How’s Coventry doing?

Pretty well.
With the demise of health reform and the company’s continued focus on core businesses at the expense of ancillary or unrelated operations, things are looking up for the mid-tier managed care company. Last week’s Q4 2009 earnings call revealed a number of positive results while acknowledging significant ‘headwinds’ exist in the health plan business.
Since CEO/Chair Allen Wise resumed leadership of Coventry over a year ago, he’s done a creditable job turning things around despite a tough business environment. While there’s still a lot left to do, Coventry is clearly back on track, despite projecting commercial medical trend of 8.5% – 9% for 2010.
Wise et al dumped the Medicare fee for service business last year along with First Health Priority Services [note FHPS is NOT the workers comp bill review/network/case management business], moves that removed burdens while adding to the overall company’s profitability. There were a number of management changes as well, particularly in regional health plans and sales, that appear to be bearing fruit.
Coventry, like most other health plans, is facing declining enrollment. With employment numbers still troublesome, they are going to lose membership on the commercial sector side but will continue to raise prices to ensure profits grow.
One of the more encouraging statements in the call was from Wise, and pertained to medical management (an area long neglected by Coventry):
“we must do a better job in managing our members’ product care needs. And to that end, we’ve embarked on several initiatives and put considerable resources to improve this area. It’s difficult to do, but we understand that providing better care and more cost-effective care for our members is basic to stay in this business.”
Although this was specific to the Medicare Coordinated Care business, it is one of the first indications that Coventry is working to move from a company solely focused on risk selection and price arbitrage to one that is at least thinking about medical management.
Workers comp
Many MCM readers are interested in Coventry’s work comp operations, so here’s a few items of potential import.
First, Wise said:
“Some comments on our remaining businesses, which is our fee-based businesses. And that’s our workers’ compensation services, our rental network, and the federal, the FEHB business, which are all stable with improving results, well-positioned and produce a diversified revenue, earnings and cash flow stream while capitalizing on our core managed care capabilities. During 2009, we spent time addressing the administrative cost structure for these areas and improvement will continue during 2010.”
Coventry cut a lot of overhead in the WC unit in 2009 and earlier this year, and word is more reductions are on the way.
Second, and more obtuse, was a discussion about hospital unit costs and their impact on trend (which was described as ‘high single digits’). Coventry personnel described their efforts to recontract with hospitals to address trend, particularly as it effected Medicare costs. Not sure how or if this affects work comp, but some of Coventry’s work comp customers have been seeing significant increases in facility expenses.
Something to watch for.
What does this mean for you?
Watch your facility costs – particularly the price per service and volume of services, and especially for ER visits.