellert said the results “reflect planned improvements in our commercial and Medicare operations in addition to our ongoing focus on reducing administrative expenses.”

The company shook up its leadership late last year and began an ongoing strategic review.

Gellert confirmed on the earnings call that the strategic review would be assisted by David Colby, a darling of Wall Street who was widely credited with helping build WellPoint into one of the nation’s largest health insurers through a series of acquisitions.

But Colby was ousted from Indianapolis-based WellPoint nearly two years ago for unspecified violations of its corporate code of conduct. His departure came amid salacious allegations about his personal life, including the claim made in a lawsuit that he maintained “concurrent relationships” with an employee and more than 15 other women.

“Health Net has entered into a consulting agreement with David Colby, under which he has agreed to advise the CEO and CFO on issues related to the strategic review and in streamlining financial processes and organization,” company spokeswoman Margita Thompson said in a statement.

“Mr. Colby has a proven track record of enhancing relationships with the investment community and maximizing shareholder returns.”

Hospital operator Tenet Healthcare Corp. also reported a first-quarter profit despite a slight drop in hospital admissions.

Dallas-based Tenet, which operates several California hospitals, reported net income of $178 million, or 37 cents a share, on a gain from a debt swap and higher revenue. Excluding the one-time gain, earnings were 8 cents a share, higher than analysts’ expectations of 3 cents a share. By comparison, Tenet lost $31 million, or 6 cents a share, a year ago.

Shares in Tenet closed at $2.52, up 2 cents or less than 1%, in trading on the NYSE.

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