PATRICK MCGINNIS - TROVER SOLUTIONS INC (TROV)
CEO Interview - published 02/02/2002

DOCUMENT # NAX214

PATRICK B. McGINNIS is Chairman and Chief Executive Officer of Trover
Solutions, Inc. Mr. McGinnis was educated at Centre College (Danville,
Kentucky) and received his MBA degree with honors from the Wharton
Graduate Division of the University of Pennsylvania. He began his
business career in 1973 with Coopers & Lybrand where he was a CPA,
specializing in accounting-related tax matters, acquisitions, and
financial statement presentation of tax information. In 1979, he joined
Humana and rose through a series of management positions in corporate
finance. His last position at Humana was Vice President - Finance and
Planning, where he was responsible for treasury and finance, portfolio
investments, strategic planning, venture capital investing, and
acquisitions and development. Mr. McGinnis left Humana in June 1988 to
found Trover's predecessor, Healthcare Recoveries, Inc. Today, Trover
Solutions is engaged in providing claims recovery services and related
software applications to the insurance industry, on a nationwide basis.
Trover was a venture capital-sponsored company, and its investors were
E.M. Warburg, Pincus Capital Partners and Humana, Inc. In August 1995,
the company merged with Per Se Technologies, Inc. (formerly Medaphis
Corporation), and in August 1996, Mr. McGinnis was named President of
Per Se's healthcare information technology operation. In January 1997,
Mr. McGinnis returned to lead Trover Solutions through its successful
100% IPO spinoff from Per Se Technologies. Mr. McGinnis serves as a
Trustee of Centre College, and he is a Director of Beacon House in
Louisville, Kentucky. Beacon House is a transitional, residential
facility for individuals recovering from substance abuse.

Sector:  SPECIALIZED HEALTH SERVICES

TWST: Would you begin with a brief historical sketch of Trover Solutions
and then give us an overview of what the company is doing at the present
time?

Mr. McGinnis: Trover Solutions was founded in 1988 as Healthcare
Recoveries. Some investors may know our company by that name. We
announced our name change to Trover Solutions on January 17. I'm a co-
Founder of the company. We began by providing a very specialized claims
recovery service to the health insurance industry. That service is known
in insurance jargon as subrogation. It involves the recovery of medical
expenses arising from accidents by health insurers. Health insurers are
entitled to make those types of recoveries under very particular
circumstances when some other individual or some other insurance company
was, in fact, responsible for the accident. The company now is
approaching its 14th birthday, and the last year or so has been one of
tremendous development for us. We've been adding new products and
solutions, and entering new markets, in particular the property and
casualty industry segment. That's one of the reasons we decided to
update our corporate identity with the new name, Trover Solutions.
'Trover' is an interesting word: it is related to the French 'trouver,'
meaning 'to find.' It also has a legal meaning: 'trover: an action to
recover property that is rightfully owned by another person.' So it
really is descriptive of our services in a broader sense, and an
indication that we're moving, not out of the health insurance
marketplace, but into a larger market ' the entire insurance industry.

TWST: What were the elements of this expansion?

