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Paduda: One Call, WCRI and a Correction/Expansion

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Too darn busy last week to get my usual three-five posts up. Things are calming down this week.

Joe Paduda

Joe Paduda

Follow-up on One Call: After the Debtwire article about One Call Care Management Inc. debtholders organizing to prepare for a “potential liquidity event and expected covenant violation,” I was inundated with nonsense from anonymous writers accusing me of bias. This continued last week.

A couple of people told me One Call owner Apax had offered $50 million to OCCM management, who turned it down.

Sorry, that’s just not credible. Let’s walk thru the logic here.

  • Private equity firms such as Apax don’t have a pot of money to write checks from. All Apax funds are from investors, and Apax has to get investors’ approval before using any of the funds.
  • To do this, Apax would have to restructure the entire transaction, giving stock to investors who think sending money to a company that will likely be owned by creditors is a great idea.
  • There’s no way One Call management would “turn down” a cash infusion. As Debtwire reported, “cash flow has been limited by high capex needs as a result of its effort to migrate users under a single system.” (Debtwire is referring to Polaris’ development cost).
  • One Call has a line of credit-type load that, according to Debtwire, “had USD 50m drawn at 31 March” out of a total available amount of $56.6 million. So, One Call had only $6.6 million available and was paying interest on the $50 million it had already borrowed.

Ergo, if management had been offered $50 million in cash, it would’ve been delighted to accept it. For the reasons enumerated above, I very much doubt that offer was made. If you know otherwise, I’m all ears.

To my critics, reporting facts isn’t “biased.” Debtwire isn’t biased, and neither are financial statements. For nonbelievers, One Call has to report its second quarter results within 45 days of the end of the quarter. That’s a month away.

It is possible, if not probable, that the debt investors will see the numbers before mid-August. If the numbers are consistent with Debtwire’s reporting, there may well be a covenant violation.

One Call CEO Rone Baldwin provided a financial update Monday morning. He stated:

One Call is in full compliance with all debt covenants for the second quarter of 2019 and expects to be compliant for the remainder of 2019, based on the full-year guidance that it intends to provide to investors in its second quarter conference call.

WCRI: Want to know how medical prices affect worker outcomes? Workers Compensation Research Institute's upcoming webinar featuring Bogdan Savych is a must.

Worker misclassification: The usually intentional practice is coming under increasing scrutiny, with the latest moves coming from the Garden State. New Jersey Gov. Phil Murphy released a report that, according to Business Insurance, indicated “employee misclassification, which has grown 40% over the past decade" and "in 2018 alone, 12,315 workers in New Jersey were misclassified as independent contractors.”

Finally, I heard from several folks about my York-Sedgwick post suggesting that my statement “a highly profitable managed care unit built by former leader Doug Markham” was inaccurate.

Fair point.

In my haste I failed to give credit to the many other people who built that business. Markham led Wellcomp prior to — and after — York’s acquisition of MCMC. The businesses were run separately for a time, then “combined” in a move that resulted in Markham running the new entity entitled CareWorks.

Mike Lindberg and his colleagues at MCMC — acquired by York — built a thriving managed care business that served, and continues to serve, a big list of customers. MCMC was kinda-sorta “combined” with York’s internal managed care entity under Markham when Lindberg departed; I won’t get into the drama that surrounded that move.

MCMC was a big chunk, if not the larger piece, of York’s managed care entity.

BJ Dougherty, Lisa Oskoui, Larry Brinton and Steve Junker are some of the professionals whose contributions made MCMC a successful company. Apologies to those folks I failed to name.

Joseph Paduda is co-owner of CompPharma, a consulting firm focused on improving pharmacy programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.

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