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Aetna’s sale of Coventry Work Comp Services…

Is off.

The latest intel from several folks in the know is consistent; APAX will not be buying Aetna’s Coventry Workers’ Comp business.

While its possible Aetna will look for another buyer, that is doubtful; the issues that reportedly led to the collapse of the APAX deal are real, material, and not going to resolve themselves. In fact, the key asset – the PPO network – continues to deteriorate. Aetna has a declining-value asset on its hands, one that, as time goes on, becomes ever less valuable.

According to reports, the biggest sticking point was APAX’ concern that the Coventry network will take at least 2 years to rebuild; when that onerous task is completed it will be nowhere near as valuable as it is today.

That’s far from surprising; I’ve discussed the network contracting issue ad nauseum. Fact is, without the real, committed, and ongoing support of a major group health/Medicaid/Medicare payer, providers aren’t going to give much of a discount to a work comp network.

Workers comp accounts for a bit over 1 percent of total US medical spend. Even if Coventry’s successor could claim 100 percent market share, their influence on a provider – outside of a relative handful – is never going to be appreciable.

But it wasn’t just the network. Sources indicated there were concerns in other business lines as well. Chalk this up to chronic under-investment in the business by Coventry pre-Aetna and the lack of focus on worker’s comp by Aetna since they bought Coventry’s parent company.

With earlier reports indicating Aetna wanted $1.5 billion for a business throwing off more than $200 million in free cash flow annually, a 7x multiple seemed reasonable. However, with no guarantee that the cash would keep flowing, I’d imagine APAX dropped the amount of their bid to account for the lowered expectations.

I’m sure there is much more to the story, but the net is APAX wasn’t willing to pay the price Aetna wanted, and Aetna wouldn’t accept APAX’ lowered bid.

What’s next?

Work comp represents just over 1 percent of Aetna’s revenue.  The company has a few other priorities on its hands at the moment – and as a $50 billion company, well it should.

Guessing here…but if I were at Aetna, I’d think about:

  • Working to keep the PPO network as functional as possible as long as possible without screwing up any of my other – much more important – business lines;
  • Selling off PBM First Script, an asset that should generate a very nice offer;
  • Replacing the bill review platform (BR 4.0) with one of the third party applications currently available. This would allow Coventry WCS to continue its very profitable bill review/PPO outsource business.
  • Leaving current management in place.  Art Lynch is running the show, and he’s the perfect person to do so.  He has strong relationships with current customers, is universally well-liked, and is just the kind of low-key, steady exec WCS needs now.

What does this mean for you?

Don’t delete Plan B – you’re still going to need it.

19 thoughts on “Aetna’s sale of Coventry Work Comp Services…”

  1. That’s disappointing news. Feeling like the proverbial red-headed step-child – the forgotten one, at that – I personally was looking forward to working for a company where the WC line of business was a priority rather than an albatross. Perhaps now Aetna will infuse this line of business with some of the good will and enthusiasm they seem to shower on the rest of the business.

  2. I had not really understood that discount networks for workers comp are so dependent on being part of global deals including commercial health insurance. I did not understand how vulnerable these WC networks are, in a time of ACA.

  3. Art Lynch is by no means universally liked. This former Coventry customer was never more pleased than to not have to deal with him any longer. He insisted that our contract with them make us legally responsible for Coventry’s errors or omissions. When we questioned it, we were told that Coventry’s business model did not contemplate risk. We moved our business to a company that was willing to stand behind its work.

  4. Dear Disappointed – dont hold your breath that Aetna is going to suddenly find it in their corporate hearts to care about WC , its not the focus of the company at this point. Medicare and Medicaid are the driving forces from what we can see from our desks. As this continues to hang over the WC department I would say lay offs are not that far in our futures.. Will be interesting to see how Aetna handles this and what the next move will be as they have played in this field before and not been able to compete. Not holding my breath that it will play out to my advantage.

  5. Since the acquisition, Aetna has treated the WC sector like dog doo stuck on their heel. Everyone was looking forward to this purchase so they could be part of a company that actually wanted to be in the WC business….. Very disappointed….. I hope Aetna higher ups make a concerted effort to incorporate and grow WC into their active business rather than continue to ignore it and let it die.

  6. Good Morning Joe,
    Why do you think Aetna/Coventry WCS should replace their Bill Review system BR4?

    1. Chris – 4.0 needs significant upgrades, has not had adequate resources to maintain/support it, and has fallen far behind other applications. Aetna can either a) rebuild it or b) use another party’s. They will not invest in it, so “a” is out, therefore “b” is necessary.

    2. Why not drop the BR business entirely and simply lease the network? Conversions always take longer than predicted, are NEVER smooth…or cheap. Sure, revenue and control would drop, but margin would likely increase. In addition, to the extent that “the other Steve’s” assessment is accurate or widely shared, customers would be insulated from the poor reputation that he reports. If Coventry changes BR platforms, the spectre of conversion might provide just one more reason for customers on the fence to drop them and go directly to the existing users of that platform or some other. Coventry’s network is likely available through each of them anyway as well as to a number of easily accessed alternatives that might (eventually) provide better savings and more support. Here in California, MPN data is atrocious and there are already a number of ways to leave the network. A poorly supported network increases that risk.

  7. Hey folks, don’t think the grass is always greener on the other side! I was part of “one of the many” One Call acquisitions and trust me – it’s a mess over here!

