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Insurance Law Blog
Can Coventry change?
Framework for the Regulation of the Insurance Industry – New Appleman on Insurance Law Library Edition, Chapter 8
Licensing of Insurers – New Appleman on Insurance Law Library Edition, Chapter 9
Market Conduct Regulation – New Appleman on Insurance Law Library Edition, Chapter 13
Insurance Solvency Regulation – New Appleman on Insurance Law Library Edition, Chapter 14
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White and Williams
11-20-2008 | 01:26 AM
Can Coventry change?
I've been conversing with a few old industry hands about
Coventry work comp's recent decision to become kinder and friendlier.
As I reported, the motivation stemmed from a customer survey done this summer by an outside consultant/now employee, Pat Sullivan. I haven't seen the survey, but it appears it shook up Coventry management enough to (finally) recognize what everyone else has known for years - Coventry's customers really don't like Coventry.
Coventry work comp's leader
, then hired Sullivan to help reform the company's image, (as well as to oversee their California strategy) an initiative that was announced last week.
They have two major challenges.
First, cultural change. There are two competing cultures at Coventry work comp - the remnants of First Health and Concentra. Sitting on top of these folks are the Coventry senior managers and a few experienced work comp managed care execs from outside organizations (e.g. Rob Gelb from Intracorp and Dwight Robertson MD from Travelers/USHealthworks/Zenith).
First Health folks came out of an organization that was quite self-confident and pretty hard-nosed
with customers, vendors, and competitors. I recall a conversation I had with one of their top execs about sharing data to compare my client's results in an area with FH's; the exec asked me "who the F*** do you think you are?" the conversation deteriorated from there. I'd note that this persona did not by any means extend to everyone, and in fact some of the folks in customer-facing positions were strong advocates for their clients.
Concentra, while not without its warts, tended to foster a culture that was somewhat more customer-centric
. Their people tended to listen better (at all levels of the organization) and be more proactive in dealing with customer issues internally.
Those two groups have clashed at Coventry, with the FH folks seeming to dominate early on, and Concentra alums now starting to exert more influence. But make no mistake, Concentra came into a company that was already dominated by FH staff, and that dominance will not be readily displaced.
Compounding the problem is the
abysmal record American companies have when they try to change their culture
; fully three-quarters of execs said that 50% or fewer of their cultural change initiatives were successful.
Second, there may well be a
conflict between Coventry's financial objectives and desire to become more customer-focused.
These are NOT mutually exclusive, and in fact many organizations have been financially successful because of their customer focus.
That will be a challenge at Coventry.
Growing the workers comp business has long been a top priority for Coventry.
Inordinately profitable (estimates are that WC margins are three to four times higher than Coventry's group health business), work comp is also a 'fee' business - unlike the 'risk' business in Coventry's portfolio, there's little uncertainty - you charge X, collect Y, and profits are Z. Thus work comp balances out their book of business nicely and as a mandated benefit employers have to buy it (unlike group health, which is declining as premiums continue to escalate).
In a time of decreasing injury rates, falling insurance premiums and declining TPA fees,
has been pushing customers very hard to agree to higher prices and additional services
. Network access fees have been increased substantially for clients facing renewal, and Coventry has also strong-armed customers into using its networks exclusively, thereby preventing customers from selecting other networks in specific jurisdictions (e.g. California and New Jersey). The company has also threatened big (and small) customers with litigation as a way to force the customer to comply with Coventry's requests. Meanwhile, improvements in data quality for bill review and network directory functions, enhancements to the 4.0 bill review application, and other client issues appear to be on the back page of the priority list.
As much as account managers may want to help out their customers, their bosses' bosses are driving hard for more revenue across an expanded product line. And as the only viable national work comp ppo, Coventry has monopolistic power in that segment.
David Young, Pat Sullivan, Ken Loffredo, Jim McGarry et al are smart and capable business people. If they can pull this off they will have accomplished something few companies ever have.
What does this mean for you?
It is really hard to change a company's culture. It is especially difficult when the people tasked with taking that message to the customer also have to tell the customer their prices are going up and they have to buy more services.
© Copyright 2008 by Joseph Paduda. All rights reserved. Reprinted with permission. This blog originally appeared on the
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