While it may not be closed, the deal is done.
Multiple sources indicated APAX is scheduled to close the purchase of Coventry Workers’ Comp a month from now. The long-rumored sale will close October 1 – if everything goes according to plan.
Here are the details – at least as they’ve been relayed to me.
- The sale includes all of Coventry’s work comp services division – PPO, bill review, Pharmacy Benefit Management, DME, IME, UR, case management, peer review, and the rest.
- Aetna has “committed” to supporting the network for two years – don’t know what this means, how it will be measured, or what the guarantees are.
- APAX is the purchaser.
A few related items worthy of consideration.
- Coventry’s been working on an RFP for a new bill review system/strategic partner for some time. No word on whether this will go forward or be mothballed, and I wouldn’t expect to hear anything until October.
- Aetna recently announced they signed a 3 1/2 year contract with northern California’s Washington Hospital Healthcare System. The contract does NOT include workers’ comp – but does include every other payer type.
- When the deal is done, APAX will own: the largest work comp PPO, imaging network, PT vendor, DME/Home health network, and case management provider; one of the largest PBMs; a major (but faltering) bill review operation; and a whole raft of ancillary businesses.
The implications of this transaction are rather dramatic. It puts control of many payers’ medical spend squarely in the hands of a private equity firm. (more on this here).
The news also refutes my (strongly-held) view that Aetna wouldn’t sell the business because it a) throws off so much free cash flow and b) can’t. The latter is based on the premise that the network contracts will rapidly fall apart without Aetna’s combined medical spend as bargaining leverage.
Regarding the latter, we shall see.
What does this mean for you?
Opportunity for bill review firms and niche medical management providers.
A return to the days when Coventry owned the market.
So, you’ll be mailing David Donn a conciliatory gift (he is partial to Padron 64’s)? Meanwhile, chin up and keep up the good work. Great blogs!
Thanks Mike. Have a few bets I’ll have to pay off once the deal is finalized.
Will this affect Coventry/Concetra MPN lists of physicians?
Multiple sources? Could you please cite your sources?
Chris – thanks for the note. No, I will not cite my sources. They are well-informed.
For those not in-the-know about Apax and its current industry position, size, or functions, do you have an opinion about the future of Aetna’s current WC staff? One would expect the executives and higher-level management could be redundant, but what about the worker bees?
I would expect there will be several repercussions for Coventry staff.
1. All will be asked/required to sign non-competes. Whether these are enforceable or not is irrelevant; few employers will want to fight with APAX even if they will win – the cost isn’t worth it.
2. Wherever possible staff will be laid off. This will continue an established pattern, with the most recent example the layoff of 99 workers at OCCM’s Tampa location.
3. Competitors are looking to identify and recruit Coventry staff, and sources indicate they are reaching out to current staff in an effort to lock them up before they sign non-competes.
More to come.
What is the purpose of posting the information you claim to have? Why don’t you leave the news, up to the news people, who are willing to validate/cite the information with reputable sources, rather than distracting employees with info that may, or may not be valid. Facebook might be a better avenue for your opinions. You’re creating a mess.
WW -thanks for the comment. The purpose of the post – and most of the other posts I’ve authored over the last ten years – is to provide my perspective on news of the day, give insight into goings on, alert people and businesses to the potential impact of events on them and their businesses, and provoke others to think more deeply about issues.
You may not be aware that many “news people” also use unnamed sources when those individuals are not authorized to discuss certain topics. As I noted in a reply to a previous commenter, I stand by my statements.
I’ve been publishing MCM for a decade now, and the growth of the readership is due in large part to the currency and accuracy of my information.
Finally, it is not I who is creating a mess. The industry is going through dramatic changes, and these changes can best be addressed – by employees and their managers – that are aware of what’s going on as early in the process as possible.
Don’t shoot the messenger.
I do appreciate your thoughts/comments regarding my question on this, and your points are well taken. Your information HAS always been accurate, so maybe it’s time for a promotion! Thanks for explaining your position.
Any thoughts on whether or not Aerna employees should sign a no compete clause? Seems to me they might acquire employees have them sign and then let them go. Also any idea when Aetna may actually let their employees in on the sale?
Kam-appreciate your questions. I am no attorney and anyone- and I mean anyone- presented with a noncompete or other form of employment agreement should ABSOLUTELY get legal advice from a qualified expert.
