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Column: Workers' Comp

How About a Flat Fee?

By: | February 18, 2014 • 3 min read
Roberto Ceniceros is senior editor at Risk & Insurance® and co-chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at rceniceros@lrp.com. Read more of his columns and features.

More employers wanting predictability in the fees they pay workers’ comp third-party administrators are negotiating to pay a single, flat fee for bill-review services, sources tell me. The arrangements follow from criticisms some employers, their brokers and consultants have heaped on TPAs, saying traditional TPA charges for bill-review services obscure the ultimate cost of those services.

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Under traditional arrangements, a TPA might charge an employer on a per-bill basis for each medical-provider bill reviewed. Or, they might charge on a per-line basis, tallying a fee for each expense line on a bill. They can also charge the employer according to the percentage of savings produced by the bill-review process.

The inconsistency in billing methods has fueled suspicion that some TPAs — operating in a highly competitive environment — win business by bidding to provide basic claim-handling and administration at a low cost, and then boost their revenue with additional charges.

TPA executives have countered that their billing measures are transparent, at times even arguing that brokers stir the controversy to attract consulting business. But questions remain.

TPAs also differ from one to the next in their billing formats for the broad range of other claims management services they offer. So employers with the resources to do so often pay their brokers or consultants additional sums to analyze their bills and to help them select the best TPA agreement for them.

Srivatsan Sridharan, senior vice president, product development for TPA Gallagher Bassett Services Inc., said more large employers are negotiating to pay a consistent flat, per-bill fee for all bill-review-related services for each claim. The employer then pays additional amounts for claims handling and all of the other TPA services required to resolve a claim, although the charges for those other services have tended to be more predictable than the bill-review fees.

Data collection has made it possible for TPAs to model an employer’s expected claims-management expenses and accommodate flat-fee deals, Sridharan said. Such arrangements won’t reduce the cost of managing a claim, but they can make bill review costs more predictable, he added.

In a similar vein, brokers meeting privately with TPA executives during the National Workers’ Compensation and Disability Conference® & Expo, held in late November, asked TPAs about their willingness to charge one, all-inclusive fee for an employer’s entire book of claims business, said Joe Picone, chief claim officer for Willis of North America.

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Ultimately, employers want to know the “true cost” of managing their claims and this “could be the next evolution of TPA pricing,” Picone said. “Why don’t we just say, ‘Instead of paying $1,500 per claim, my whole contract is worth $1 million or $500,000.’ ”

The mountain of workers’ comp claims data that TPAs collect could help make the broader flat-fee arrangement possible, at least theoretically, because TPAs could mine the data to predict the claims management costs an employer will generate when operating in a specific region and industry, with certain employee demographics and exposure differences.

We will have to wait and see whether innovative employers and TPAs go down that path.

But additional employer options for paying workers’ comp expenses would be a good thing. And with data increasingly available to help TPAs and employers understand claims-management costs, the time is right for employers wanting pricing predictability to seek change.

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Workers' Comp

National Employers Push for Comp Options

Wal-Mart, Safeway, and Nordstrom are among companies pushing for a free-market alternative to traditional state workers’ comp systems.
By: | September 16, 2014 • 3 min read
Scenario_LibertyMutual

National employers already benefiting by opting out of Texas’ workers’ compensation system are now pushing for “free market alternatives” to traditional state systems across the nation.

They launched a new organization called the Assocation for Responsible Alternatives to Workers’ Compensation. ARAWC plans to lobby state legislators to allow employers to develop new options for delivering medical and wage replacement benefits to injured workers.

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Its members include nationwide companies such as Wal-Mart Stores Inc., Lowe’s Companies Inc. and Sedgwick Claims Management Services Inc.

The employers are frustrated with being forced into “entrenched” workers’ comp systems that prevent them from adopting practices that could benefit them and their employees, said Richard Evans, executive director of Austin-based ARAWC.

“Many employers in Texas have experienced first-hand the financial savings and positive employee benefits of an alternative occupational injury benefit plan. Companies need flexibility in other states.”– Janine Kral, ARAWC president and VP of risk management at retailer Nordstrom Inc.

Traditional state systems, influenced by various interests, make it impossible to adopt medical delivery practices that can lower costs and speed employee return to work, he elaborated. State administrative burdens, for example, discourage the best doctors from treating workers’ comp cases.