Mr. McGinnis: Broadly speaking, you can think of Trover Solutions as a
business process outsourcing company. The particular services that we
provide are to insurers and involve some type of recovery of claims paid
by our customers. In health insurance, as I mentioned, we began our
offerings with subrogation recovery services in 1988. In 1999, we added
provider bill auditing services. In that product, we use nurse auditors
to review medical records on complex hospital transactions. These audits
typically yield a savings to the customer of 5%-10% of the claim. We
entered into that business through acquisition of a fine company, MedCap
Cost Containment Services. Also in 1999, we introduced our overpayments
recovery services to the healthcare industry. Overpayments involve the
detailed analysis of paid claims, looking for transactions that, for a
variety of reasons, should not have been paid by the healthcare
provider. So now we have a portfolio of three products for the
healthcare insurance industry. Early in 2001, we made the announcement
that we are offering our subrogation recovery services to the property
and casualty industry under our branded name, TransPac Solutions. It's
off to an excellent start. We finished 2001 with seven contracts. The
opportunity for subrogation services in property and casualty is
substantially larger than it is in healthcare. Subro recoveries for P&C
insurers are 6 to 8 times larger than healthcare recoveries. So we're
excited about the size and scope of that market, and the early
indications are that it's off to an excellent start. Also in 2001, we
announced the introduction of our subrogation software for sale to the
insurance industry under the branded name, Troveris. Troveris is the
technology that we use internally for our own operations. It's an
Internet-enabled application that we're marketing in an ASP business
model, using activity-based pricing. The software enables an internal
subrogation department to achieve many of the productivity gains that
we've enjoyed in our own operations, but most important of all, Troveris
enables us to unbundle any aspect of our subrogation service and sell
that unbundled service on a piecemeal basis to an internal department. 
This capability is important because, having been in the business for
almost 15 years, still about 50% of the healthcare marketplace is in-
sourced, and our expectation is that it's not likely to move to
outsourcing. So now we have a product that addresses the needs of
internal subro departments as well as full outsourcing. There's also a
Troveris version for the property and casualty market. We're looking for
our first customer in Troveris, and the excitement level is high. We're
having conversations with insurance companies that we could never talk
to about outsourcing. So we're very encouraged about those developments
for 2002.

TWST: I would guess that there's nobody competing with you across this
broad range of services.

Mr. McGinnis: That's exactly correct. There is no other single company
that addresses all the markets that we address. There, of course, are
companies that compete against us in particular product segments, none
of whom approach our size and scope. We're the only public company in
this particular business-processing space; all of our competitors are
privately held.

TWST: What are your plans for growth?

Mr. McGinnis: We just completed a conference call on January 4 to
provide the investment community with some very granular guidance for
2002. We're looking for an earnings-per-share range in 2002 of between
$0.60 and $0.68; the midpoint of that is $0.64, which, on a pro forma
basis, compares to $0.53 for 2001'up about 15%-20%. We think our
prospects for growth are good, and we're looking to get there on the
revenue line this year. One of the things we need to demonstrate to our
investors is that we're able to grow the company by growing our customer
base.

TWST: Will there be further acquisitions?

Mr. McGinnis: Acquisitions are certainly a possibility. We have a $40
million acquisition credit line, and we only have about $10 million or
so outstanding at this time. Our acquisition strategy is designed to
accomplish two things. First of all, we want to acquire new products
that we can sell into our existing customer base. This would be
attractive to us relative to the time and expense of an internal
development effort. However, we will spend for internal development of
new products if we're not able to add to our portfolio through
acquisition. The other possibility for acquisitions is the opportunity
to increase the critical mass of our company. One of the challenges of a
microcap company such as ours is gaining the attention of the
institutional investment community, and one way to get there is with
acquisitions that are of size but have excellent strategic fit and
appropriate financial characteristics that are attractive to investors.

TWST: What will you be worrying about?

Mr. McGinnis: What I'm going to be worrying about over the next 12
months is execution of our business plan. We've got a very detailed plan
in place; we have the management team in place to execute that plan. Job
number one is to hit our numbers for 2002. If we do that, we'll be well
positioned for growth in 2003 and 2004. It is my task as CEO to make
sure that we expand the platform in terms of products to sustain that
kind of growth rate.

TWST: Regarding your business plan, is there anything further you'd like
to add to what you've already said?

Mr. McGinnis: Just to emphasize that it's very much what I describe as a
'plan of execution.' We have the new products in place. They're
developed. They're marketable. We've substantially expanded our
commitment to sales-and-marketing resources: we're going to be spending
in 2002 about 2 times as many dollars on sales, marketing and client
services as we spent in 1999. So it's a major commitment on our part to
grow through the expansion of products and to grow the top line.

TWST: You seem to have a very tricky mix of things requiring highly
skilled people. What can you tell us about the background and expertise
of the people you have at Trover, the talent at the company?

