ABRY’s investments in work comp; what am I missing?

This is a pretty simple question.  How is it that an investment firm owns stakes in a TPA, MSA company, subrogation firm – and a physician dispensing and billing company?

That’s the question I’ve tried to ask folks at ABRY Partners in the past, but they’ve never seen fit to return my calls.

Don’t they know that their TPA’s (York Risk Services) clients are being hammered by physician dispensing, paying millions more for drugs and driving up their loss costs?

Has it occurred to them that their MSA company’s (Gould and Lamb) settlement estimates are directly, and in some cases dramatically, affected by physician dispensing?

Is it not ironic that one of their investments (Trover Solutions) seeks to recover dollars spent in error or inadvertently, while another (Automated Healthcare Solutions) actually increases employers’ costs? 

Physician dispensing companies make lots of money charging employers and taxpayers outrageous amounts for drugs. That is so well-known as to be common knowledge.  And no, there’s no data that outcomes are better, but there is growing evidence that medical costs are higher and claimants are out of work longer when they get drugs from their docs.

Claims administrators flourish by controlling their employer clients’ workers comp costs. They do battle day in and day out with physician dispensers and their allies, striving to keep medical costs down while ensuring claimants get the drugs they need.  York is, by all accounts, a very good TPA, one that is doing all the right things on behalf of their employer clients. (disclosure – I’ve done work with York in the past, and have been universally impressed with their people, their focus, and their dedication to doing the right thing)

Yet in many states, employers’ workers comp costs are significantly higher than they should be, due to the massively higher prices for physician-dispensed drugs.

Medicare Set-Aside firms: “forecast future medical exposure and establish a medically accurate basis on which to set reserves for workers’ compensation and liability files or claims with limited medical records. By accurately forecasting future medical exposure, [the future medical care plan] becomes an invaluable negotiation tool for mediation and settlement.” (from Gould and Lamb’s website)

Obviously, the higher the drug cost, the higher the costs for the future medical care plan.  That’s not to say Gould and Lamb – or any other MSA firm – benefits from increasing their estimate of future medical costs.  They most certainly don’t.

With that said, there’s no question AHCS, and by extension ABRY, do benefit – a lot – by increasing claimants’ drug costs.

Another ABRY investment, Trover Solutions, Inc., is in the business of recovering claims dollars through subrogation; they’ve been in the P&C industry since 2000.  One wonders if their software, Troveris, is able to identify bills paid to AHCS for drugs in Florida, where some payers are finding success in denying physician dispensers’ high billed charges and repricing the bill to the same rate charged by their retail pharmacy networks for the same drug.

Given the recent report by WCRI that almost two-thirds of Florida’s work comp drug costs are from physician dispensed drugs, there may be an opportunity here for Trover.

I get that investment firms are in business to make money.  So am I, and there’s a very good chance you are too.  That’s fine.

But I’m puzzled by ABRY’s investment decisions.  What’s to think about an investment firm that owns businesses with apparently conflicting business goals?