A Marriage of Compatibility
For all that modern client and third-party administrator (TPA) interaction depends on technology, compliance expertise, analytics and efficient claims administration, the most important factor in its success is still the partners’ compatibility, industry experts agree.
“It comes back to the relationship,” said Fred Hunt, active past president, Society of Professional Benefits Administrators (SPBA), a national association of TPA firms.
Since the client and TPA can interact daily on government compliance and such delicate issues as fluctuating reserves and claims escalation, “you have to like and trust your TPA,” Hunt said. “It’s like getting married.”
Scott P. Rogers, executive vice president, casualty operations, Sedgwick Claims Management Services Inc., agreed, since in many cases the self-insured employer, insurance collective, union or insurance carrier is entrusting the health of employees to a third party.
“Companies hire TPAs when they believe the right partner can do a better job dealing with their most important assets, their employees, and their most important constituents, their customers,” he said.
Other than the bread-and-butter claims payment services, Hunt said, clients depend on “ERISA nerds” like his organization’s members to stay in compliance with complex, shape-shifting state and federal laws and regulations. “The TPA will call to say, ‘The IRS just issued this new reg, and we’re going to have to do this or that.’ ”
Companies may delegate because they don’t have in-house expertise, Hunt said, and penalties for violations can be devastating.
The right fit depends on a program customized to the company’s appetite for risk, cost threshold and company culture, said Rogers.
Size and scope matter also, said Richard Messick, specialist leader, Deloitte Consulting. “Larger companies may need a larger TPA with national or even global providers and regulatory experts. Smaller companies with only one or two local locations may do perfectly well with a regional TPA that doesn’t have the broad geographical reach of the larger companies.”
But Rogers said smaller clients, especially those who enhance their buying power by joining captive and affinity groups, such as public university insurance collectives, can benefit from the resources and expertise large TPAs may offer.
“The smaller clients get the same customization as the big companies,” he said, including access to a broad base of claims expertise, legislative updates and technology advancements. “It goes back to how the client and TPA partner together.”
Large or small, said Karen Stankevitz, managing director of consulting and analytics, Aptus Risk Solutions, all TPAs have strengths and weaknesses apart from the basic claims-payment services all provide.
“When you assemble your list of requirements in your request for proposals, don’t put down the basics,” she said. Instead, clients should figure out what they need beyond the basics, such as expertise and presence in all 50 jurisdictions or deep and broad contacts within the managed care community.
“Look at their differences,” Stankevitz said. Aptus, a consultant specializing in medical cost containment, claims and litigation management, sees prospective vendors’ strengths and differentiators emerge in sales presentations.
“The more a client asks a TPA to do outside their standard services, the harder it is for the TPA to perform optimally, and the more it will cost to get those services.”
When comparing sales presentations, Aptus suggests that clients may see desirable services one vendor provides that the client may not even have thought about requesting.
Regardless of their size and specialty, prospective clients and TPAs should meet and get to know each other rather than depend on a broker to vet candidates, SPBA’s Hunt said. If possible, clients should pay site visits to their prospective partners’ locations.
Brokers, however, can and do play an important role in partnering clients with the right TPA, said Srivatsan Sridharan, senior vice president, product development, Gallagher Bassett Services. The broker compares the client’s exposure data (such as industry, state and job type) against outcomes from various TPAs to find those with the best track record.
For example, if a client wants to contain medical management costs, the broker could collect data on its exposure in a given state for a given type of claim, then superimpose it on a TPA’s discounts, outcomes and penetration for those bill types in the states where the client operates.
When vetting candidates, said Ivan Dolowich, managing partner, Kaufman Dolowich & Voluck, which specializes in professional lines of business, “it’s good to look at claims systems,” some of which are highly automated and specialized. The industry was slow to invest in technology, he said, and TPAs’ systems are sometimes better than insurers’ legacy systems that they developed on their own and adapted to the type of claims they’re handling.
“At the end of the day, actions speak louder than words. Employers quickly recognize genuine performance.” — Scott P. Rogers, executive vice president, casualty operations, Sedgwick Claims Services Inc.
