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Concentra’s investor briefing

Concentra Inc.’s presentation at the Bank of America Investor Conference earlier this month focused on their continued growth, focus on workers comp, and impact of the acquisitions of Beech Street and Occupational Health and Rehab.
Here are some of the highligts from the presentation and comments on same.
Revenues for 2005 are projected to be $1.1 billion, with EBITDA of $156 million and operating cash flow of $101 million. Revenues are growing organically about 5% per year, while operating cash flow is down from $114 million in 2003 to $98 in 2004 to $101 in 2005.
Workers comp is by far their largest market, driving 70% of revenues. The Beech deal will certainly help diversify Concentra’s revenue base, as Beech is a strong mid-tier group health PPO. Beech’s provider contracts will also be compared to the Concentra contracts to identify the ones with the best rates. This, coupled with the greater buying power brought by Beech, may help Concentra drive better deals with some providers.
Of Concentra’s three distinct business units, by far the highest margin business is network services, with a margin of 31%, followed by the clinic business’ 14% margin. The care management sector, which is primarily field and telephonic case management, was hurt by declining revenues and price compression and returned 6%.
Of note, the clinics saw same store revenues up 6.6% on a 5% increase in visits. This at a time when the WC injury rate has been declining by about 4%.
Thomas made the point several times that after the completion of the OH+R deal, Concentra’s clinics will see one of of every ten workers’ comp injuries for initial care. While that sounds impressive, and is impressive, it is important to note that the clinics only see the routine injuries, and most of the dollars that are spent on WC medical go to the more complex cases that are treated by specialists.
The Beech Street and OH+R acquisitions were expensive at $210 million +. The Beech deal adds significantly to Concentra’s group health product offering. while OH+R will add 26 clinics after 8 existing clinics are closed.
Both Thomas and Kiraly repeated their assertion that Concentra is the industry leader in the WC managed care business, and is a full service integrated services provider. From a sheer numbers perspective, they are correct. However, other entities are leaders in segments of the WC business. For example, Coventry’s First Health is by far the leader in the WC PPO sector. MedRisk is the industry leader in management of physical medicine; and PMSI in pharmacy management.
Thomas noted that because Concentra manages all aspects of the claim, it therefore impacts more claims dollars than other competitors. Not exactly. Intracorp has case management, networks, bill review, peer review, and access to specialty managed care. So do Genex and CorVel. Concentra’s out of network bill negotiation entity (Concentra Payment Services) may well be the industry leader in non-network bill processing, but a host of competitors are now in this space.
While Concentra is not a public company, rumors have been rampant for years of their desire to become one. That, coupled with the large amount of debt outstanding, is evidently the reason for their continued participation in these road shows.

4 thoughts on “Concentra’s investor briefing”

  1. joe,I enjoy reading some of your material. I am wondering if you can define leader in sectors a little better, yes these companies like first health and medrisk are big… but they are not leaders I think that is giving them undo credit. after benchmarking these vendors on key data metrix they peform at industry ave.. not very good at all… thanks

  2. Jay – the definition of market “leader” is based on size in this post – if you read the previous sentence in the post this should be clear.
    Re MedRisk, they are the leader in terms of size and performance. They deliver savings 2-4 times higher than generalist networks, have unmatched clinical expertise in physical medicine, a ten year track record, and dominant market share.

  3. thanks joe, Is there a base line established to measure or valadate your opinion? In other words I would argue that savings 2-4 times higher..
    subjective comment… I get calls from vendors all day claiming 40-50% savings and discounts,, corvell, concentra, ect the question is 40-50% savings from what … where is the baseline? anyway something to think about.

  4. Jay – good question re the baseline; I never quote statistics or results as a matter of opinion, but based on quantifiable data. The data on MedRisk are from my direct knowledge of the company’s results, defined as savings below WC fee schedule. MedRisk savings on physical medicine average 35% below FS/U&C net of their fees. the average generalist PPO (First Health et al) average 11% to 15%, before their fees which are in the 20-35% range (retail).
    In WC, the baseline should always be below FS. Some vendors use billed charges as a baseline, which is an irrelevant and useless comparison.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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