Advertise
Resources
Member, Beacon International Group, Ltd.
Broadspire's second quarter results reflect problems faced by the broader workers compensation market – unemployment and lengthening claims durations.
Broadspire is a TPA unit of Crawford & Co. and a large provider of services for the workers comp industry.
Crawford recently reported second quarter 2011 consolidated revenues of $292 million, up 22% from the same quarter in 2010. It earned $13.5 million in 2011 second quarter net income, compared with a net income loss of $2.5 million for the same period in 2010.
But Crawford's Broadspire unit earned only $57.9 million in revenue during the second quarter of 2011, down 5% from the same period in 2010. It experienced an operating loss of $3.1 million during the second quarter of this year compared to a loss of $1.8 for the same period in 2010.
The company mentioned three problems. Broadspire was adversely impacted by lengthening claims durations, something I suspect is a broader trend across the industry. An earlier Comp Time posting on the trend is available here.
Revenue per claim is fixed under many of Broadspire's contracts. So if claims stay open longer the TPA incurs more costs and no additional revenue.
Broadspire also said that it is seeing a larger percentage of less complex claims, which must be good for employers, but not for TPA revenue.
And lastly, but this is a big one, Broadspire isn't seeing the claim volume growth it needs and it blamed ongoing unemployment. The TPA did see a 7.7% increase in claims, helped by expansion in the healthcare industry.
But with construction and manufacturing still off, the TPA has been hurt by the dismal job market. Unemployed workers don't produce claims.
You have to think these trends are impacting other TPAs and work comp service providers.
There is an interesting side note. Crawford said Broadspire has been helped by insurers reducing the list of TPAs they work with.
I wonder if more insurers funneling their business only to the larger TPAs will help fuel TPA industry consolidation?