It's official. Coventry Healthcare has informed their employees they will be closing up the Medicare Private Fee For Service business at the end of this year.

The announcement was made today at the healthplan's two PFFS operations centers in Houston and San Antonio by the site directors. While the 'transition' plan has not yet been released, sources indicate members have begun calling with questions about the program's demise. The official transition plan will be released around the end of June.

As I reported last week, the decision was finalized at Coventry's Board meeting which came two days after the Q1 earnings call wherein CEO Allen Wise gave strong indications the PFFS business would be shut down.

The move is a logical one. Coventry lost its way a few years ago with diversification into various governmental and ancillary lines. The new ventures contributed to a loss of focus on core business functions, with the resulting increase in hospital expenses, failure to closely monitor costs, and resulting deterioration in financial performance. Notably one of Wise' initial moves after he re-assumed the CEO job was to stop funding expansion of Coventry's managed Medicare program and drill into the medical expense issue.

The termination of the PFFS program is the logical next step.