Mr. McGinnis: Your observations are on the mark. We thrive on
complexity. The secret, I think, to business process outsourcing is
command of complex and esoteric business processes. It's because we're
able to scale and leverage our expertise that we are, in fact, able to
do these things better than organizations many, many times as large. So
it all gets down to talent and experience. We have a fairly flat
organization structure, and we have an experienced executive in charge
of our four operating divisions. I have six direct reports. We have a
corporate executive in charge of sales, marketing and client services
across all products and our Chief Financial Officer and Chief
Administrative Officer. Now let me take those things in order. Deb
Murphy runs our healthcare subro division, which is the anchor for our
business. It still is the greatest portion of our profitability. We're
not looking for tremendous growth in healthcare subro, but we do expect
substantial profitability to come from that. Deb Murphy has been an
executive of TROV for over 10 years. She has been running the subro
division for about three years. Deb is hitting on all eight cylinders in
terms of making her numbers and keeping her financial commitments.
Turning to our new product areas, Rob Bader runs our provider bill
auditing and overpayment services, and he will be a major player in
additional new products in the healthcare area. Rob has been with us for
four years now and comes with a very strong operational background from
a major Blue-Cross/Blue-Shield organization. Leading TransPac Solutions,
our property-and-casualty claims recovery service, is Rob Jefferson. Rob
comes with 20 years' experience from Aegon, Inc., a major life insurance
holding company. Rob has the advantage not only of his insurance
management experience, but he can tap into a lot of key managers and
supervisors within our organization who are well-schooled in subrogation
business processes. Troveris, our software offering, is led by Mark
Bates. Mark has been with us since 1998. He came to us from Humana. His
last position there was leading all of Humana's computer applications
development. So he is a very experienced software development manager.
Tim Cahill runs our sales and marketing across the company. Tim joined
us in 1999 from Concentra. He's very experienced in healthcare claims
recovery services and has spent the last two years not only in new
product development but, in particular, in reorganizing and building our
sales and marketing team. We have 6 to 7 times as many sales executives
on the street today as we did when Tim joined the organization. Doug
Sharps is a veteran of Trover Solutions. Doug joined us in 1990 as our
General Counsel and was promoted to Chief Financial Officer in 1994. He
has held that position through our public offering and is responsible
for all of our investor relations, human resources and a variety of
compliance matters as a public company. We don't have any kids. It's a
seasoned group. I'm the graybeard of the bunch at 54, and the rest of
our team are in their late 30s and 40s. Everybody has 15-20 years of
experience under their belts. So we're ready to roll.

TWST: What can you tell us about the corporate culture?

Mr. McGinnis: I think I would want people to know that our culture is
based upon pay-for-performance and results. Probably 80%-90% of our
employees ' right down to the recovery specialist level ' are on some
sort of results-based variable compensation plan. When our customers win
and our shareholders win, our employees win as well.

TWST: Could you give us a general picture of where you can reasonably
expect the company to be in 2004?

Mr. McGinnis: In 2004 and beyond, I think we will be a company that has
added substantially to its portfolio of outsourcing services and
computer applications to support both outsourcing and insourcing for the
insurance industry. That industry segment is enormous, and the
opportunities for outsourcing are still largely untapped. So we're going
to be a more substantial organization because that's one of the things
we need to do for our shareholders. However, I see us as a software and
BPO company serving the insurance industry for at least the next three
to five years.

TWST: Are there any large-scale political or demographic or economic
factors that will impact you?

Mr. McGinnis: I think I'd make the point that we're not a cyclical
business. Our fortunes don't rise and fall with the economy as do many
companies'. We are somewhat linked to the insurance industry. I think
one of the things going on as a mega-trend in health insurance is the
rapidly rising cost of healthcare benefits. I believe over the next five
years these cost increases are going to constrain the growth of health
insurers. The problem of uninsured Americans, as you probably know, is a
substantial one, and if our country allows those costs to continue to
rise as they are now, the only thing it means is fewer people are going
to have health insurance. So the size of the pie will shrink a bit. On
the other hand, the cost of accident claims and other types of claims is
going to rise, and that will tend to offset any sort of macroeconomic
impact of that phenomenon. We live in a world where we have to deal with
plaintiff attorneys, in particular in the healthcare side, and they have
a lot of political power. That's always something we keep an eye on. We
get sued a lot, but we've been very successful in defending ourselves
against the plaintiff attorney industry.

