In the late 1970s, a few Texas doctors created a handful of occupational medicine clinics called Occusystems. Independently, in the early 1980s, several Boston-based rehab professionals founded CRA, a case management firm. In the mid-1990s, CRA went public. The two firms merged and took the name of Concentra. Then the bottom fell out of its stock price. The firm executed a leveraged buyout and went private. Since then, Occusystems has been in charge. It has continued to build and buy clinics as part of a large book of managed-care services.
Dan Thomas, Concentra's CEO, was recruited as COO by Occusytems in 1993. At that time the firm ran two dozen clinics; today, 305. It controls about 10 percent of all occupational medicine clinics in the country.
I talked with Thomas about where this largest of the workers' comp managed-care firms is heading. As I expected, Thomas was vague about the firm's business strategy. I have a feeling that the firm is planning to stay very close to what it knows best: how to run medical practices.
Thomas estimates 2006 revenues at around $1.3 billion. More than half comes from clinic operations, which contribute about 45 percent of the firm's profits. Its network division, a conglomerate of provider networks, medical bill review and related services, contributes another 45 percent. Traditional case management and other professional services contribute about 10 percent.
The economics of Concentra is one of attention to detail, including continuous cultivation of business contacts. A prospect with annual revenue of as little as $5,000 is worth pursuing. Most clinics use a shared information system, permitting the home office to monitor activity. A fifth of invoices and treatment documents are sent out electronically, far higher than the industrywide average.
Occupational medicine clinics look tired after a few years, and businesses that direct workers to them can relocate. To compensate, Concentra relocates or renovates upward of one-fifth of its clinics annually.
It is not surprising that total revenue per clinic is high. Average revenue per patient is also high, $800 compared with perhaps $600 for independent clinics and regional chains. Concentra has been criticized for overtreating. Thomas says that such cases are isolated and eclipsed by numerous favorable client audits for controlling total claims costs--disability and medical claims.
Published studies indicate that occupational medicine clinics outperform other providers in early treatment of injuries, suggesting that early treatment by an occupational medicine clinic results in 30 percent savings in total claims costs. Those savings include both medical and indemnity costs--significant because well-treated workers return to work faster and probably won't sue their employer. Concentra's higher costs may result in a net savings.
Thomas expects to build or buy more clinics. The competition includes the only other national chain with over 100 clinics, U.S. Healthworks. Other health-system-owned chains like Kaiser Permanente's and local physician entrepreneurs also compete.
Thomas told me that the physical-therapy practices lodged in the clinics are enrolled in provider networks of group health insurers. Physical therapy is the most profitable part of an occupational medical clinic's business. The firm also has personnel working on premises at hundreds of employers.
Speculation swirls around whether the firm plans to go public or might be acquired. With medical costs dominating the workers' comp debate, there is no question that Concentra and occupational medical issues will be at the center of any solution.
is a Vermont-based writer and columnist for Risk & Insurance®.
September 15, 2006
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