How About a Flat Fee?
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.
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.
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.
Southwest Emphasizes Teamwork in Workers’ Comp Services
Subject matter expertise alone is not enough when workers’ compensation service providers want Southwest Airlines’ business.
They also need to set aside any inclination to compete with other workers’ comp companies that also provide services to the airline — even when their product offerings overlap.
And they need to adopt Southwest’s customer service culture that follows from The Golden Rule’s mandate to treat others as one wishes to be treated.
“We work really hard to foster our Southwest Airlines corporate culture and spirit into the vendors that we work with because we want our claims team, and the nurses that we have in our [workers’ comp] program, and all the [other service providers] involved, to feel like they are an extension of Southwest Airlines,” said Patti Colwell, Southwest’s workers’ comp program manager responsible for on-the-job injury care of the company’s 45,000 employees.
“At Southwest we live by The Golden Rule,” she continued. “We expect our employees to treat our paying passengers with kindness and respect so why would we expect our vendor partners to treat our employees with any less kindness and respect?”
Like many other employers, the service providers Southwest partners with include third-party administrators, managed-care companies, pharmacy-benefit managers, and attorneys.
In addition to workers’ comp expertise, Colwell looks for service providers capable of working as a team with other companies servicing her program.
There can be a tendency to compete, for example, when a TPA and a managed-care company both offer managed-care services, but under an “unbundled” arrangement, the TPA provides claims-adjusting services while the other company provides the managed-care products.
“We make it very clear they are not competing with each other for our program and we expect our data and information to be shared completely among the parties because that is the only way we will know what is going on and can come to solutions,” Colwell said.
“We also look for partners willing to be accountable for results and we do that with performance guarantees.”
“We expect our employees to treat our paying passengers with kindness and respect so why would we expect our vendor partners to treat our employees with any less kindness and respect?”
After seven years, though, Southwest recently discontinued its unbundled approach, or separating managed care and bill review services from their TPA’s services. Those services are now bundled together and provided by Sedgwick Claims Management Services Inc., Colwell said.
Even when an employer obtains a bundled product from a single source, however, there may be competing interests among a single provider’s own managers who oversee different services, she added.
“Oftentimes, which has been my experience in the past, we found even within the same company they may have competing objectives, so we still foster this team approach even when they are internal to the same organization to make sure we all have the same goals,” Colwell said.
To do that, Southwest brings together a program manager from her TPA’s claims-administration side and a program manager from the managed-care side, for both quarterly partnership meetings and monthly claims-review meetings. Other service providers also join the meetings, such as pharmacy-benefit-manager representatives
In addition to reviewing specific case files, the claims-review meetings improve communications between all the service providers and Southwest, and they provide an opportunity to spot trends needing corrective action.
“We try to find solutions to wrap claims up, but we also try to find trends that we need to address because our whole goal is to get our employees early diagnostics, get them the treatment they need, and to get them back to good health as soon as possible,” Colwell said.
One adverse trend revealed in such a meeting, for example, involved second shoulder surgeries performed on employees treated by a specific doctor.
“We had all the players at the claims review and we kept hearing the same thing over and over about second shoulder surgeries,” Colwell said. “The same doctor’s name kept coming up and it was obvious there was an issue.”
Further analysis revealed the doctor referred patients to a particular physical therapist who frequently prescribed home physical therapy after just a couple of office visits. But post-shoulder surgery therapy can be painful and injured workers were not following through with their prescribed routine.
Consequently, they suffered frozen shoulder issues requiring the second operation, Colwell said.
That occurred in a state that allowed the airline to direct injured employees to medical providers known to produce better medical and return-to-work outcomes.
Spotting and correcting the trend resulted from the relationships built through the meetings, Colwell said.
“You have to have the relationships in place to be able to act quickly and mitigate circumstances,” Colwell said.
Patti Colwell will speak on Nov. 20 at the National Workers’ Compensation and Disability Conference® & Expo in Las Vegas. She will be joined by Tron Emptage, chief claims officer at Progressive Medical Inc., and Julie Fortune, senior VP and chief claims officer for Arrowpoint Capital, to discuss “Approaches to Managing Nontraditional Claims Including Unions, Legacy Claims and Co-Morbidities.”
Achieving More Fluid Case Management
Risk management practitioners point to a number of factors that influence the outcome of workers’ compensation claims. But readily identifiable factors shouldn’t necessarily be managed in a box.
To identify and discuss the changing issues influencing workers’ compensation claim outcomes, Risk & Insurance®, in partnership with Duluth, Ga.-based Healthcare Solutions, convened an April roundtable discussion in Philadelphia.
The discussion, moderated by Dan Reynolds, editor-in-chief of Risk & Insurance®, featured participation from four tenured claims management professionals.
This roundtable was ruled by a pragmatic tone, characterized by declarations on solutions that are finding traction on many current workers’ compensation challenges.
