Category Archives: acquisitions

Hospitals Launching Private Health Plans Have Concerns: What It Could Mean to Work Comp

My fellow FAU alumna, Maria Todd, wrote a very good article about what’s at stake for hospitals considering launching private health plans.

While Maria’s article focuses on hospitals and general health care, it would be prudent for the workers’ comp industry to pay attention to what she has to say, as her expertise in the areas of health care, hospital development, healthcare marketing and branding, concierge medicine and medical tourism has taken Maria around the world several times (lucky her – “I never get to go anywhere”).

There is one item Maria raises in her article that should be of vital interest to workers’ comp.

According to Maria, the process to launch private health plans is fraught with complexity and extreme financial risk. She goes on to add that it involves, at a minimum, obtaining a state license and meeting (and maintaining) capital reserve requirements adequate to cover IBNR (incurred but not reported) claims lags.

Those of us who have been in the claims arena of work comp know a little something about IBNR claims, and what that can do to both a carrier’s loss picture and an insured’s frequency and severity, which affects their experience mod.

If hospitals do choose to launch such plans, they will move closer to being insurance companies that happen to provide medical care, rather than just providing medical care as a hospital.

Maria’s recommendation is that they sink their money into something better that will float.

Consolidation Rolls On In Work Comp

Consolidation was mentioned in the last post as one of the areas of concern over physician payment reform.

Yet, consolidation is also a concern in workers’ compensation, as Joe Paduda reports this morning.

Joe has been keeping tabs on all of the acquisitions occurring in the workers’ comp sphere for a very long time, and one of the main companies involved in these transactions has been Apax Partners, owners of One Call Care Management and GENEX Services.

GENEX has itself been bought or bought other companies in the past three years that I am aware of, thanks to Joe’s reporting.

Reuters, Joe says, reported that Apax is preparing a bid close to $2 billion for peer Helios. Helios is the product itself of a merger between Progressive Medical and PMSI, and is the largest workers’ comp Pharmacy Benefit Manager (PBM).

PMSI was bought by H.I.G. Capital some years back for about $40 million, Joe states, then purchased for probably 8-10 times that figure a couple years ago and merged with Progressive, and there are countless other companies in the work comp service sector that have gone through similar mergers, acquisitions, purchases, etc.

Given the consolidation in the health care sector with hospitals, insurers, and physician practices, especially the development of ACOs, the consolidation on the work comp will also lead to higher cost for services or cuts to services provided.

Competition was supposed to be a good thing in a capitalist society, but as we have seen before in many other industries, leveraged buyouts, mergers and acquisitions, and hostile takeovers have shrunk the competitive sphere, so that in these industries, only a handful of large corporations remain.

Banking, insurance, and financial services, especially Wall Street brokerage firms, have all been consolidated in one form or another, so that now, a company like Goldman Sachs dominates the market after the financial collapse of a few years ago.

Health care and work comp are no different. Perhaps one day, the world of “Rollerball” will become reality, and all companies will be combined into their own industries, headquartered in different cities around the world, as was in that groundbreaking film.

Who knew the highest form of capitalism was really monopoly?