“Workers’ comp is slow to change,” Evans said. “There are a lot of stakeholders involved and it’s hard to make those changes.”

Therefore, it is better to push for alternative options than to “try to come in and tinker around the edges with workers’ comp,” Evans said.

Members of ARAWC, pronounced a-rock, have succeeded in controlling costs and improving claims outcomes by opting out of Texas’ workers’ comp system.

Unlike all other states which mandate employer participation in their workers’ comp systems, Texas has long allowed employers, called “non-subscribers,” to forego participation.

Many Texas non-subscribers provide wage replacement coverage and medical benefits delivered through health plans regulated by the federal Employee Retirement Income Security Act of 1974, although they are not required to.

“Many employers in Texas have experienced first-hand the financial savings and positive employee benefits of an alternative occupational injury benefit plan. Companies need flexibility in other states to provide the best solution for their employees, and ARAWC’s mission is to help expand those opportunities,” Janine Kral, ARAWC president and VP of risk management at retailer Nordstrom Inc. said in a statement.

ARAWC member companies include employers that pushed for Oklahoma’s adoption of “option” legislation in 2013. Employers there can now provide an employee injury benefit plan as an alternative to meeting their obligation to care for injured employees through the state’s traditional arrangements.

“Some of the employers that were active in Oklahoma decided that we wanted to have a more coordinated effort as we go forward into other states to open up those states to allow employer options,” Evans said.

Texas and Oklahoma’s alternative options are significantly different from each other. While Oklahoma requires employers to provide injured workers with benefits equal to those provided under the state’s traditional system, Texas does not. But Texas employers can be sued by an injured worker.

Now ARAWC plans to assess the political landscape and workers’ comp costs in other states to identify which ones may be ripe for adopting their own alternative structures. Tennessee is said to be on a short list.

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Evans said he expects other states to adopt alternatives that look more like Oklahoma’s model rather than follow Texas, although “we are not trying to come in with a one size fits all” for all states, Evans said.

Nor will ARAWC attempt to dismantle existing state workers’ comp systems.

“Workers’ comp works well for some employers and some are going to want to stay in that,” he said.

ARAWC’s effort is likely to face opposition, however. An ARAWC fact sheet states that insurers “typically resist an Option because the competition tends to drive down premiums.”

Roberto Ceniceros is senior editor at Risk & Insurance® and co-chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at rceniceros@lrp.com. Read more of his columns and features.
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Sponsored: Lexington Insurance

The Re-Invention of American Healthcare

Healthcare industry changes bring risks and opportunities.
By: | September 15, 2014 • 5 min read
SponsoredContent_Lex

Consolidation among healthcare providers continues at a torrid pace.

A multitude of factors are driving this consolidation, including the Affordable Care Act compliance, growing costs and the ever-greater complexity of health insurance reimbursements. After several years of purchasing individual practices and regional hospital systems, the emergence of the mega-hospital system is now clear.

“Every month, one of our clients is either being bought or buying someone — and the M&A activity shows no signs of slowing down,” said Brenda Osborne, executive vice president at Lexington Insurance Co.

This dramatic change in the landscape of healthcare providers is soon to be matched by equally significant changes in patient behavior. Motivated by growing out-of-pocket costs and empowered with new sources of information, the emergence of a “healthcare consumer” is on the horizon.

Price, service, reputation and, ultimately, value are soon to be important factors for patients making healthcare decisions.

Such significant changes bring with them new and challenging risks.

Physician integration

Although physicians traditionally started their own practices or joined medical groups, the current climate is quite the opposite. Doctors are now seeking out employment by health systems. Wages are guaranteed, hours are more stable, vacations are easier to take, and the burdens of running a business are gone.

“It’s a lot more of a desirable lifestyle, particularly for the younger generation,” said Osborne.

Brenda Osborne discusses the changing healthcare environment and the risks and opportunities to come.

Given the strategic importance of successfully integrating acquired practices into a larger healthcare system, hospitals are rightfully focused on how best to keep doctors happy, motivated and focused on patient safety.

A key issue that many hospitals struggle with is how to provide effective liability insurance for their doctors. Physicians who previously owned their practice are accustomed to a certain type of coverage and they expect that coverage to continue.

Even when operators find comparable liability insurance solutions for their doctors, getting buy-in from their staff is often an additional hurdle to overcome.