The advantages of face-to-face case management visits with injured workers got some of the strongest support at the roundtable.
“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” participant Barb Ritz said, a workers’ compensation manager in the office of risk services at the Temple University Health System in Philadelphia.
Telephonic case management gradually replaced face-to-face visits in many organizations, but participants said the pendulum has swung back and face-to-face visits are again more widely valued.
In person visits are beneficial not only in assessing the claimant’s condition and attitude, but also in providing an objective ear to annotate the dialogue between doctors and patients.
“Oftentimes, injured workers who go to physician appointments only retain about 20 percent of what the doctor is telling them,” said Jean Chambers, a Lakeland, Fla.-based vice president of clinical services for Bunch CareSolutions. “When you have a nurse accompanying the claimant, the nurse can help educate the injured worker following the appointment and also provide an objective update to the employer on the injured worker’s condition related to the claim.”
“The relationship that the nurse develops with the claimant is very important,” added Christine Curtis, a manager of medical services in the workers’ compensation division of New Cumberland, Pa.-based School Claims Services.
“It’s also great for fraud detection. During a visit the nurse can see symptoms that don’t necessarily match actions, and oftentimes claimants will tell nurses things they shouldn’t if they want their claim to be accepted,” Curtis said.
For these reasons and others, Curtis said that she uses onsite nursing.
Roundtable participant Susan LaBar, a Yardley, Pa.-based risk manager for transportation company Coach USA, said when she first started her job there, she insisted that nurses be placed on all lost-time cases. But that didn’t happen until she convinced management that it would work.
“We did it and the indemnity dollars went down and it more than paid for the nurses,” she said. “That became our model. You have to prove that it works and that takes time, but it does come out at the end of the day,” she said.
The ultimate outcome
Reducing costs is reason enough for implementing nurse case management, but many say safe return-to-work is the ultimate measure of a good outcome. An aging, heavier worker population plagued by diabetes, hypertension, and orthopedic problems and, in many cases, painkiller abuse is changing the very definition of safe return-to-work.
Roundtable members were unanimous in their belief that offering even the most undemanding forms of modified duty is preferable to having workers at home for extended periods of time.
“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.
Unhealthy households, family cultures in which workers’ compensation fraud can be a way of life and physical and mental atrophy are just some of the pitfalls that modified duty and return-to-work in general can help stave off.
“I take employees back in any capacity. So long as they can stand or sit or do something,” Ritz said. “The longer you’re sitting at home, the longer you’re disconnected. The next thing you know you’re isolated and angry with your employer.”
“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.
Whose story is it?
Managing return-to-work and nurse supervision of workers’ compensation cases also play important roles in controlling communication around the case. Return-to-work and modified duty can more quickly break that negative communication chain, roundtable participants said.
There was some disagreement among participants in the area of fraud. Some felt that workers’ compensation fraud is not as prevalent as commonly believed.
On the other hand, Coach USA’s Susan LaBar said that many cases start out with a legitimate injury but become fraudulent through extension.
“I’m talking about a process where claimants drag out the claim, treatment continues and they never come back to work,” she said.
Social media, as in all aspects of insurance fraud, is also playing an important role. Roundtable participants said Facebook is the first place they visit when they get a claim. Unbridled posts of personal information have become a rich library for case managers looking for indications of fraud.
“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” said participant Barb Ritz.
As daunting as co-morbidities have become, roundtable participants said that data has become a useful tool. Information about tobacco use, weight, diabetes and other complicating factors is now being used by physicians and managed care vendors to educate patients and better manage treatment.
“Education is important after an injury occurs,” said Rich Leonardo, chief sales officer for Healthcare Solutions, who also sat in on the roundtable. “The nurse is not always delivering news the patient wants to hear, so providing education on how the process is going to work is helpful.”
“We’re trying to get people to ‘Know your number’, such as to know what your blood pressure and glucose levels are,” said SCS’s Christine Curtis. “If you have somebody who’s diabetic, hypertensive and overweight, that nurse can talk directly to the injured worker and say, ‘Look, I know this is a sensitive issue, but we want you to get better and we’ll work with you because improving your overall health is important to helping you recover.”
The costs of co-morbidities are pushing case managers to be more frank in patient dialogue. Information about smoking cessation programs and weight loss approaches is now more freely offered.
Managing constant change
Anyone responsible for workers’ compensation knows that medical costs have been rising for years. But medical cost is not the only factor in the case management equation that is in motion.
The pendulum swing between technology and the human touch in treating injured workers is ever in flux. Even within a single program, the decision on when it is best to apply nurse case management varies.
“It used to be that every claim went to a nurse and now the industry is more selective,” said Bunch CareSolutions’ Jean Chambers. “However, you have to be careful because sometimes it’s the ones that seem to be a simple injury that can end up being a million dollar claim.”
“Predictive analytics can be used to help organizations flag claims for case management, but the human element will never be replaced,” Leonardo concluded.