TWST: What do you have to concentrate on most on a day-by-day basis?

Mr. McGinnis: With the seasoned management team, it allows me to begin
to turn my attention more toward the external community: product
development, acquisitions, investor relations, and political and
regulatory issues.

TWST: What is it that investors don't know about the company?

Mr. McGinnis: I think the big issue for any company such as Trover
Solutions ' we currently have about a $50 million market cap ' is
investor communications. As you know, sell-side analysts don't have the
resources to follow companies like us, so it's incumbent upon us to
provide the kind of information that otherwise would be provided by
research analysts. That is why we spent a considerable amount of time
and effort and had a very detailed conference call on our earnings
prospects for 2002 back on January 4. It was well attended, and, in
fact, our stock traded up about 20% after the Webcast. We were at about
$4.80 the day before the conference. We gave our guidance, and on that
day we traded up to about $5.90. The following Monday we traded 250,000
shares and the increase in valuation held firm.  These are the kinds of
things that we who manage Trover have to do to let people know about our
growth prospects. We think, based on those prospects, the stock is
relatively cheap.

TWST: Do you think you might be a likely target for acquisition?

Mr. McGinnis: I don't know. We're certainly not looking for that, but
you never know what tomorrow may bring. We're interested in creating
value for our shareholders. At this point, the greatest value that can
be created for our shareholders is the execution of our plan. I think
anyone who would acquire the company today, at least in my mind, must
pay a substantial premium from where we are. Our guidance for 2002 is at
$0.64, that's only a 10 multiple. I think if we execute our business
plan, we have an excellent opportunity for multiple expansion,
especially as we approach the $100 million market capitalization, where
sell-side analysts begin to take notice.

TWST: Could you give us the three or four best reasons why the long-term
investor should be looking closely at Trover Solutions?

Mr. McGinnis: I think the best reason is that well-managed, well-
positioned, micro-cap stocks are a bargain right now. The micro-cap
sector has performed very well in the last 12 months. We opened 2001 at
$3 a share and finished the year at $4.60 or so, and have since added
another $1.25.  So I would say, first of all, people should be looking
at micro-caps because they represent value, and then once you focus on
that sector, you want companies that are profitable, are cash-flowing,
and have good growth prospects, and we certainly meet all of those
criteria.

TWST: Thank you. (MC)

PATRICK B. MCGINNIS
 Chairman & CEO
 Trover Solutions, Inc.
 1400 Watterson Tower
 Suite 1500
 Louisville, KY 40218
 (502) 454-1340
 (502) 454-1065 - FAX
 www.troversolutions.com
 e-mail: information@troversolutions.com

Each Executive who is the featured subject of a TWST Interview is
offered the opportunity to include a Corporate Profile or other
highlight material to be provided and sponsored by and for the company.
This Interview with Patrick B. McGinnis, Chairman & CEO of Trover
Solutions, Inc., is accompanied by a Corporate Profile containing
corporate information.

Copyright 2001 The Wall Street Transcript Corporation
All Rights Reserved


The Wall Street Transcript (TWST) interviews are published verbatim, and TWST does not in any way endorse or guarantee the accuracy of any information or opinions expressed herein and all opinions are subject to change without notice. Nothing herein constitutes a solicitation to buy or sell any securities. TWST interviews with CEOs may include include "forward-looking statements", which are based on factors that involve risks and uncertainties. Actual results may differ materially from those expressed or implied. TWST shall have no liability whatsoever for any trading losses arising out of use of this information. Copyright 1999 Wall Street Transcript Corporation. All Rights Reserved.