  8. Hi Joe,

    I see that you said what you would do in this situation. But what are your informants saying about what is likely to happen? Is it likely that they dont pay any attention to the work comp depts and let it slowly fade away? If so, how does that happen? do they just not invest in them anymore, on marketing etc and then just lay everybody off slowly. Or do you think that one day they will come in and just slash the WC sector all together and be done with it?

    1. I knew it
      Thanks for the queries.

      I specifically avoided commenting on what will happen because I don’t think anyone knows. Cwcs folks certainly don’t. Aetna senior management doesn’t as they likely haven’t thought that thru yet.
      My GUESS is they will let it slowly fade away. But that is just a WAG.

  9. Count me amongst those CWCS employees who are disappointed that this deal fell through. I was so looking forward to getting out from under the thumb of big brother (Aetna).

  10. Long-term WC IT resource here. I see the issues around BR 4.0 being almost a moot point. Replacing the system will effectively transition responsibility for maintaining Fee Schedule and other regulatory work to a third party, but BR 4.0 is the lynchpin for the entire WC suite of applications, meaning that the conversion/migration/integration effort will be quite significant, long in duration, and likely expensive. The clients that endured the migration from Concentra’s PowerTrak system may not have any appetite to go through that process again so soon. On the other hand, revitalizing the BR 4.0 system will likely be deemed an unwise investment by Aetna. Seems like the lady or the tiger to me.

  11. Why write about something that may or may not happen? This blog started a lot of rumors in all the depts., people were second guessing their job choices and a few left Aetna to find another job before the sale was completed. This is the main reason Aetna does not talk about their business dealings until they have something in writing. The few that have talked negatively about working for Aetna (being disappointed), unless you have a contract with Aetna, I’m pretty sure you can find another job and see if the grass is greener. Aetna has its goods and bads, but you make your job what it is. You want more from Aetna, work for it, educate yourself, and move up the ladder. I started in the mail room many years ago, I educated myself about the company, learned about the different depts., and I moved up the ladder. Do I think my job will last forever, probably not but I have more knowledge about the health industry now then I had many years ago…thanks to Aetna.
    Am I all for Aetna? No. Aetna is a large billion dollar company who is (like many other large billion dollar companies) looking at the bottom line…how can they make more money, where are they losing money. They will do what they have to in order to keep their company going….it’s all business and nothing personal. I will stay with the company until they hand me a “pink slip”, then I will take the knowledge I’ve acquired and find another job. But until that happens I come to work everyday, I do my job to the best of my ability, I stay away from the negative people, and at the end of the day I go home. Employees of Aetna: If you’re not happy, find another job, stop spreading rumors at work, do what you are paid to do and be thankful you have a job. People that talk negatively and spread rumors are usually the first ones the company will let go, and then they wonder why the company let them go….
    Blogs like this are fun to read, but don’t take them to heart. Most of the time it’s just words from someone who is only guessing at what will happen in the future…50/50 chance they will be right.

    1. Longtimer,
      guess you didnt transition over from the Coventry side when Aetna aquired us…that being said have no idea as to what the WC /UR department has gone thru in the last few years and esp since Aetna stepped in. A department w/ 40 plus employees down to single digits.. and no the grass isnt always greener on the other side of the fence. So walk in the shoes of the people who have been told already regardless of any buyout they are losing their jobs because Aetna has no use for WC and no interest in saving it..and would rather outsource the work then keep in here…

      1. Ann,

        I work under CWCS. But not in the UR dept. We aren’t being told jack but i have heard thru the grapevine about how the UR dept has been slashed. Did they really tell you that regardless of any buyout that yall will end up losing your jobs?

  12. ANN –
    I started out when Coventry was Concentra, so yes I was part of the transition, I’ve been in the business for over 20 yrs. I have worked in BR, UR, TCM, FCM, and CMO. I worked my way up the ladder so yes, I have walked in your shoes before, many times.The dept that went from 40 to single digits has always operated in the red, it’s never made money for the company (Concentra, Coventry and now Aetna). As I said before Aetna bottom line is making money (as with any company)…not keeping depts. that always operate in the red. If you have already been told you are losing your job, now would be a good time to take full advantage of the Aetna learning center and increase your knowledge so you can get a better job.

  13. I, also, transitioned over from Cvty and had a feeling it might come down to this. I agree that people shouldn’t spread gossip at work but I don’t think this blog is written with the intention to incite that type of behavior. People will talk no matter what. Personally, I am happy to have found this blog because it helps me stay informed. It is upsetting to think we might all lose our jobs but nothing in this life is certain so I think it’s best to just stick it out til the end and use the skills we’ve learned elsewhere.

  14. I have quite a bit of experience in many different arenas. I’ve been through many acquisitions so I was proactive in fear and the ‘known’. But I don’t think Aetna is a bad company in comparison to WC.(seriously need new management blood to whip it in shape) I have tried to transfer to another position from WC to Aetna Medicare or other segments that I am well qualified for. They won’t even acknowledge us from CWCS. I had one HR person be extremely rude to me in fact. I had almost every aspect of what they were looking for, and it wasn’t enough. I have great references from many including where I am at now. However, I believe once they know we are from WC they completely ignore us. That is putting the bad taste in my mouth, not trying to sell a non profitable business off. At least with other companies I went through this with, the tried to absorb as many people as they could. Not here, they’d just rather get rid of us. That is why many are disappointed in the sale not going through.

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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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