Sedgwick to Acquire York Risk Services Group
-From our friends at workcompcentral.com
The list of quality TPA’s continues to consolidate. As a huge fan of the former F.A. Richard which was bought by York, I see this as unfortunate –
The largest third-party claims administrator is about to get bigger: Sedgwick on Monday announced it is acquiring York Risk Services Group.
York has nearly 5,000 employees in more than 60 offices across the U.S., as well as an international presence, the companies said in a news release.
With the acquisition of York, Sedgwick will grow to almost 27,000 employees.
The closing of the transaction is subject to customary conditions and regulatory approvals. Terms of the acquisition weren’t disclosed.
In July 2014, Canadian private equity firm Onex Corp. reportedly paid $1.33 billion to purchase York.
Sedgwick and York both provide workers’ comp third-party claims administration, in addition to an array of other services.
“There is a strong strategic fit between Sedgwick and York,” said Judy Molnar, Sedgwick’s vice president of public relations. “The two companies offer complementary services and geographic footprints.”
For example, Molnar said, York has expertise in servicing multi-policyholder programs for insurance carriers and risk pools, as well as public entity clients and alternative workers’ compensation plans under the U.S. Longshore and Harbor Workers’ Compensation Act and Defense Base Act. In addition, York’s managed care offerings, and medical bill review in particular, will augment Sedgwick’s offerings, she said.
A ranking based on 2017 gross revenue placed Sedgwick as the largest TPA, followed by Crawford & Co. and its Broadspire company. Among TPAs providing multi-line services, York ranked third-largest.
Joe Paduda, principal of Health Strategy Associates and author of the Managed Care Matters blog, said the acquisition isn’t surprising.
“This industry will continue to consolidate for the foreseeable future,” Paduda said.
Paduda described the impact of the York acquisition as neutral for the work comp industry. Although the acquisition will reduce the number of TPAs, “there is still plenty of competition,” he said.
But to some, bigger isn’t necessarily better.
Frank Pennachio, co-founder of Oceanus Partners, a consulting firm for insurance companies and agencies, said Sedgwick’s increased size would increase its bargaining power with medical providers. And if provider reimbursement is squeezed, that could adversely impact injured worker care, he said.
“Can you just say ‘no’ to Sedgwick and York and still be a viable practice?” Pennachio asked.
A benefit to Sedgwick of the acquisition is the elimination of a rival for attractive accounts, Pennachio said.
On its website, York touts its 15-year relationship with Walmart, the world’s largest retailer.
“Every year, we have to re-earn our partnership by demonstrating we go beyond claims administration for workers’ compensation,” York said in a blog post.
York has made a number of its own acquisitions in recent years. In July 2018, York announced it had acquired the third-party administration business of Key Risk Management Services, a member of the W.R. Berkley Corp.
In 2014, York acquired Houston-based American Claims Services Inc. and Risk Management Planning Group, or RMPG, a New York-based provider of workers’ comp claims and risk management services. Also that year, York announced the acquisition of Bickmore, a Sacramento, California-based risk management and actuarial consulting firm that manages group self-insurance programs and association group programs.
“For many years York was the acquirer of TPAs, and now they are being acquired,” said David Donn, chief executive officer of Donn & Co., a San Francisco-based consulting firm.
Donn said the five years since Onex acquired York seemed like a reasonable time for turning over the investment. He predicted that York’s medical management services would soon fall under the Sedgwick umbrella and be rebranded over the next few years.
Sedgwick has gone through a recent ownership change of its own. In December, The Carlyle Group completed its acquisition of a majority ownership of Sedgwick from KKR and other shareholders. The transaction was valued at about $6.7 billion. Funds managed by Stone Point Capital LLC and Caisse de dépôt et placement du Québec, along with Sedgwick management, remain minority investors.
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