The buzz from the comp conference.

Friday, November 9, 2007 | 0

By Joe Paduda

You can't cover the National Workers' Compensation and Disability Conference & Expo conference without addressing the gorilla in the room - Coventry Workers' Comp.

With capabilities in networks, bill review, pharmacy, case management, MSAs, Coventry touches/impacts most of the major payers, and a lot of the mid-tier and smaller ones as well. Here's what I heard.

Coventry has two types of customers, resellers/current customers and new payer prospects. And they are offering both ''deals they can't refuse".

There are two types of "deals"; one not-so-good, and the other somewhat better.

Resellers (bill review companies and managed care firms) and current Coventry payer customers are not getting many warm and fuzzies from Coventry. Instead current payer customers are getting price increases, little flexibility in contract language, and strong positive incentives to shift all managed care services to Coventry (as well as punitive measures if they keep their business with other managed care vendors).

Resellers are seeing much the same; the bill review entities I spoke with have all been told their access fees are going to increase, and a few have been told their Coventry contracts are going to be terminated. Whether this is a negotiating ploy or draconian strategy to drive more bill review business to Coventry is not clear.

New payer customers and current network/bill review customers looking for pharmacy and other managed care vendors are also getting deals they can't refuse - but for an entirely different reason. As I've noted before, Coventry is pushing hard - very hard, to sell all their services - networks, bill review, and especially PBM. It has become abundantly clear that Coventry is willing to sell one service at a rock-bottom price if they have to in order to close a deal.

The account-rounding strategy (sell all services to each account) appears to be gaining traction, at least for now. But here's the problem. Many payers have seen their managed care departments shrink over the last few years, a casualty of the soft market and the (mis)perception that medical costs are under control (boy are they in for a rude shock).

Price is not the main driver of WC medical costs - it is utilization. And payers that buy based on price are likely to see costs increase when utilization (the volume and type of services).

This is especially problematic in pharmacy.

What does this mean for you?

Be very very careful of deals that are too good to refuse.

Joseph Paduda is the principal of Health Strategy Associates. His blog, managedcarematters.com, covers cost-containment in workers' compensation, managed care for group health and auto insurance.