CorVel Corp just announced its results for the quarter and nine months ending December 2004 , and the picture isn’t pretty. Both revenues (down about 7%) and profits (dropped about 30%) declined significantly from the same period in 2003, while G&A expenses actually increased by about 4%.
According to CorVel, the soft labor market and a purported decline in the rate of inflation in Workers’ Comp medical costs were responsible. While the former may have had something to do with the poor results, the latter appears to be a rationalization at best. Medical trend rates are running in the double digits, so it is hard to understand how that would increase would contribute to a decline in revenues and profits for a company primarily focused on WC.
CorVel has grown recently through acquisitions, and is still assertively pursuing this strategy. Meanwhile, their difficulty in handling large national WC accounts (due to distributed IT systems), spotty management (some regions are very well run, others less so), and poor discounts delivered by their PPO may be the more significant contributors to the bad news than the environmental factors cited in their press release.
As a maturing market, the Workers’ Comp managed care industry is seeing consolidation among the top players and significant growth among smaller, specialty entities. Expect this trend to continue, as the real innovation is occurring among specialty managed care firms such as Choice Medical Management (regional player in FL), MedRisk (physical medicine and claims workflow automation), OneCall (diagnostic imaging), and in selected firms in the PBM area.
(Note to reader – MedRisk and Choice are consulting clients of HSA)
Jan
27
