I’ve been remiss in not keeping faithful readers up to date on developments at CorVel. I had a chance to listen to their latest earnings call, and here’s the report.
All in all, things are looking up, a bit.
Revenue for the quarter was $76.7 million, up 15.2% from the December 2006 quarter with EPS also improving to $0.43 for the quarter or 61% from the year before.
Patient Management, revenue for the quarter was $33.3 million. This is a 29.3% increase over the December quarter of 2006 and a 5.7% increase over the September quarter of 2007. Profit improved 174% over the December 2006 quarter and 26.1% over the September 2007 quarter. Patient Management includes the revenues from CorVel’s recent TPA acquisitions, which likely accounts for the majority of the increase.
Case Management revenues over the last half of the year are up somewhat, expenses are under control, resulting in better margins in this sector. Interestingly, the CM business appears to be coming from both internal sources and external clients.
Network Solutions revenues for the quarter were $43.3 million up 6.2% over the December 2006 quarter and 3.3% over the September 2007 quarter. Profits were up as well.
OK, so what does this all mean?
Clearly, the overwhelming majority of revenue increase was from the TPA business – of the $10 million bump in revenue, perhaps $9 million from claims and related services. This is growth from acquisition, not organic. It appears CorVel has been able to leverage its TPA relationships to drive up case management and network revenues – the account rounding is working.
CorVel’s strategy of competing as a TPA is, as I’ve noted before, very risky. The company is likely losing business as its customers shy away from doing business with a competitor. The trick will be to see if CorVel can grow the TPA business faster than it is losing managed care business.
And the timing just could not be worse. The market is awfully soft; although prices in California are just starting to look like they’ve hit bottom (any lower and insurers would be paying employers premiums), that isn’t the case in most states – rates are low and getting lower. Employers can now buy WC insurance for less than their predicted claims, which raises the very good question, why be self-insured if Insurer X is going to give me such a great deal?
TPAs around the country are like fish gasping for air in a pond that is drying up. If CorVel can survive till the rainy season, they may be OK. But even then, they will have to successfully transition from a managed care vendor to a TPA.
I doubt CorVel can hang on. All faithful HRMS clients and employees are leaving and they have not written any new business. They cannot offer the quality service & product that Ms. Hazelrigg did. Their reputation for being greedy in their managed care fees is well known and is currently being seen by the remaining HRMS clients. Their reputation for providing a poor product from their nurses, among other things, is also coming to light.