Not all due diligence is so high tech. In the course of a bidder’s conference, said Rogers, the prospective client and TPA may compare core values and decide their shared cultures bode well for the partnership.
“At the end of the day,” Rogers said, “actions speak louder than words. Employers quickly recognize genuine performance.”
To Bundle or Not to Bundle?
There are pros and cons to bundling and unbundling, said Stankevitz. A client has more buying power if it uses one TPA for multiple lines of business, and it may lose some negotiation leverage if it splits up the concentration. Reporting and analytics may also be better and easier with a single TPA.
“With all data in one system, running reports will be less complicated and more standardized,” she said.
But TPAs have different areas of expertise. “If you’re heavy in products claims,” she said, “you might want to assign that part of your business to a TPA that specializes in that line of business.” And if a client assigns different TPAs to different lines, it has a broader knowledge base, she said.
“If you have two TPAs, you have more resources to ask your questions. It opens up the networking,” she said.
A pilot program may be an option. “You can pilot a TPA in a state or a different line of business to get a sense of how they operate and manage your requests. It will give you a better sense of marketplace.”
Clients should be prepared to invest time and money in the process of unbundling a program, although with good planning the investment should provide returns. Transport operator FirstGroup America unbundled its bill review, pharmacy benefits management, field and case management, independent medical examinations, and occupational and physical therapy services in its self-insured program.
Two and a half years later, Frank Lott, the company’s corporate claims director, reported cost savings, and greater control and flexibility in the providers it chooses for its employees, and far greater transparency in its bill review.
During a Risk & Insurance® webinar, “Succeeding with an Unbundled Claims Management Approach,” Lott said that before unbundling, “We could never get a true understanding of our managed care costs.” After unbundling, the company found “a higher level of expertise in these areas, and they’ve become an extension of our team.”
However, these gains didn’t come without effort. “There’s an implementation phase,” Lott said, to allow each TPA on the team to “talk” to each other electronically.
“You have to look at connectivity. You have to look at how much time and money it will cost to build systems and interfaces. Can all the partners access the different systems?” There was also a training element that involved both the vendors and the TPA. “The goal was to not put additional work on the adjuster’s plate,” he said.
“A company needs to ask itself, ‘Do we have the internal resources to drive an effective program?’ ”
If a company decides to take on this process, said Suzanne Flynn, a webinar participant and senior vice president and risk management consultant for Wells Fargo Insurance Services, it should coincide with the initial execution or renewal of a TPA contract, some of which prohibit unbundling or impose punitive costs or fees, such as an exorbitant $9 per check writing fee.
“A company needs to ask itself, ‘Do we have the internal resources to drive an effective program?’” —Frank Lott, corporate claims director, FirstGroup America
The contractual definition of “managed care” can also catch companies off guard, Flynn said, and may restrict programs without their administrators’ knowledge.
“Is it the traditional definition of fee schedule audit, preferred provider organization and utilization review? Or has the definition been expanded to include things like telephonic case management, field case management, pharmacies and/or durable medical equipment, thus becoming an even greater source of revenue for the entity?”
While some TPA contracts forbid unbundling, in other cases, clients are obliged to unbundle if their TPAs don’t service all their insurance lines, said Deloitte’s Messick. This is especially true for specialty liability lines, such as medical malpractice and directors’ and officers’ insurance.
After prospective clients and TPAs perform due diligence and decide they can work well together, they negotiate a contract that assigns their respective roles and responsibilities. The language in the contract should exceed the boilerplate contractual language of most service agreements, and include as much detail as possible, including the performance standards that define the parties’ respective roles, said Michael T. Griffin, partner, Edwards Wildman Palmer LLP in Hartford, Conn., who specializes in insurance law.
For example, he said, if the TPA will maintain a call center, the contract should detail the service standards the TPA must maintain. How many hours will it be open? How many people will staff it? How quickly will the staff answer phone calls? How quickly must claims be paid, or carriers and employees notified of their progress?
“If I’m a national carrier, the TPAs that represent me directly impact my reputation. I want their performance to reflect well on my brand,” he said.
