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Coventry to buy Concentra's comp business for $387.5M


ADDISON, Texas—Coventry Health Care Inc. has agreed to buy Concentra Inc.'s workers compensation business for $387.5 million.

The deal marks further consolidation in the market for nationwide workers comp managed care service providers.

Coventry Health Care Inc. said last week that it has agreed on a cash deal to buy Addison, Texas-based Concentra's workers comp preferred provider organization, provider and bill review business, along with a pharmacy benefit management unit, case management business and independent medical exam business. Concentra will retain ownership of its health centers and other businesses.

The deal will have its biggest impact on workers comp PPO services and bill review services, said Joseph Paduda, a health care and workers comp consultant and president of Health Strategy Associates in Madison, Conn.

Both Coventry and Concentra operate large medical provider networks.

Bethesda, Md.-based Coventry is a national managed health care company that operates several health plans and insurance companies as well as providing managed care services.

Few companies compete with Concentra and Coventry in providing workers comp managed care services on a nationwide basis, Mr. Paduda said.

Coventry's announced purchase of Concentra comes two years after its purchase of Downers Grove, Ill.-based First Health Group Corp., which provides managed care services for the workers comp and group health industries (BI, Oct. 18, 2004).

"Now there is going to be a lot less competition," said Mr. Paduda.

Coventry declined to comment on the consolidation within the industry.

But Dale B. Wolfe, chief executive officer of Coventry, said in a statement that "Concentra's complementary businesses enhance our product portfolio to provide workers compensation services to a broad array of customers."

Coventry has successfully integrated past acquisition's, including First Health, said Sally Rosen, managing senior financial analyst for A.M. Best Co. Inc. in Oldwick, N.J.

But service is likely to suffer as Coventry and Concentra work to integrate their systems and cultures, said William McDonough, managing principal in Boston for Integro Insurance Brokers' health care practice.

Eventually though, both entities have best practices that can help improve operations, Mr. McDonough said.

According to Coventry, in 2006, Concentra's workers comp managed care business generated $324 million in fee-based revenue.