Their hair is on fire over what they see as self-dealing, hidden compensation. The arrangements are sometimes called wholesale/retail, rebates, markups, overrides and commissions. TPAs, when asked, might describe them as administration or facilitation fees.
But that's not quite the end of the story. What if the TPA did not receive any rebate but ordered case management mainly to lighten the claims load on an adjuster? The adjuster would use the case manager as an expensive clerk to collect and digest information, perhaps even to do the initial three-point contact. Or a claims staff engages a less qualified claims team as a subcontractor while it chases after better-paying work, leaving the current client in the lurch.
No rebates here, but the client is harmed by a deterioration of service, higher costs and blurred accountability.
These two abuses--hidden compensation and excessive delegation--converge in what has emerged as Exhibit A within the court of industry opinion about TPA/supplier shenanigans.
An internal audit by Florida's Broward County School Board in its 2006 report of the enmeshed relationship between the district's TPA at the time, Gallagher Bassett, and its managed-care vendor, Corvel, sheds light on the issue.
From reading the report, I got a strong impression that the district's risk management department was unable to put Gallagher Bassett on a tight leash. Gallagher in turn loaded up Corvel with tons of assignments but had no quality controls over anything that Corvel did--or failed to do.
The auditors, who knew little about workers' comp, nonetheless put some pretty basic questions to Gallagher Bassett about who was accountable. They could have done the same to the risk manager.
The report did not expressly allege that the two were engaged in some side deal. But Gallagher Bassett, which had to have seen that train coming, never made an effort to scotch the insinuation.
Gallagher Bassett told me it doesn't comment on client matters. But Gordon Clemons, CEO of Corvel, returned my call. He endorsed better disclosure about financial arrangements. And he said that it should be more than a perfunctory footnote.
Here is what prime contractors need to disclose clearly:
* every material subcontractor or supplier relationship, even if with an affiliate
* a clear set of performance standards for subcontractors and suppliers
* evidence that these standards are enforced
* rebates or administrative fee arrangements, however you call them.
Wouldn't we all be better off if everyone adhered to standards like these?
Some employers might not care. And some suppliers will object to the release of proprietary information by their client--a TPA--to an employer they might never meet. Vendors should not use these as excuses not to have a standard policy of disclosure.
For when everything goes, nothing gets accomplished that is not in some way tainted.
PETER ROUSMANIERE, a Vermont-based consultant and writer, is the workers' comp columnist for Risk & Insurance®.
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July 1, 2007
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