Dolowich, of Kaufman Dolowich & Voluck, said he prefers contract language that defines authority lines and avoids the gray areas that can presage litigation. At what point does the TPA need the client’s approval to expand or clarify its reserve or settlement authority? Are the reserves adequate?
Those service level standards are often addressed in exhibits to the agreement, Griffin said, so if the parties want to tweak the details, they can modify the exhibit rather than amend the body of the agreement.
The contract should also provide for the eventual termination of the relationship, Griffin said, almost like a pre-nup.
“If you’re a carrier at the end of the relationship, the TPA is left with your information. How do you get it back?”
He encourages parties to think up-front about termination and transfer of data. How will information be presented? In hard copy? Pursuant to some system requirement? If costs will be incurred in the transfer of the information to its owner, who incurs those costs?
The Scales of Justice
Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.
Frankie and Hector
“It’s a great day for the Irish!”
Whether they loved him or found him annoying, workers in the seafood and meat departments in the Better Harvest grocery store in Boston’s Back Bay knew the meaning of that booming morning greeting very well.
It declared that boisterous fish cleaner and erstwhile fish-counter salesman Frankie Burns was at work, and he wanted everybody to know it.
Despite his sometimes jarring presence, most people loved Frankie. Frankie knew seafood, having worked on his family’s cod boat when he was younger. Now, at 55, he provided a knowledge of local fish and shellfish that was an asset in a store catering to the Back Bay’s educated, prosperous consumers.
Barrel-chested, with forearms, shoulders and biceps solidly built from years of manual labor, Frankie cheerfully and proudly unloaded the tubs of hake, pollock and flounder sold by the market.
This May morning, though, would prove to be a wake-up call for the hard-living Frankie. As he had thousands of times before, Frankie hoisted a heavy tub of iced pollock up onto the fish-cutting counter. This time, though, his back gave out.
“Whoa,” Frankie said as he clutched his lower back, wincing at the piercing, unfamiliar pain there.
Testing revealed that Frankie had aggravated a chronic degenerative back condition. His claim was found to be compensable.
With 180 stores nationwide and close to $8 billion in sales, Better Harvest’s human resources department was well-versed in the amendments to the Americans with Disabilities Act that were enacted in 2008.
Following Better Harvest’s well-documented procedures, and at Frankie’s reluctant request, Back Bay store manager Gracie Walker granted Frankie an accommodation under the ADA.
For now, Frankie was done hoisting ice-filled fish tubs. The store would need to find another fish cutter as the heaviest thing Frankie would be permitted to lift would be paper-wrapped one pound cod fillets.
“Hey, a job’s a job,” Frankie said, as he hoisted a beer and a Fenway Frank with his brother Petey at a Sox game that summer.
Hector Velasquez was the fish cutter in Better Harvest’s Brentwood, Calif. store.
At 53, Hector’s idea of a good time was to go Zydeco dancing with his latest and greatest girlfriend Vera at the Puma Club in nearby Venice Beach.
That’s exactly what Hector was doing on a steaming hot California night during a performance of his favorite Zydeco band, the Vallejo Oyster Crackers. But Hector made a misstep due to a slippery combination of spilled beer and crushed peanut shells on the dance floor of the Puma Club.
Vera tumbled to the ground with Hector but popped right back up, adjusting her hair and skirt in the process. Hector wasn’t so lucky.
“Honey, are you hurt?” Vera said.
Hector, whose love of beer, fried seafood and tortillas had left him with a stout belly, tried to get up but couldn’t.
Another dancer, seeing Hector in distress, stopped Hector from trying to move.
“Stay still, man,” the Zydeco dancer said. “You might have really hurt yourself.”
Hector’s fellow dancer put his hand on Hector’s belly to still his movements and pushed a chair cushion under his head.
“Be still a minute, man, and breathe — breathe against the pain,” the Zydeco dancer said.
Hector looked up at the man thankfully and started to breathe more deeply, his beer belly rising and falling with each labored breath.