“Physicians listen to two things — physician leaders and data,” said Osborne. “That’s why Lexington provides assessments that utilize deep data analysis, combined with providing insights from leading doctors to help explain trends and best practices.

“In addition, utilizing benchmarks against peers helps to identify gaps in best practices. It’s a very powerful approach that speaks to doctors in a way that will help them improve their risk.”

Focusing on the “continuum of care”

There’s been a fundamental shift in how healthcare providers care for patients: Treatment is becoming more focused on a patient’s overall health status and related needs.

SponsoredContent_LexA cancer patient, for example, should have doctors in a number of specialties communicating and working together toward a positive patient outcome. But that means a change in thinking: Physicians need to work collaboratively with one another — not easy for individuals or groups that are used to being independent. Healthcare is a team sport.

“If there isn’t strong communication, strong leadership, and the recognition of proper treatment procedures between physicians, healthcare providers can increase the risk of error,” said Osborne. “The provider has got to treat the whole patient rather than each individual condition.”

That coordination must extend from inpatient to outpatient, especially since the ACA has led to a rapid increase in patients being treated at outpatient clinics, or via home health or telehealth to reduce the cost of inpatient care

“Home health is going be a growing area in the future,” Osborne continued. “Telehealth will become an effective and efficient way of managing and treating patients in their home. A patient might have a nurse come in and help the healthcare provider communicate with a physician through an iPad or computer. The nurse can also convey assessment findings to the physician.”

Metrics matter more than ever

Patients have not always thought of themselves as healthcare consumers, but that’s changing dramatically as they pay more out of pocket for their own healthcare. At the same time, there’s an increase in metrics and data available to the public — and healthcare consumers are drawing upon those metrics more and more when making choices that affect their health.

SponsoredContent_Lexington“Consumers are going to start measuring physicians against physicians, healthcare systems against healthcare systems. That competition will force everyone to improve the quality of care.”
– Brenda Osborne, Executive Vice President, Lexington Insurance

Think about all the research a consumer does before buying a car. Which dealership has the best price? Who provides the best service? Who’s offering the best financing deal?

“Do patients do that with physicians? No,” said Osborne. “Patients choose physicians through referrals from friends or health plans with minimal information. Patients may be putting their lives in the physicians’ hands and not know their track record.

That’s all going to change as patients’ use of data becomes more widespread. There are many web based resources to find information on physicians.

“Consumers are going to start measuring physicians against physicians, healthcare systems against healthcare systems,” said Osborne. “That competition will force everyone to improve the quality of care.”

Effective solutions are driven by expertise and vision

The rapidly evolving healthcare space requires all healthcare providers to find ways to cut costs and focus on patient safety. Lexington Insurance, long known as the leading innovative and nimble specialty insurer, is at the forefront in providing clients cutting-edge tools to help reduce costs and healthcare exposures.

These tools include:

  • Office Practice Risk Assessment: To support clients as they acquire physician practices, Lexington developed an office practice assessment tool which provides a broad, comprehensive evaluation of operational practices that may impact risk. The resulting report, complete with charts, graphs and insights, includes recommendations that can help physicians reduce risk related to such issues as telephone triage, lab results follow-up and medication management. .
  • Best Practice Assessments: High risk clinical areas such as emergency departments (ED) and obstetrics (OB) can benefit significantly from external, objective, evidence-based assessments to identify gaps and assure compliance with best practices. In addition to ED and OB, Lexington can provide a BPA for peri-operative care, prevention of healthcare-acquired infections, and nursing homes. All assessments result in a comprehensive report with recommendations for improvement and resources along with consultative assistance and support. .
  • Continuing Education: In an effort to improve knowledge, decrease potential risk and support healthcare providers in the use the most current tools and techniques, Lexington provides Continuing Medical Education credits at no cost to hospitals or their physicians.
  • Targeting the Healthcare Consumer: With Medicare reimbursement impacted by patient-satisfaction surveys, assuring a positive patient experience is more critical than ever. Lexington helps hospitals understand and improve the patient experience so they can continue to earn the trust of healthcare consumers while preserving their good reputation. .

To learn more about Lexington Insurance’s scope and depth of the patient safety consulting products and services healthcare solutions, interested brokers may visit their website.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Lexington Insurance. The editorial staff of Risk & Insurance had no role in its preparation.

Lexington Insurance Company, an AIG Company, is the leading U.S.-based surplus lines insurer.
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