Ametros Financial names “new” CEO
Ametros Financial, the upstart professional administrator, has named Tom Ash its new CEO. See press release here.
Comment: This company entered the market last year promising lower fees than previously seen in the professional administration market. They claim these lower fees (which range from $1,000-$1,500 initial set-up and less than $500 per year ongoing) are possible due to a new technology platform that automates many of the functions currently performed by more expensive human administrators. I assume their goal is to convert more self-administered claims into professional administration cases thereby turning a billion dollar self-admin market into a pot of gold for their owners, Clarion Capital – former private equity backers of Crowe Paradis.
While they have achieved some measure of success, according to industry observers, this change indicates to me that the growth rate and margins have not matched Clarion Capital expectations. I am not surprised for a variety of reasons.
First, regardless of any improved computer technology, of which I am skeptical, the market is not nearly big enough to support a firm with such a singular focus and high fixed expenses. For example, between Tom Ash, Sandra O’Sullivan and Hany Abdelsayd (former PMSI and Rising pitchman) command executive salaries. And given that we see them at every workers compensation conference, large and small, travel and entertainment expenses have to subtract another 100k to 200k from the bottom line (unless of course the three of them are tripling up at the Motel 6 and eating the free food at the conferences). And that is before anyone, other than HAL2000 back in the office, administers a single claim.
By my math, they would need more than 700 cases per year simply to breakeven. Looking back at the last year, I doubt the entire professional administration market was more than 500 cases split between six or seven competitors.
Second, new competitors, such as the MSPCF, are offering their services for free or at least at equal cost to Ametros, further eroding their possible market share.
Third, they boisterously claim that they are not taking rebates from DME/PBM provider Progressive Medical (which of course is both unethical and illegal) nor are they pooling the funds for investment purposes (which is expensive from a SEC regulatory standpoint). With only $450 per year to administer claims over lifespans that can be 30 years or more, I just don’t see how the business model works.
Abrupt CEO changes usually mean things are not going as planned, despite the ringing endorsement of the change by current leader Sandra O’Sullivan in the press release.
I think this is going to end up being a failed endeavor which leaves the claimants and the payers stuck looking for another solution – especially if the administration was ordered by the court. But only if I am right.
And if I am wrong? Clarion Capital makes another bundle of money in the workers’ compensation industry and Ken Paradis goes down as the greatest Chairman of the Board in modern MSP compliance history.