Coventry closed the Concentra acquisition four months ago, and has been working diligently to merge this new acquisition and First Health. While it is still early, here’s what things look like after four months.
(sources are today’s earnings call and discussions with industry insiders)
First, the numbers. Coventry’s Specialty Division (aka workers comp) is producing about $620 million in annual revenue. This is fee-based, not risk revenue; Coventry’s entry into the WC space has been driven largely by the company’s interest in diversifying away from risk-based revenues and the First Health and Concentra deals demonstrate the level of commitment.
Workers comp was all but ignored during the earnings call, except for statements from management about their enthusiasm for results to date and optimism for the future of this line. Undoubtedly, they know something I don’t. (and if you do, shoot me an email)
Existing network business appears to be leaving Coventry faster than new business is coming in. Sources indicate that industry giant Liberty Mutual will be moving its California network business from Coventry to Wellpoint; while not a dominant player in the Golden State, LM’s share has been growing significantly of late. With California responsible for about 15% of total national WC spend, this is a very significant market, and one where both Kaiser and Wellpoint are having success competing with Coventry.
Aetna has made solid inroads at Liberty, Hartford, Zurich, and among several managed care firms, territory that used to be the private domain of FH and/or Concentra. While AWCA is not tearing up the industry, sources indicate the WC division of the huge insurer is on track to meet expectations this year. And with the WC network business a mature industry, AWCA’s gains will come by taking business from Coventry and CorVel.
Coventry’s earnings call highlighted the importance of the FirstScript PBM business to Coventry management (part of the Concentra deal, and by some accounts the key component of that transaction), which will be driving up to 15% of the Specialty Division’s revenues. Clients confirm Coventry has been pushing FirstScript hard, and in some cases, really really hard.
The Concentra staffers are working to bring a new customer-oriented mindset to Coventry workers comp. The jury is still out on their ability to make this fundamental, and absolutely critical, mindset and cultural change.
Finally, Coventry’s WC Priority Services division just lost its sales and marketing leader with sources indicating James Molloy is moving on for personal reasons. These reasons may relate to MSA sales, which appear to be running behind plan (this may well be a result of an inordinately aggressive plan).
I don’t know about Coventry’s “customer-oriented mindset “in workers’ comp. However, in my humble opinion, they need to get a “provider-oriented mindset’ and understand that provider reimbursement in workers’ comp is vastly different from one state to another. Like other national work comp networks (now long gone), they seem to think that ‘one-size fits all’. Coventry is offering providers a standard “10% of the state fee schedule’ and a very cold ‘if you want an exception, put it in writing’ and ‘our payers cannot administer carve-outs’ response to requests to negotiate. That is just not going to fly in states like Florida. The bottom line in marketing Managed Care networks…. If you don’t have providers, you don’t have a network to sell.