In the past two columns, we covered claims management and how a third-party administrator (TPA) handles prescriptions, which continue to be a large driver in workers' compensation medical costs. We outlined how an understanding of pricing transparency helps create best possible outcomes.
In this article, the last in our TPA series, we will answer questions and cover areas that employers should know about their TPA's data and network capabilities to analyze claims history.
Workers' compensation is a dynamic process. Many variables impact whether claims results are improving or deteriorating. Choosing the right TPA and with right RMIS can affect an employer's workers' compensation results.
Without cost and performance metrics, an employer is unable to monitor their TPA's progress and compliance. Essentially, the employer would be without the information needed to impact their workers' compensation costs and thus their ultimate cost of risk.
DATA AND NETWORKS
Risk management information systems (RMIS) are typically computerized systems that assist in consolidating claims, policy and exposure information. The system provides employers the capability to track and manage reporting, enabling them to monitor and control their overall cost of risk.
When choosing a TPA, an employer will want to consider its RMIS capabilities. Is the TPA capable of data analysis that will provide the employer with information to make sound decisions? For example, is the TPA able to analyze claims history to help implement loss-control measures? An employer needs a TPA with a well-built, reliable RMIS that will assist with recordkeeping, file maintenance, communications and handling of all reporting needs.
A TPA should analyze data on past claims in order to find better, more cost-effective ways to handle an employer's current claims. Being able to identify the most costly claims quickly, and getting the right resources to manage them, will help control the financial impact of the claim.
Which networks the TPA selects will also impact the employer's medical costs. A successful TPA will have established relationships with provider networks that give the employer access to extensive provider coverage, discounts and reasonable access fees. A TPA should guide an employer through the process of designing a plan that fits the needs of its employees while ensuring that costs remain controlled.
Employers with a TPA that can collect data accurately and consistently will find it useful when attempting to reduce claims frequency and control claims costs within their workers' compensation program. Yet before claims information reaches the employer's TPA, clear guidelines on how claims (including near misses) will be investigated and reported should be in place.
Consistency in coding claims details across many claims is even more important than capturing every unique detail on individual claims.
With a RMIS involved, an employer should make sure that all changes in the claims record are updated there. Once a company has a credible workers' compensation claims database, it should run periodic reports to identify claims with missing data, incorrect data or improper coding.
When choosing a TPA, an employer should know whether or not they conduct regularly scheduled internal audits to catch mistakes. Making sure that the claims data is consolidating into a single, consistent format can be done with a TPA who has a strong and reliable RMIS.
If an employer chooses to deal with more than one TPA, data consistency can be a huge problem. Not all workers' compensation insurers use standard claims coding, and not all capture claims status or financial information in the same manner.
By choosing the right TPA, and one with financial strength, an employer will benefit from a successful claims program that operates smoothly and creates a return on investment. A solid working relationship with a TPA--which includes specified benchmarks in order to monitor and measure performance outcomes--can help an employer maintain and ensure continued success. A TPA that consistently executes best practices and successfully manages claims costs will help an employer reduce their total cost of risk.
MARK NOONAN is a managing principal and the senior knowledge manager for workers' compensation for the Casualty Practice within Integro Insurance Brokers.
(Click here to read part 1 and part 2 of Mark's series on choosing a TPA.)
Read more at the WORKERSCOMP ForumTM homepage.
March 4, 2010
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