Innovative Resource Group

Innovative Resource Group (IRG), based in Brookfield, WI, specializes in healthcare services and behavioral health resources, serving over two million individuals in 49 states. IRG was a wholly-owned subsidiary of Cobalt Corporation (NYSE: CBZ), a publicly traded company, that holds the Blue Cross and Blue Shield license in the state of Wisconsin.

Working through Tammie Miller, now a Grace Matthews Vice President, Cobalt Corporation acquired eight medical and behavioral health services companies and consolidated them into IRG. This “roll-up” strategy reduced Cobalt’s dependence on volatile HMO revenues and allowed it to leverage its operations over a larger customer base for additional profits.

Several years later , Cobalt made the decision to sell IRG in order to maximize the value of its investment in the subsidiary. Miller guided Cobalt in planning and executing its exit strategy.
While several alternatives were considered, a sale to APS Healthcare of Bethesda, Maryland quickly arose as the most promising strategy. The companies had complementary lines of business and geographical footprints. APS Healthcare generated revenues mostly through its behavioral health business and could benefit from IRG’s medical and disease management capabilities. In addition, APS Heathcare’s provider network was concentrated on both the East and West Coasts, while IRG had a concentration of providers in the Midwest.

The transaction included the execution of thirteen long-term service agreements between Cobalt and APS Healthcare, representing a watershed in the Blue Cross world since Cobalt effectively was able to outsource certain parts of its own internal operations through the sale. In addition, the transaction represented a significant return on investment over the amounts initially invested in the various IRG acquisitions.