Is UnitedHealthcare going to stay in the workers’ comp services business?

I don’t see why not.

Those who don’t track these things that closely likely don’t know that UHG is in the work comp services business.  Back in the spring, the company’s Optum subsidiary purchased PBM Catamaran, who had just bought work comp PBM/network/bill review firm Healthcare Solutions.

Catamaran (now OptumRx) has substantial share in the workers’ comp PBM space, with total Rx revenues likely in the $650 -$750 million range, spread among its network rental business, PBM Cypress Care, Ohio BWC services and other governmental work. Adding Healthcare Solutions’ other services pushes total work comp revenues closer to the billion dollar mark.

While that may sound like a lot, recall UHG’s 2015 revenues are projected to be $143 billion.  It is possible, indeed likely, that there’s more work comp business in that figure; when companies get to the size and complexity of UHG, it’s pretty hard to precisely identify sources of revenue.

Historically, UHG has been in and out of the work comp business several times.  Back in the early nineties, the company tried to be a risk-taker in the Florida work comp market.  That did not work out very well, and the company abandoned the space after losing a bunch of money. At various times, UHG also owned a technology business focused on bill review (Power-Trak) and two work comp services businesses; MetraComp (a former employer) and Focus.  Power-Trak was sold to Mitchell; the others were also sold almost a decade ago.

One could well look at UHG’s history and draw the conclusion that UHG may choose to dispose of their current work comp business; while that would be consistent, it would also ignore several key differences between then and now.

First, UHG management has changed.  Most of the senior folks who decided to exit work comp are gone or in very different roles.

Second, the health plan world of today is fundamentally very, very different from the world of 2006. ACA has dramatically altered the landscape and will continue to do so. There is far more regulatory risk for health plans these days; with the expanded influence of CMS and federal regulators, decisions made in DC (or more accurately suburban Maryland) have far-reaching consequences for health plans.

In contrast, work comp regulatory risk, while significant, is limited to what individual states do.  If one state makes a change, it has zero impact on the others, thereby minimizing regulatory risk.

There are a number of other nice things about UHG’s work comp business:

• it’s a fee business, without insurance risk
• margins are pretty healthy; a lot higher than group/governmental programs
• it has scale; when all the dollars are combined it’s a substantial player
• minimal investment is required as the businesses are mature and operating pretty successfully with experienced management and solid brands

While I know the folks at Healthcare Solutions and Catamaran (both are members of CompPharma, a work comp PBM consortium of which I am president), I have no inside information about UHG’s or HCS’ plans, company strategy, or current integration efforts.

I do know that the benefits of keeping this business far outweigh the benefits of disposing of it.

One last consideration. I find it revealing that UHG announced it’s pending acquisition of Catamaran just days after Catamaran revealed the purchase of Healthcare Solutions. It is hard to believe the Healthcare Solutions deal would have happened if UHG didn’t want to be in the work comp services business.