An aggressive approach by companies to negative social media reports can be effective.
A quiet approach also can work.
The latter tactic seems to be working for Irvine-based healthcare services provider CorVel Corp., which has chosen to say little about a recent blog report that caused its shares to fall earlier this month.
CorVel sells software and services for managing workers’ compensation claims, reviews medical bills and providing healthcare services to keep insurance costs in check.
The company also employs nurses who manage the healthcare of workers injured on the job and maintains a network of other service providers.
The company’s shares plunged as much as 12% on Jan. 19, the day a report questioning CorVel’s ethical and legal practices was released by an unidentified team of analysts calling themselves “Copperfield Research.” The report was cited by various investor websites.
CorVel saw 239,000 of its shares trade that day, about 10 times its typical volume. Stock eventually rallied to close down 7%.
“It’s unfortunate that a self-proclaimed short seller (who) would publish such a document would receive any attention at all,” CorVel Chief Executive Daniel Stark said in an interview last week.
“CorVel has been built on a firm foundation of ethics over the past 20-plus years, and we believe that our position in the workers’ comp market and our financial history speak for themselves,” Stark said, declining further comment.
CorVel has bounced back since the initial report by Copperfield hit the blogosphere. Its shares have bounced back to about where they were prior to the report, at a market value of some $575 million last week.
Copperfield’s report “likened potential accusations” of wrongdoing at CorVel to Medicare fraud investigations under way of Community Health Systems Inc. in Franklin, Tenn., according to an follow-up article on the Motley Fool investor website.
Carefully Worded
The report is carefully worded:
“In this report, we attempt to synthesize the pieces of the unusual CorVel mosaic while abstaining from any assertion that CorVel acts in a fraudulent manner,” Copperfield said in its introduction.
Yet Copperfield’s report said, among other things, that it appears that CorVel has been operating as what’s known as a “silent preferred-provider organization,” which gives insurance companies “a back-door method to systemically underpay healthcare providers.”
Little is known about Copperfield, but some industry observers have suggested that it is the product of short sellers. Short sellers sell borrowed stock with the hopes of making a profit if the share price declines.
Copperfield said that “due to the danger of retaliation by company management, our reports are written under a pseudonym,” according to its blog, which is part of investor website SeekingAlpha.com.
CorVel’s approach to dealing with criticism is an example of “a new world that companies are in,” said Joan Gladstone, chief executive of Gladstone International Inc., a crisis communication firm in Laguna Beach. Gladstone’s firm performed crisis communications for Orange County during its 1994 bankruptcy.
• Headquarters: Irvine
• Business: software and services for managing workers’ compensation claims, other medical bills and services, case management
• Founded: 1987
• Ticker symbol: CRVL (Nasdaq)
• Market value: about $575 million
• Notable: has taken low-key response to recent blog reports that led to dip in share price
“First of all, it’s impossible to ignore what people are saying on social media, but companies do have many options as to whether or not they respond,” said Gladstone, who is not working with CorVel.
Gladstone said executives should base their responses in part on whether charges being made are based in fact or opinion.
Companies often monitor discussions and “decide whether they want to engage,” she said.
Consider the Source
The decision on whether a company remains quiet or takes a more aggressive approach depends on whether there’s substance to contentions, as well as the credibility of the source of the criticism.
CorVel has been tight-lipped, but others in social media are weighing in on the matter.
Joseph Paduda, principal of Connecticut-based consultancy Health Strategy Associates and proprietor of industry blog Managed Care Matters addressed the report because it quoted him extensively, and “that’s why I find it necessary to speak out.”
Paduda, a former managed care and insurance company executive, wrote that he’s “no fan of CorVel” and cited reservations about its business model, service quality and customer service. But he said he was “even less enamored of the ‘research’ and ‘analysis’ done by Copperfield.”
“It’s quite clear that Copperfield knows next to nothing about CorVel’s workers’ comp business, or the work comp world in general, for that matter,” Paduda said.
