Acquisitions and future deals – the latest in the work comp services business

Summer is ending next week, and favorable tax treatment will sunset not much later. With the end of vacation season fast approaching, investors will likely step up the pace, while owners looking to maximize their take-home are motivated to get deals done before 2011.
Another big motivator is the large amount of cash sitting idle as private equity firms have been waiting for things to settle down before risking their investors’ funds.
Here’s what’s happening.
ISG Holdings announced this am that they have finalized their purchase of Bunch and Associates. The deal took forever to close, but now that ISG owns the managed care vendor look for Bunch to dump their Ingenix relationship and move to Stratacare (part of ISG’s holdings).
Part of Bunch’s attraction for ISG was the potential to move their bill review from Ingenix to Stratacare, a move that will increase margins by a couple million bucks. This won’t be easy nor smooth, as Bunch has built a lot of logic in and around the PowerTrak bill review system, logic that has helped Bunch sell their services to self-insured employers. There are going to be some pointed conversations down in Lakeland (Florida, Bunch’s home) as the new owners look to maximize margins while customers, and customer advocates, look to proceed with caution.
Earlier this summer, Odyssey Investment Partners’ One Call Medical acquired transportation and translation company STOPS, broadening its workers comp portfolio. From a synergy perspective, this makes sense as injured workers often need transportation to their MRI appointment; as the largest MRI network in work comp, OCM should be able to leverage the relationship quickly.
Injured Workers Pharmacy has been looking for a buyer for some time, and the book is still out. IWP got hammered when NY changed their work comp pharmacy regs a couple years back, and has since moved into other states where they try to get claimant attorneys to get their clients to buy drugs thru IWP. Payers report IWP’s costs are much higher than the same, or essentially identical drugs purchased thru PBMs’ retail networks, making IWP persona non grata in the payer community.
PT firm Align Networks was rumored to be considering a sale this fall, but reportedly has decided to hold off for now.
There are a few more possible deals in the works, but we’ll have to wait and see what develops. I’d expect at least two more transactions in the space before the end of the year, perhaps more.