TPS, a subsidiary of Fiserv, has had a rather tumultuous recent history. For sale for a reported $200+ million, then taken off the block when no buyers appeared. Left behind when Fiserv sold the rest of its health business to United Healthcare earlier this year. Meanwhile, TPS was buying its sole competitor, WorkingRx for a reported $25-50 million (highly contingent on AR collections).
Earlier this week I noted that WorkingRx has filed over a hundred individual cases in Utah naming specific employers liable for ‘shortpays’ (payments of less than WRx thinks they’re owed). In my opinion, WRx overreached; the filings named the pharmacies that filled the scripts – and when employers find out which pharmacies are behind this mess, they will be none too happy.
WRx’s General Counsel, Rex Huang, left the firm just before the end of the year.
With Huang’s departure, the rapid disappearance of senior staff at WRx is now close to complete.
The third party biller market is now a monopoly, and some pharmacy chains indicate the pricing proposals from TPS are starting to reflect that.

Here’s a few brief items from the world of workers comp managed care.
Steve Rodriguez, the ex-CNA insurance executive who was brought in to Coventry Workers’ Comp, has moved on, with his responsibilities apparently assumed by former Concentra network boss David Young. Rodriguez, who by all reports was well-respected within Coventry, reportedly has a six-month non-compet Rodriguez was COO of the WC unit at Coventry.
Third party biller WorkingRx (now wholly owned by Third Party Solutions) has filed over 160 separate suits against employers in Utah. The suits are apparently an effort by WRx to collect on the difference between what WRx was reimbursed by the payers and what WRx believes they are owed. Interestingly, the specific pharmacies that filled the scripts are named in the suits. What is even more interesting is the suits, for the first time, will likely reveal WRx’s margins – the difference between what WRx pays the pharmacies and what they bill the payers.
The difference may prove to be enlightening to regulators, infuriating to payers, and embarrassing to the pharmacies.
Whhy is WRx doing this? My guess (and it is only a guess) is that the terms of the deal with TPS include some provisions related to accounts receivable. WRx’ previous owners get paid more if more of the outstanding A/R is collected. This, combined with WRx’ well-documented eagerness to litigate, likely led to this action.

Coventry CEO Dale Wolf presented a brief overview of the company’s prospects at a JP Morgan conference last week – while Wolf’s comments about WC were brief, they were also revealing. (webcast is available till 4/7/08)
To date, the WC business has ‘Done very well” (paraphrase) – while it is only about 5% of revenues it drives 10% of profits. Coventry’s WC business is even more attractive as it is fee-based and thus not subject to the underwriting cycle.
Wolf specifically mentioned Coventry’s WC PBM as a key growth driver. The PBM, FirstScript, did have notable sales successes in 2007, a significant portion of which was driven by packaging the PBM with bill review and networks. The CNA sale (a package deal of networks PBM and other services) was only done when Coventry slashed their PBM pricing well below that of the two other finalists . (sources indicate the pricing on that deal was at breakeven or possibly slightly below).
I mention PBM because unlike network and bill review services which are fee-only, PBM revenues also include the cost of the drugs. (Coventry reported PBM ingredient costs will total $150-$170 million in 2008) Thus, a deal with a mid-size carrier may generate $50 million in top-line revenue, but 80-90% of that is pass-through. If one is looking to grow top line, PBM sales are going to be the fastest way to get there. Especially when low margins on PBM sales can be offset by price increases on network access, where Coventry believes it has strong pricing power (from my conversations with multiple large payers).
Coventry expects WC to generate more than $700 million in revenues for 2008; with profits from the line estimated at $75 million. (Note – WC revenues were flat from Q2 2007 to Q3)
I would also note that Wolf, in talking about the WC business, said words to the effect that Coventry ‘would take advantage of their leading position’.
Coventry management expects meaningful growth from the WC business in 2008. From conversations with large payers and resellers (bill review companies and managed care firms) a good chunk of that growth is coming from price increases of two to four points on network access fees – by far the most profitable segment of their product offering.
While nature abhors a vacuum, markets positively hate a monopoly. Readers may be interested to know that there is at least one well-capitalized entity looking to provide an alternative to Coventry; stay tuned.

NCCI’s latest report on drug costs makes for pretty compelling reading. At least among those of us who find this stuff remotely interesting. The report, published this November, adds much-needed depth to our understanding of the factors driving drug costs. Everyone (well, everypne defined as the hundred or so who pay attention to this) knows utilization is the big driver; the study goes well beyond to provide detail on how much utilization contributes and where.

Continue reading Drug utilization in comp: more details

Yesterday was the beginning of a review of workers comp bill review vendors; today we’ll continue with a look at FairIsaac, a firm that provides software and performs bill review and Coventry.

Continue reading Work Comp Bill review, part 2

Networks aren’t the only work comp managed care service experiencing change these days. The bill review business is also looking a bit tumultuous, with the landscape shifting in response to, as well as independent of, Coventry’s moves.
I’ll be examining the industry this week, looking at a few of the major entities at a time.

Continue reading WC Bill Review – status update