The latest on Coventry Health – steady progress

Shawn Guertin, Coventry’s CFO, spoke at the Wachovia investor day conference late last month, and here, so you don’t have to listen to the entire webcast, are the highlights. But if you do want to, it is still available here (although it was due to be taken down a couple weeks ago.)
The net is the company is recovering nicely from the troubles of 2008, and remains committed to building a low cost operating structure in commercial, medicare, part d, medicaid, and workers comp.
– Q1 revenues were $3.6 billion, with an MLR under 81%. That’s good news for CVTY, who had problems in the same Q in 2008, and represents 20%+ growth over that quarter. Commercial health accounts for about half of the company’s total revenue.
– Medicare results were in line with expectations, with the all-important MLR also not surprising anyone at Coventry (or more importantly the analysts). Coordinated Care is growing nicely, and membership will be around 180k this year. Coventry remains convinced this is a good business…
– Part D membership is up substantially this year, with growth of over a half-million members.
– Coventry is continuing to emphasize its core businesses – Medicare, commercial, and workers comp. They are following thru on the exit from Medicare Private Fee for Service (PFFS) which will free up significant capital and are selling off or exiting a few other smaller businesses. Guertin went thru the financials of the PFFS exit; suffice it to say that dumping that business will not hurt 2010 earnings. Once PFFS is shut down, $3 billion will drop off the top line, leaving the company at $10.8 billion annual revenue.
– Commercial risk membership is dropping about 10% – no surprise to anyone in this industry due to the economy. The primary driver is attrition from existing businesses, as fewer employees opt to maintain coverage at their existing customers.
– The individual health business is growing, with membership expected to grow 20%+ this year.
– Work comp remains a favored child at CVTY, and why shouldn’t it; with revenues of about $800 million driving margins of over $500 billion there’s a lot to like. Guertin noted the drop in claims frequency has hurt the company a bit, but this has been offset by sales wins and good growth in WC PBM business. He also said that WC is more insulated from health care reform, and is also attractive as it produces ‘unregulated’ cash flows. Not exactly; as anyone in the network or bill review business can tell you, when a state changes its fee schedule (see California, Ambulatory Care), it can dramatically affect revenues. In CA, the the change resulted in dramatically lower margins for PPOs.
I’d also pick on Guertin’s statement that Coventry “never abandoned medical management principles”. Truth be told, the company didn’t have much in the way of med mgt to abandon. Compared to an Aetna, Coventry’s medical management capabilities are quite limited.
One other point I found quite interesting – regarding COBRA uptake, Coventry hasn’t seen any significant change in the number of folks signing up for COBRA despite the subsidy built into the stimulus package. That is consistent with my sense back in February, and with what other health plans are seeing now.
I won’t be able to perform the same service for the Q2 earnings call (July 28) as I’ll be in Africa with the family on a much-anticipated trip. Any volunteers to fill in?