Tuesday, June 2, 2009

Health Care Dilemma – Who’s Telling the Truth?

Tuesday's Tirade
The Many faces of Coventry Health Care, Inc. of Bethesda MD

No matter what one reads in mainstream media or online, there is always a contrasting opinion from another source. Who to believe?

Here are a few recent accounts of the “health” of Coventry Health Care, who has struggled financially since suffering major losses in 2008.

Coventry Health Care profits slump 65%
Tuesday, April 28, 2009

Coventry Health Care Inc. generated a hefty jump in revenue last quarter but it was not enough to overcome higher medical costs and profits declined by almost two-thirds.

The Bethesda-based provider of health plans announced Tuesday that net income in the first quarter was $44.2 million, or 30 cents per diluted share, compared to $125 million, or 82 cents per diluted share, in the year ago period.

Coventry credited growth in all of its Medicare products for a revenue increase of 21.5 percent to $3.6 billion, but higher sales and administrative costs, and medical costs that swelled 31percent to $2.83 billion, ballooned operating expenses to $3.5 billion and sank the bottom line.

Coventry (NYSE: CVH) forecast full year revenue of $13.59 billion to $13.99 billion and full year earnings of $1.70 to $1.90 per diluted share.

~ Washington Business Journal - by Tucker Echols Staff Reporter

Coventry's work comp financial results - stellar

Coventry released its financial results for Q1 2009, and the work comp financials are, to say the least, strong.

Revenues were up almost 10% quarter over quarter to $188 million, while gross margin actually declined by a couple points to $130 million. The 10-K states that the growth in revenue was driven primarily by an increase in the company's work comp PBM revenues.

I'm more than a little surprised by the gross margin number. Coventry's PBM, FirstScript, has been aggressively expanding, slashing prices to do so. Margins in the WC PBM business have been declining of late, under pressure by the dynamics and market forces of a rapidly maturing market. Yet Coventry's gross margins are holding up quite well.

It is likely that the company's well-documented efforts to raise prices on network rental services have helped keep the gross margin number where it is. Kudos to Coventry for this success; it's taken a lot of work and come despite strong resistance from many clients.

The slight drop in gross margin dollars (understanding it is a larger decline in percentage terms) will likely turn around in Q2, as Coventry has recently laid off a number of managers and directors in the work comp business.

Work comp is - by far - the most profitable business for Coventry. Although comp only accounted for 5.3% of Coventry's revenues for the quarter, it delivered about 19% of gross margin.

Those are pretty strong numbers, and shows exactly why the new management team is enamored with the business. Any business that produces $520 million in gross margin on $850 in annual revenue is going to have lots of Board support.
~May 12 2009 Managed Care Matters, Joe Padula

Coventry Health Care, Inc., Q1 2009 Earnings Call Transcript

In general we view the future of many of our businesses having some challenges, but more than the challenges there are even more opportunities… In summary, it’s been a good quarter. I believe we’re doing most of the activities to improve our business in the future; however, it’s clear that we still have a lot of work to do. I like our platform, I am proud of our management group, and I’m optimistic about this year. I think that many of my comments today reflect our efforts to make this a better company in 2010. Our management team understands the direction, understands the company isn’t for sale, and that we must execute both today and tomorrow to accomplish our long-term strategy.
~ Coventry CEO Allen F. Wise, April 2009

My Experience as a Coventy Consumer

While Coventry suggests that their focus on different markets is stronger, I am very concerned about a customer base that is more and more dissatisfied with lack of quality service. Coventry has done an excellent job insulating itself from public scrutiny as well as marketing its services. I fear that someone, willing to do a lot of digging, will discover their Achilles’ heel.

Will many analysts agree with CEO Wise that “it’s been a good quarter?” In the end, it will not be the company’s performance that is critical; it will be how transparent Coventry is willing to be? If my case is representative of how Corporate does business, there are hidden agendas through the system, agendas that limit quality life of the consumer.

~June 2, 2009, Christine O’Brien Stenger Plaintiff : Civil Lawsuit Christine Stenger v. Carelink Health Plans, Inc. of West Virginia and Patrick Dowd (former) Carelink CEO.

Tuesday’s Tale
All Eyes are on West Virginia

There are a growing number of ears out there for me. A slow trickle of support and new revelations.

On Thursday, I spoke with the director of an advocacy group interested in justice within West Virginia. I was not surprised to hear of his sharing yet another experience exposing Jane Cline, WV Insurance Commissioner.

A few years back my friend attended a national business meeting and was seated next to a distinguished gentleman who was familiar with state politics throughout the country. Upon learning that my friend lived in West Virginia, his face saddened, “My young man, do you not know that Jane Cline of West Virginia is the most corrupt insurance commissioner in this country?”

I guess the secret is not as secret as I had thought. The Good Guys scored another point.

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