Can Coventry Become Kinder and Friendlier?

Wednesday, October 22, 2008 | 0

I've been conversing with a few old industry hands about Coventry work comp's recent decision to become kinder and friendlier.

As I reported, the motivation stemmed from a customer survey done this summer by an outside consultant that is now an employee Pat Sullivan. I haven't seen the survey, but it appears it shook up Coventry management enough to recognize what everyone else has known for years - Coventry's customers really don't like Coventry.

Jim McGarry, Coventry work comp's leader, hired Sullivan to help reform the company's image as well as to oversee their California strategy an initiative that it announced last week.

They have two major challenges.

First, cultural change. There are two competing cultures at Coventry work comp - the remnants of First Health and Concentra.

Sitting on top of these folks are the Coventry senior managers and a few experienced work comp managed care executives from outside organizations – including Rob Gelb from Intracorp, and Dr. Dwight Robertson from Travelers/USHealthworks/Zenith.

The First Health folks came out of an organization that was quite self-confident and pretty hard-nosed with customers, vendors, and competitors. I recall a conversation I had with one of their top execs about sharing data to compare my client's results in an area with First Health's.

The exec asked me, "Who the do you think you are?"

The conversation deteriorated from there. I'd note that this persona did not by any means extend to everyone, and in fact some of the folks in customer-facing positions were strong advocates for their clients.

In contrast, Concentra, while not without its warts, tended to foster a culture that was somewhat more customer-centric. Their people tended to be better listeners at all levels of the organization, and were more proactive in dealing with customer issues internally.

Those two groups have clashed at Coventry, with the First Health folks seeming to dominate early on, and Concentra alums now starting to exert more influence. But make no mistake, Concentra entered into a company that was already dominated by First Health staff, and that dominance will not be readily displaced.

Compounding the problem is the abysmal record American companies have when they try to change their culture three-quarters of execs said that 50% or fewer of their cultural change initiatives were successful, according to an Economist Intelligence Unit survey.

Second, there may well be a conflict between Coventry's financial objectives and desire to become more customer-focused. These are not mutually exclusive, and many organizations have been financially successful because of their customer focus.

That will be a challenge at Coventry.

Growing the workers comp business has long been a top priority for Coventry.

Inordinately profitable (estimates are that workers' compensation margins are three to four times higher than Coventry's group health business), work comp is also a 'fee' business - unlike the 'risk' business in Coventry's portfolio, there's little uncertainty - you charge X, collect Y, and profits are Z. Thus, work comp balances out their book of business nicely and as a mandated benefit employers have to buy it (unlike group health, which is declining as premiums continue to escalate).

In a time of decreasing injury rates, falling insurance premiums and declining third-party administrator fees, Coventry has been pushing customers very hard to agree to higher prices and additional services. Network access fees have been increased substantially for clients facing renewal, and Coventry has also strong-armed customers into using its networks exclusively, thereby preventing customers from selecting other networks in specific jurisdictions (e.g. California and New Jersey). The company has also threatened big (and small) customers with litigation as a way to force the customer to comply with Coventry's requests.

Meanwhile, improvements in data quality for bill review and network directory functions, enhancements to the 4.0 bill review application, and other client issues appear to be on the back page of the priority list.

As much as account managers may want to help out their customers, their bosses' bosses are driving hard for more revenue across an expanded product line. And as the only viable national work comp ppo, Coventry has monopolistic power in that segment.

David Young, Pat Sullivan, Ken Loffredo, Jim McGarry, et al., are smart and capable business people. If they can pull this off, they will have accomplished something few companies ever have.

What does this mean for you?

It is really hard to change a company's culture. It is especially difficult when the people tasked with taking that message to the customer also have to tell the customer their prices are going up and they have to buy more services.

Joseph Paduda's Weblog, http://managedcarematters.com, is about managed care for group health, workers' compensation and auto insurance, covering health care cost containment, health policy, health research, and medical news for insurers, employers, and healthcare providers. Paduda is the principal of Health Strategy Associates.