Got an email from a colleague asking, “So why should I care about who owns who or what their strategy is?”

Joe Paduda

Because your service providers — that you pay a shipload of dollars to and through — determine your medical and combined loss ratios. So you’d best figure out if your priorities are the same as theirs.

OK, we’ve dug through the differences between corporate and private-equity-owned work comp service providers. Today we focus on multiservice providers and single-service providers and how they compare.

The first group is Mitchell Genex Coventry (MGC), Optum WC and OneCall. The second is Conduent, ExamWorks and MedRisk (a Health Strategy Associates consulting client).

The good thing about being a multiservice entity is you’ve got flexibility, a diverse income stream and several services/products that may interest prospects and keep customers tied down. You may also be able to leverage one line to get more business, and depending on what your services are, perhaps even apply enough pressure to force customers to use those other services.

The bad thing is your business lines are rarely all best in class. An underperforming service may devalue your other lines. The other bad thing is they can be pretty different, require different expertise, systems, processes, reporting and network development.

Example: Imaging is one-and-done, and customer value is mostly scheduling and price (yeah, people talk “quality” of reads, but it's almost always talk). Physical medicine is utilization-driven, as price-per-service is way less important than a scan that often costs 15-20 times more than a PT service. PM also requires lots of data and information feeds, more clinical oversight, a different contracting strategy, and ongoing monitoring of attendance and progress. Transportation is different as well, and so is durable medical equipment.

It is difficult to be really good at multiple services and have scale where you can get competitive prices and deliver all services everywhere payers need them delivered.

Single-service suppliers get really, really good at one thing. This affords them scale, reduces distractions and builds a lot of corporate expertise and, if done well, a solid brand.

But — and it’s a darn big but — if a big state changes its fee schedule, or Medicare does the same, you could be screwed. Example: California adopted a Medicare-based fee schedule the same year Medicare slashed reimbursement for imaging. Imaging companies got hammered, as California has about 17% of the nation’s WC volume.

OK, so here’s the net: Multiline businesses are tougher to manage but can insulate the owner from regulatory risk and provide leverage over customers. Single-service suppliers are usually really good at what they do, but there’s that regulatory risk thing.

All that said, each of these companies is, in some very important ways, unique, with their own strengths and weaknesses, strategies and tactics.

What does this mean for you?

Are your suppliers’ priorities, successes and growth strategies aligned with yours?

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.