When it comes to social services there's not much that isn't in this company's providence. Providence Service Corporation operates through two divisions: Social Services and Non-Emergency Transportation Services (NET) to provide behavioral health and counseling services as well as non-emergency transportation to people in home and community-based settings. Providence manages foster care systems, provides correctional support such as probation supervision, offers job training, and provides substance abuse treatment. Its NET services are provided to people with disabilities, hospital patients, and Medicare and Medicaid members, among others. Providence operates in about 40 states and British Columbia.
Just 2% of Providence Service Corp's. sales come from Canada, where it operates foster care services through subsidiary British Columbia-based WCG International Consultants (acquired in 2007).
The majority of Providence's revenue comes from its NET services (more than 60%). NET's primary payers include state Medicaid programs, local government agencies, and hospital systems. Its clients range from senior citizens and individuals with limited mobility to people with limited means of transportation and people with disabilities that prevent them from using conventional methods of transportation. Most of the NET division's income comes from state payer contracts that are three-to-five years long with renewal options; only about 6% of the division's income is derived from fee-for-service contracts. Its biggest customers are the State of Virginia's Department of Medical Assistance Services (12%) and the State of New Jersey (11%).
Providence's government sponsored social services account for the remainder of the company's income. Its counselors, social workers, and behavioral health professionals work with some 61,000 clients who are eligible for government assistance, either because of their income level or because of emotional or educational problems. Some of its clients are also under court order to be seen by Providence's social workers (such as those on probation). Payers range from state and local government agencies to commercial insurers and HMOs. Unlike the NET division, most of Social Services' contracts are fee-for-service arrangements, which means they can be terminated at will by the payer, making them less secure than the NET division's long-term contracts.
Providence Service Corp's. (PSC) 2011 sales increased 7% vs. 2010, driven by increased revenue from its Social Services and Non-Emergency Transportation Services (NET) businesses. New contracts in Michigan and Wisconsin in 2011 and expansion in New Jersey, Arkansas, and other regions helped bolster NET operations. Revenue from the Home and Community Based Services segment rose more than 7%, aided by the acquisition of ReDCo Group, a provider of home and community based services in Pennsylvania, in mid-2011.
Net income fell 28% in 2011 vs. 2010 on higher operating expenses, including steeper costs for NET services. Net income has been flat to down over the past two years, after surging in 2009 following an unprofitable 2008. Meanwhile, PSC's sales have surged nearly 400% over the past five years.
Providence's primary form of growth has historically been through acquisitions. Most notably, the 2007 acquisition of Charter LCI Corp., including its subsidiaries, collectively referred to as LogistiCare, transformed Providence and prompted it to form the NET division, its main moneymaker. Between 2002 and 2008 the firm made about two dozen purchases of a range of businesses including tutoring, behavioral health, family services, and correctional services.
Along with acquisitions, Providence is focused on securing contracts, such as those it has with Virginia and New Jersey, to boost its income. To that end, Providence tracks state legislation and funding trends to determine how they may impact its operations and targets states with favorable funding opportunities. It also establishes new contracts with commercial payers in regions in which it already has a presence by taking advantage of its existing networks in those areas.
Mergers and Acquisitions
PSC acquired Pennsylvania-based The ReDCo Group in June 2011 for $605,000 and the repayment of about $8 million in ReDCo Group debt. The purchase added more than $20 million to home and community based services revenue in 2011.
Ameriprise Financial and Coliseum Capital Management each own about 12% of the company's shares. – less