Aetna’s sale of Coventry – the deal is done

While it may not be closed, the deal is done.

Multiple sources indicated APAX is scheduled to close the purchase of Coventry Workers’ Comp a month from now.  The long-rumored sale will close October 1 – if everything goes according to plan.

Here are the details – at least as they’ve been relayed to me.

• The sale includes all of Coventry’s work comp services division – PPO, bill review, Pharmacy Benefit Management, DME, IME, UR, case management, peer review, and the rest.
• Aetna has “committed” to supporting the network for two years – don’t know what this means, how it will be measured, or what the guarantees are.
• APAX is the purchaser.

A few related items worthy of consideration.

• Coventry’s been working on an RFP for a new bill review system/strategic partner for some time.  No word on whether this will go forward or be mothballed, and I wouldn’t expect to hear anything until October.
• Aetna recently announced they signed a 3 1/2 year contract with northern California’s Washington Hospital Healthcare System. The contract does NOT include workers’ comp – but does include every other payer type.
• When the deal is done, APAX will own: the largest work comp PPO, imaging network, PT vendor, DME/Home health network, and case management provider; one of the largest PBMs; a major (but faltering) bill review operation; and a whole raft of ancillary businesses.

The implications of this transaction are rather dramatic. It puts control of many payers’ medical spend squarely in the hands of a private equity firm. (more on this here).

The news also refutes my (strongly-held) view that Aetna wouldn’t sell the business because it a) throws off so much free cash flow and b) can’t.  The latter is based on the premise that the network contracts will rapidly fall apart without Aetna’s combined medical spend as bargaining leverage.

Regarding the latter, we shall see.

What does this mean for you?

Opportunity for bill review firms and niche medical management providers.

A return to the days when Coventry owned the market.