The results for the second quarter are in, and Coventry’s doing well.
For now, we’ll focus on the work comp sector; if you are looking for any insights into Chariman Allen Wise’ views on comp, you won’t find them in his comments or the transcript of the earnings call. Both the Coventry folks and the analysts were entirely focused on preparations for reform, Medicaid, Part D, and expansion plans.
Despair not, as there’s enough other info out there that we can discern some trends with their work comp sector.
Fortunately Coventry has been reporting the work comp sector’s revenues on a separate line for a couple of quarters. The data indicates essentially flat sales with a slight dip this quarter (2.5 percent) compared to the same quarter in 2011. That’s a solid accomplishment, as its came despite the loss of significant PBM revenue with the move of ACE’s pharmacy business to rival Progressive Medical.
Pharmacy drives Coventry’s work comp top line. Coventry’s PBM, First Script, (and all PBMs) count pass-thru pharmacy transaction revenue as Coventry revenue. Contrast this to other service lines such as bill review and networks, where only Coventry’s portion of the spend hits their top line, and the importance of pharmacy to top line becomes evident.
Those other lines are under pressure as well. ACE reportedly is moving other business away from Coventry, including provider networks. Macro factors, such as the continued soft employment picture and fewer workers comp claims are also dragging down performance, reducing case management, bill review, and network business.
A factor that is getting almost no attention is the impact of physician dispensing on First Script’s revenue. With almost two-thirds of work comp pharmacy spend in Illinois and Florida and over a third of national spend from dispensing physicians , First Script’s top line is about a third lower than it would be if this practice was limited — as well it should be.
Best guess is Coventry’s work comp revenues would be about a hundred million dollars greater if not for dispensing docs.
To keep expenses down, management has been reducing staff; sources indicated several analysts from the reporting group were let go a few months back.
Aug
6
