Risk & Insurance magazine reported on the 2014 National Workers Comp & Disability Conference and a panel discussion called, Buying in to Workers’ Comp. In the article Hunter Philbrick, managing director of Hellman & Friedman, is quoted as follows:
“I think you will continue to see significant activity in the workers’ compensation space,” said Hunter Philbrick, managing director of Hellman & Friedman, whose firm (along with Stone Point Capital) acquired Sedgwick Claims Management Services in 2010 and sold it to Kohlberg Kravis Roberts & Co. earlier this year.
P/E firms get a bad reputation for ripping apart companies, he said. “That’s a very small minority and not really true of any of our firms up here.”
Philbrick was joined on the panel by Jeffrey McKinney, managing principal of Odyssey Investment Partners, which acquired majority interest in York Risk Services in 2010, and acquired and later sold One Call Care Management; and Camilo Horvilleur, principal of H.I.G. Capital, which acquired PMSI Group in 2008, selling it in October 2013, after which it merged with Progressive Medical and became Helios.
Of course the attendees at the panel were impressed. After all, their interest was likely to gain equity investment, use the vacuum cleaner sales model to sell their products or services in order to generate the appearance of growth for the equity investor, whose sole intention it is to sell the company for a huge profit. But has equity investment improved the workers comp environment or has it created an ambivalence in purpose and loyalty? Who would have thought that nurse case management services could be sold using the vacuum cleaner sales model? For those of you who don’t know the vacuum cleaner sales model refers to the sale of a product or service by a company using a large sales force and supporting it with a contracted or very small support group. That’s how companies make money mass producing products and services – through volume sales. Other than the volume sales, has equity investment of workers comp companies and service providers improved our “industry”? Take a look around. It hasn’t created more jobs, in fact, the industry has contracted. More importantly, have employers, the folks we have a fiduciary responsibility to, gained anything from this type of insurance model? Have employees recovered and returned to work in greater numbers? Have all these volume sellers, instead, created a regular feeding ground of sales and profit that will suffer if litigation were to fall significantly, TTD periods reduced and employees were to return to work in greater numbers? It’s hard to see when one is in the midst of the storm and much easier to assess the damage or improvement from a different perspective. However, a look from a different vantage point may provide some answers.