I would suggest any affected employee may want to learn more about how Noncompetes have been used in the past and their effect on the workers who signed them.
As to when Aetna says anything, they really have nothing to say until the details of the deal are agreed upon and a formal letter of intent signed.
If this is true then why is Aetna steadfastly denying any and all sales to their staff in WC and all other departments? Why would it benefit them to continually deny this?
They can’t say anything as there is no official deal.
Another CVTY person- our boss told us, but the higher ups are still acting like nothing happened. Genex was bought out by Apax and the staff was NOT asked to sign a no compete agreement.
Another Party- appreciate your observations. I rechecked with a contact and evidently the higher ups at Genex and the sales and account mgt folks did have Noncompetes.
How do you think this buy-out will impact BR4’s bill review services, since APAX already has Medical Bill Review Services under GENEX?
CP
Thanks for the question. Genex’ BR operation is tiny compared to coventry’s. That said BR4.0 is well past it’s prime and needs replacement. Cvty has been working on an rfp for a BR application; this will likely be tabled for a while.
Expect some rather major changes to Coventry BR. What that will look like we can get to in a couple weeks.
thank you very much
Hi Joe,
I thoroughly enjoy reading your blog and am thankful to have found it. I currently work for Cvty workers comp/ Aetna in a Tampa office. I came across your blog when we started receiving internal emails about the rumours of a sale. I have been checking your blog on a weekly basis since then . Just wanted to say thank you for the info, I hope this turns out to be for the best.
Thanks very much for your kind words. Best of luck with the transition and hope it works out for you and your colleagues.
What does APAX Partners tend to do with these companies, after they acquire them?
Hi Chris – APAX has not been in the work comp space until recently; I’d suggest you may want to review the history of the various OCCM companies – TechHealth, Network Synergy, Genex, MSC etc. Like most investors, they look for opportunities to reduce cost and increase revenue. This isn’t good or bad, it just reflects the demands of their investors.
Often this results in fewer employees over the near term, and possibly more employees if the company is able to grow.
Joe,
You say ‘competitors’ are reaching out to present employees. Who do you think those competitors are?
Hi Justawonderin – I’d expect many of their competitors in similar businesses are looking for talent.
IPO in the future…or a possible implosion!
Hi Joe, Your blog is awesome and gives us a “heads up” on what is likely to happen and what to expect. What do you think will happen to the Case Management folks (telephonic case managers etc)? Do you feel they will just acquire the Aetna Case mgrs and then lay them off giving the business to the already acquired Genex?
Concerned employee – thanks for the kind words and glad it is helpful.
A lot depends on where staff is located, whether they are low- or high-cost, what states they serve, licensure, and customer desire.
My GUESS is APAX will combine the Coventry staff with Genex is it doesn’t make good sense to keep two separate operations. However, that will take some time. However, if case volumes are low, I’d expect staff reductions – IF necessary – might occur.
Hi Joe. We have not heard from David Young since his departure from CWCS. Is there any chance he is looping back around to Coventry with this APAX deal?
Well we thank you for the heads up. We all knew it was coming when things began with Aetna purchase of Coventry they had done workers comp twice and bailed both times… while it is devastating for those of us who hold no licensing and are the true worker bees we can only hope that they offer some of us opportunities within the new organization. ..
debbir – thanks for the note and hope the posts have been helpful. I’d suggest that if you are asked/told to sign a noncompete, you thin long and hard before doing so. A group may want to seek an attorney’s advice as spreading the cost among many would be very helpful.
best of luck and keep me posted.
Joe
How do you think this buy-out will impact Coventry IME services, since APAX already has IME services under GENEX?
Thank you
As an employee who was here prior and during the APAX acquisitions (merger of OCM and MSC) of OCCM I can say there were many growing pains I would attribute to lack of knowledge on APAX’s part in these business fields, but that being said after some initial (in some cases very large) judgment bumps APAX seems to have been very careful in their decision making process with the further acquisitions and has been very very receptive in listening to and picking the brain of those folks that know their areas before making large scale decisions. Yes we have lost colleagues some of which not having I feel is a real blow to the organization(s) and believe me I am not playing good company boy here I feel there have still been mistakes made but I think all in all the heads of the ship are not just making rash blind decisions with out a bit of research behind them. I say this because I hope it will put some ease to the CVTY folks in the understanding that the all powerful ax method does not necessarily seem to be the method of choice.