Coventry’s Priority Services unit is stumbling

AIG is no longer using Coventry for MSAs.
AIG was quite displeased when Coventry raised prices for networks and other services. AIG has long been a loyal First Health/Coventry customer, and was one of their larger MSA customers.
The defection, and other business losses has led to a reported 60% drop in revenue for Coventry’s Priority Services unit (they handle the MSAs (Medicare Set-Asides); sources indicate Q1 2008 MSA revenue is down almost $3 million from Q12007.
Priority Services has had other problems, namely issues related to its ‘guarantee’ that CMS would accept its recommendations for Medicare Set-Aside amounts. I don’t have the details, but it appears that Coventry has not been able to deliver on what has been its key marketing message – the guarantee. Apparently this is in large part due to CMS’ unfamiliarity with state workers comp fee schedules.
The drop off in business reportedly has led to layoffs at Coventry’s Priority Services division.
The business decline comes on the heels of a Federal subpoena issued to Coventry demanding they cease any and all destruction of records related to their MSA business dating back at least three years. The subpoena has made its way to all PS employees, and may well be tied to a complaint from a couple years back alleging that PS inappropriately used Coventry’s online access to Medicare eligibility data.
The net is this – Coventry has been very aggressively working to maximize WC revenues, to sell all its services to all its customers by bundling, offering what amounts to bulk purchase deals, and in some cases requiring customers to agree to significant price increases. When you are a monopoly in one critical area (workers comp networks) you have some pretty strong leverage.
The problem arises in other areas, where Coventry does not have a monopoly, and customers, angered by their heavy-handed tactics, vote with their feet and move their business elsewhere. The workers comp buyer is tough, does not like to be hemmed into a corner, can be loyal but only if s/he believes s/he is being treated fairly, and has a long memory.
Coventry may be forgetting that their priorities must be aligned with their customers’ if they are to prosper over the long term.