Hector couldn’t make it to work the following Monday and filed for leave under the Family Medical Leave Act.
Hector rested for a few days, trying to dull the pain with Ibuprofen and light beer. Given that he wasn’t hurt at work, Hector didn’t go to a doctor, thinking he might end up bearing the cost of treatment that he couldn’t afford.
On the Thursday after his injury, Hector got a ride from a buddy and came back to work. Hector is self-medicating, taking unhealthy doses of Ibuprofen in an attempt to perform his job.
He barely made it through Thursday and Friday, depending on co-workers to cover for him. Over the weekend, home resting but still in substantial pain, Hector faced the music.
“There’s no way, man,” he said, looking at his bent-over body in the bathroom mirror.
“I gotta talk to somebody.”
The following Monday, Dave Wagner, the general manager of the Brentwood Better Harvest store, got a knock on his office door.
Being the GM of this store, with its affluent and demanding customer base, was no joke. Dave Wagner was one busy man.
“Hector, what’s up?” Dave said.
“I need to talk to you, Mr. Wagner. It’s my back. I hurt it bad the other night and I can’t do any lifting, not much anyway,” Hector said.
Dave did some rapid-fire mental calculations as he gestured Hector to a chair.
“Sit down Hector, sit down,” he said.
Hector moved slowly to sit down, telling Dave everything he needed to know about how badly Hector was hurting.
“I’ll tell you what Hector, I’ll tell you what,” Dave said, as memories of Better Harvest HR emails concerning the ADA flashed through his formidable memory.
“Hold on a sec,” Dave said and popped down at his desk. In two clicks and a couple of scrolls, Dave scanned some emails from HR.
“Reasonable accommodation” is the phrase that stuck in Dave’s mind as he rapidly scanned the emails.
“You don’t have to lift,” Dave said, turning back to Hector. “You can work the counter. How does that sound?”
Hector, although in substantial pain, brightened some.
“That sounds good Mr. Wagner, thank you,” Hector said. But Hector’s feeble attempts to stand up sent Dave a message.
“Talk to Marcus and tell him what I said and I’ll talk to him too,” Dave said, as Hector made his way out.
As Hector went off to find Marcus, the manager of the seafood department, Dave engaged in professional, removed reflection.
“We’ll see what’s reasonable. I’ll give it three months,” he said to himself, before his vibrating cellphone distracted him.
“Cripe,” the harried Dave said to himself, looking at the number and picking up his phone.
“Dave Wagner,” he said impatiently to whoever was on the line.
Three months came and went, and Dave had to make a call. Hector just wasn’t that strong on the counter.
You had to have serious customer service skills to handle Brentwood and Beverly Hills customers and Hector was flailing. Complaints about him were coming at Dave from all sides, customers, co-workers, you name it.
“Reasonable means reasonable,” Dave said to himself as, worn down with complaints about Hector’s customer service shortcomings, he moved to terminate him.
The Wheel Turns
After his firing, it didn’t take long for the befuddled Hector to hook up with a gifted, ambitious employment rights attorney, Lucia Yamamoto, a graduate of Berkeley Law and a passionate defender of workers’ rights.
This is how the pre-trial negotiations went between Yamamoto’s firm, The Workers’ Rights Center, and the firm that did defense work for Better Harvest’s employment liability carrier, Apex Insurance.
“Okay guys, this is an easy one,” Yamamoto said on the phone call with the Apex defense team.
“We don’t see it that way,” was the game response from Ed Kleindinst, the defense lead for Apex’s law firm, Kleindinst, Evans, Hale & Brown.
“Oh really?” Yamamoto said, her derision palpable.
“You got two guys, practically the same age. They’re both working the same job. I mean this is beautiful,” she said.
“You accommodate one guy, and he’s still got a job,” Yamamoto said.
“Your GM in the Boston store continues to accommodate him, according to widely disseminated company policy…,” she continued.
“I don’t think you’re in a position to know how widely disseminated it was,” Kleindinst responded.
“Like it matters,” Yamamoto shot back.
