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Oct
15

Coventry to acquire First Health

Coventry Health Care announced yesterday it is going to acquire FirstHealth Group for stock and cash equivalent to about $18.70 per share. Coventry is a second-tier managed care company focused on small group, fully insured business, in 15 states.
This may well indicate a change in Coventry’s strategy, as it evolves from its tight focus on small group insurance in limited markets. The acquisition gives Coventry a national PPO for work comp and group, ownership of the federal MailHandler’s health benefit program, and ancillary or related services including PBM capabilities and Medicaid services.
Notably, there were no indications on the part of Coventry senior staff of a desire to retain FH senior management over the long term; while this is conjecture the tone and wording of their statements does not give one the sense that the top layer of FH management is around for the long term.
One interesting question is what will Coventry do with the WC business? Coventry is managed by people who have little past experience with WC, and actually worked for firms that rid themselves of WC subsidiaries (UnitedHealthGroup selling MetraComp and Focus) to focus on core business. My sense is Coventry will leave the WC alone for now, and see what develops – stay tuned over the next six months, as any change in this may happen around the middle of next year.


Joe Paduda is the principal of Health Strategy Associates

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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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