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The work comp PBM industry’s evolution continues

The news that Catamaran has acquired PBM, bill review, and network company Healthcare Solutions is yet more evidence that the workers’ comp services market is mature and evolving.  Nowhere is this more evident than the WC PBM industry where there are now six major PBMs, down from ten just five years ago.

This is partly due to the change in definition of “major”; as industries consolidate the size of the companies increases as scale and buying power become critical to success.

As a colleague pointed out, this transaction doesn’t consolidate the industry per se…

Here are the key data points…

  • HCS’ purchase price is $405 million
  • at EBITDA of $35 million, the multiple is a very healthy 11.6x
  • the deal is expected to close in the second quarter
  • Catamaran’s revenues for 2014 were over $21 billion

The transaction transforms Catamaran, the fourth largest PBM serving the health, Medicare and Medicaid industries from a back office and network supplier to the workers’ comp PBM industry to a direct vendor. Things could get complicated, as WC PBMs Carlisle and myMatrixx use Catamaran’s back office and network services.

Sources indicate HCS’ management and staff will remain in place; good move as CEO Joe Boures has a very strong team that has delivered solid sales improvements, a robust and effective clinical program, and strong customer relationships.  As Catamaran doesn’t have these capabilities in-house, and HCS is growing in a mature industry, I’d expect minimal changes.

What does this mean?

Several takeaways.

  • multiples remain very strong – good news for anyone considering selling their company.  Considering it looks like this wasn’t an auction but rather a direct sale, this bodes well for anyone considering a transaction.
  • strong management drives value; after several years of spotty performance, a revamped management team has created a lot of value for HCS’ owners (full disclosure – I have a tiny equity stake left over from a previous role on HCS predecessor Cypress Care’s advisory board)
  • very happy for the Datelle family (founders of Cypress Care); Hank, Marc, and Lisa are all friends and it’s good to see them do well – again.

more to come…

3 thoughts on “The work comp PBM industry’s evolution continues”

  1. Hi Joe,
    Long-time reader, first-time commenter here. Thanks for your efforts to keep us all apprised of the latest industry developments. Do you have any sense of Catamaran’s interest in the auto side of HCS’ business?

    1. Nick – thanks for the note and glad you’ve been around for a while – patient man, you!

      Word is the auto – and the entire Procura business – is part and parcel of the deal. While it isn’t a niche Catamaran has been in to date, HCS has carved out a nice niche in auto, and there are those beloved “synergies”; clients buying bill review, networks, auto, case management and other services from HCS are also using their PBM. Thus, it doesn’t make sense to split those “ancillary” businesses off from the “core” PBM.
      I’d note that many other PBMs also have ancillary lines as well.

  2. Very interesting development – can’t wait to see how this affects worker’s comp in general in the long run. Thanks for sharing your insight.

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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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