“The other guy, same company, you terminate after 90 days even though it’s not presenting an undue hardship to your business. Instead, he was terminated because the manager felt he had accommodated him for long enough, which runs contrary to the company policy,” Yamamoto says.
“Been there 20 years, married with four children. Never been disciplined in his working life. Hello? Are you guys still there?” she said.
“We’re here,” Kleindinst said, this time with a little less vigor, pushing the mute button and rolling his eyes at his co-counsel in one of the Kleindinst, Evans, Hale & Brown conference rooms.
One of the partners jotted a note on a sheet of paper and slid it in front of Kleindinst.
There was a pause — orchestrated on the part of both Yamamoto and Kleindinst.
“Well, you’re not saying anything,” Yamamoto said.
“Go on, please, counsel,” Kleindinst said.
“Oh I’ll go on, I could go on all day with this one,” Yamamoto said.
“Two million,” she said.
“Oh come on!” Kleindinst said.
“See you in court!” Yamamoto replied.
Kleindinst’s partner jerks his head at the sheet of paper, trying to focus Kleindinst.
“One million,” Kleindinst said.
“One and six or we go to court and no more of this,” Yamamoto said.
There is another pause.
“Gentlemen, are we done?” said Yamamoto.
Kleindinst looked at his co-counsel, who nodded and pulled back in his chair.
“Yes, we’re done,” Kleindinst said.
“I really, really don’t like her,” Kleindinst said to his partner after he hung up.
“Like it matters,” his partner said.
Risk & Insurance® partnered with Sedgwick to produce this scenario. Below are Sedgwick’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance®.
1. Medical review: Make sure you request and document medical reviews of any request for leave or accommodation under the Family Medical Leave Act or the Americans with Disabilities Act as part of the overall interactive accommodation process.
2. Consistency: Different injured employees with debilitating chronic conditions should be treated with consistency under the Americans with Disabilities Act, regardless of whether their need for accommodation is due to a work-related injury, a non-occupational injury or illness or for another medical need.
3. Document, document, document: Companies need to make sure that standard procedures regarding leave or accommodation under the Family Medical Leave Act or the Americans with Disabilities Act are in place, up to date and triggering interactive process review – as well as clearly communicated to employees. Companies also need to document that they have communicated changes to those policies in a comprehensive and timely manner. A robust information management platform is key to supporting the process and necessary documentation.
4. The leave option: Although the goal of ADA/ADAAA is to keep people at work and every effort should be made to meet an accommodation request, supervisors need to keep in mind that there may be cases where a workplace accommodation isn’t possible or advisable due to the significant hardship it would place on their business; time off from work may be the only option. Shoe-horning an employee into a task they are unfit for may do more harm than good.
5. Disabled means disabled: Under the law, even if a condition is “controlled” by medication or some other treatment method, a disability is still a disability. Be very careful not to treat someone with a chronic condition differently just because they’re asymptomatic.
Medication Monitoring Achieves Better Outcomes
There are approximately three million workplace injuries in any given year. Many, if not the majority, involve the use of prescription medications and a significant portion of these medications is for pain. In fact, prescription medications are so prevalent in workers’ compensation that they account for 70% of total medical spend, with roughly one third being Schedule II opioids (Helios; NCCI; WCRI; et al.). According to the U.S. Drug Enforcement Administration (DEA), between the years of 1997 and 2007, the daily milligram per person use of prescription opioids in the United States rose 402%, increasing from an average of 74 mg to 369 mg. The Centers for Disease Control and Prevention (CDC) reports that, in 2012, health care providers wrote 259 million prescriptions—enough for every American adult to have a bottle of pills—and 46 people die every day from an overdose of prescription painkillers in the US. Suffice to say, the appropriate use of opioid analgesics continues to be a serious issue in the United States.
