Aetna is selling Coventry Workers’ Comp

It was perhaps the worst-kept secret in the industry; Aetna’s effort to sell the Coventry work comp business.

Now the secret is out, and yes it is true – they are looking to sell the entire thing – network, bill review, PBM, case management, and the rest.  

While a couple of friends have chided me – and undoubtedly more will – for my statements that this wouldn’t happen, I’d suggest that it may not.

The reasons are two-fold.  First, the PBM, FirstScript, uses Express Script’s retail pharmacy network and processing engine.  It represents about a third of the total revenues of Coventry Work Comp (CWC).  If Express decides it wants to own that business, or terminates the network and processing engine deals, FirstScript is in trouble.  Anyone looking at CWC is going to look at that as a risk.

Second, Aetna still has not figured out how to deal with the network contract issue. As I noted in a previous post:

The network generates the lion’s share of the margin; if Aetna wanted to sell the WC business it is hard to see how it could transfer the network’s provider contracts to the new owner as most are a combined WC/group/governmental contract. Sure, Aetna could guarantee access to their contracts going forward for some period certain, but given Aetna’s history with workers comp, any buyer would be very reluctant to bet the future of their investment on that guarantee.

Word is Aetna is NOT going to support the work comp contracts, which means whoever buys CWC – if anyone does – is going to have to convince providers to sign a contract based solely on work comp claims.  Considering workers’ comp accounts for just over 1 percent of total US medical spend, that’s a tough sell.  

So, who’s likely to bid on the asset that some lunatic said could go for as much as $1.5 billion?  (must’ve been on their way out of Colorado at the time..).

We’ll dig in to that later…