The short answer – elimination of a major network and bill review competitor, acquisition of a PBM and case management operator, and an annual revenue increase for Coventry’s specialty division of about $320 million.
The annual revenue increase is equivalent to 150% of Coventry WC sub First Health’s annual revenue, pushing the WC fee business at Coventry up over the half-billion dollar mark (annual revenues). Considering that this business is inordinately profitable, the financial rationale is clear.
Now, the longer answer.
Case Management – I’ve discussed this earlier
An IME network – Independent Medical Exams are performed by physicians on injured workers when there is a disagreement or lack of clarity about the appropriate medical treatment or prognosis or causality. Concentra has a large IME network, a service that can be sold right alongside case management.
A Pharmacy Benefit Manager, or PBM. Evidently one of the more attractive assets was Concentra’s FirstScript. FirstScript has been around for years, but only recently has the company been investing significant resources in the PBM space.
A really large PPO network, albeit one with a wart or two. Concentra’s FOCUS network (acquired from United Healthcare about eleven years ago) is very large, consisting of both direct contracted providers and agreements with other networks allowing FOCUS clients access to those networks’ providers. Sources indicate about half of FOCUS’ providers are contracted directly, with the rest coming in via other networks such as Aetna, Rockport, and Interplan.
The “warts” are related to recently-resolved legal issues. Concentra settled a couple of painful and long-running lawsuits, one in Louisiana and another in Pennsylvania, with providers who alleged that the company had engaged in selling “silent PPOs” to payers, as well as arbitrarily slashing bills without ‘due process’ (my words, not their’s). The settlements cost Concentra upwards of $25 million, and required the company to hire more staff, communicate more clearly, and require their customers to actively direct injured workers to participating providers.
What Coventry is NOT getting are the group health and auto managed care businesses and the 310 Concentra clinics, which generated almost a billion in revenue last year.
The deal is scheduled to close the first week of April.
