NWCDC – key takeaways

What was noticeable about this year’s NWCDC was what wasn’t.

That is, I didn’t hear or see much that was surprising or new or revelatory.  After a score of scheduled and many more unscheduled meetings, what emerged was an overall sense that the work comp industry is doing pretty well, the big takeaway being the status quo continues.

That needs some additional explanation. Today’s “status quo” is marked by:

• consolidation both within and among industry verticals;
• emergence of smaller, niche-specific service providers; and
• continued interest on the part of investors.

Let’s take those on in order.

First, there’s no question consolidation continues.  In an industry with a structural decline in claims frequency, the rules of a mature industry are incontrovertible.

• Scale and efficiency are critical to success.
• Some service offerings/verticals are being commoditized.
• Market share is hard to come by.
• Service deficiencies lead to customers leaving, while
• price is key to gaining other suppliers’ unhappy customers.
• Vendors are broadening their services by acquiring “sub-vendors” (think TPAs acquiring medical management assets); and
• Vendors are acquiring other vendors in the same market vertical (think Genex acquiring other case management firms).

Yet there are multiple examples of new competitors emerging, looking to take advantage of opportunities that arise because their much larger competitors are focussed on streamlining, efficiency, consistency, cost control.  While these tactics make sense in a mature market, they also create openings because customers don’t all want the same thing delivered the same way.

I’ll dig deeper into that tomorrow.

Finally,  investment professionals were evident on the floor and at sessions.  This year I encountered representatives from hedge funds in addition to the usual investment banking and private equity folks.

The investment interest seems to be concentrating in a couple areas – the really big and pretty small. On the “really big” end of things, the continued reports that UnitedHealthcare is going to invest in the WC PBM space, Examworks’ ongoing acquisition campaign, and Mitchell’s move into pharmacy management are all indicative of the trend.

While I haven’t seen much in the way of funding for small firms, it could well be there’s a good deal of activity I’m not aware of.  Certainly there’s a lot of interest among investors as they focused their time on the periphery of the exhibit show floor, looking for smaller companies with intriguing, potentially disruptive solutions and services.

Finally, I was somewhat surprised to hear about a good deal of innovation on a variety of fronts.  More on this later this week.

What does this mean for you?

Status quo does not mean static.  The industry continues to evolve, but there are potentially significant external factors that may well change where we are headed.