Stakeholders throughout the workers’ compensation industry are seeking solutions to bend the curve away from misuse and abuse and these concerning statistics. Change is happening: The American College of Occupational and Environmental Medicine (ACOEM) and the Work Loss Data Institute have published updated guidelines to promote more clinically appropriate use of opioids in the treatment of occupational injuries. State legislatures are implementing and enhancing prescription drug monitoring programs (PDMPs). The Food and Drug Association (FDA) is rescheduling medications. Pharmaceutical manufacturers are creating abuse-deterrent formulations. Meanwhile payers, generally in concert with their pharmacy benefit manager (PBM), are expending considerable effort to build global medication management programs that emphasize proactive utilization management to ensure injured workers are receiving the right medication at the right time.
A variety of factors can still influence the outcome of a workers’ compensation claim. Some are long-recognized for their affect on a claim; for example, body part, nature of injury, state of jurisdiction, and regulatory policy. In contrast, prescribing practices and physician demographics are perhaps a bit unexpected given the more contemporary data analysis showing their influence on outcomes. Such is the case for medication monitoring. Medication monitoring tools promote patient safety, confirm adherence, and identify potential high-risk, high-cost claims. Three of the more common medication monitoring tools include:
- Urine Drug Testing (UDT) is an analysis of the injured worker’s urine that detects the presence or absence of a specified drug. Although it is not a diagnosis, UDT results are generally a reliable indicator of what is present (and what is not) in the injured body worker’s system. The knowledge gained through the testing helps to minimize risks for undesired consequences including misuse, abuse, and diversion of opioids. With this information in hand, adjustments to the medication therapy regimen or other intervention activities can occur. UDT can also be an agent of positive change, as monitoring often leads to behavior modification, whether in direct response to an unexpected testing result or from the sentinel effect of knowing that medication use is being monitored.
- Medication Agreements or “Pain Contracts” signed by the injured worker and their prescribing doctor serve as a detailed and well-documented informed consent describing the risks and benefits associated with the use of prescription pain medications. Medication agreements help the prescribing doctor set expectations regarding the patient’s adherence to the prescribed medication therapy regimen. They serve as a means to facilitate care and provide for a way to document mutual understanding by clearly delineating the roles, responsibilities, and expectations of each party. Research also suggests that medication agreements promote safety and education as injured workers learn more about their therapy regimen, its risks, and benefits.
- Pill Counts quantify adherence by comparing the number of doses remaining in a pill bottle with the number of doses that should remain based on prescription instructions. Most often, physicians request pill counts at random intervals or the physician may ask the injured worker to bring their medication to all appointments. As a monitoring tool, pill counts can be useful in confirming proper use, or conversely, diversion activities.
On a stand-alone basis, these tools rank high on individual merit. When used together as part of a consolidated medication management approach, their impact escalates quite favorably. The collective use of UDT, Medication Agreements, and pill counts enhance decision-making, eliminating gaps in understanding. Their use raises awareness of potential high-risk, high-cost situations. Moreover, when used in concert with a collaborative effort on the part of the payer, PBM, physician, and injured worker, they can improve communication and align objectives to mitigate misuse or abuse situations throughout the life of a claim.
Medication monitoring can achieve better outcomes
The vast majority of injured workers use medications as directed. Unfortunately, situations of misuse and abuse are far too common. Studies show a growing trend of discrepancies between the medication prescription and actual medication-regimen adherence when it comes to claimants on opioid therapy (Health Trends: Prescription Drug Monitoring Report, 2012). In response, payers, working alongside with their PBM and other stakeholders, are deploying medication monitoring tools with greater frequency to verify the injured worker is appropriately using their medications, particularly opioid analgesics. The good news is these efforts are working. Forty-five percent of patients with previously demonstrated aberrant drug-related behaviors were able to adhere to their medication regimens after management with drug testing or in combination with signed treatment agreements and multispecialty care (Laffer Associates and Millennium Research Institute, October 2011).
In our own studies, we have similarly found that clinical interventions performed in conjunction with medication monitoring tools such as UDT reduces utilization of high-risk medications in injured workers on chronic opioid therapy. Results showed there was a decrease in all measures of utilization, driven primarily by opioids (32% decrease) and benzodiazepines (51% decrease), as well as a 26% reduction in total utilization of all medications, regardless of drug class. This is proof positive that medication monitoring can be useful in achieving better outcomes.