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By DAN REYNOLDS, managing editor of Risk & Insurance®

The practice of offshoring medical utilization reviews of workers' compensation cases by third-party administrators has been picking up steam in the past couple of years. But there is a reluctance among those doing it to talk about it, even though some experts think the practice is sound from a quality of care perspective.

"I think it is probably a case where those who do utilization review have been looking for ways to lower operating costs," said Jeff Miller, the chief operating officer for Paladin, a medical management company based in Santa Ana, Calif.

"I don't want to say it is prevalent but I think it is starting to bubble up a bit more," Miller said.

Paladin, which is owned by SeaBright Holdings, Inc. and has SeaBright Insurance Company as a client, uses physicians in all services including its medical utilization reviews, Miller said.

"A doctor will talk to a doctor," Miller said. "A nurse might reach the doctor but they will typically get the office manager, claims examiner or otherwise," Miller said.

Mike Gavin, the chief marketing officer for Prium, based in Duluth, Ga., said he too has been watching offshoring of medical utilization reviews coming into the market more and more.

"My view is that it is increasingly the case that overseas resources are being used for utilization review," Gavin said.

"I think it has predominantly to do with the fact that utilization review in general is becoming more of a commoditized process," Gavin said.

One company that speaks openly about conducting offshore reviews is MediCall, a Pleasanton, Calif.-based clinical services company that works in both the workers' compensation space and the group-health space.

Michael Donlan, the company's chief sales and marketing officer, said the company, which was founded in 2003, is currently seeing a growth rate of 40 percent to 60 percent annually. Revenues, he said, are in the $25 million to $50 million range.

The company conducts medical utilization reviews using teams of U.S. and Philippine-trained nurses that are based in the Philippines. Donlan said the staff ratio currently breaks down as approximately 60 percent U.S.-trained nurses and 40 percent Philippine-trained nurses.

He said the company is generating labor costs savings for clients in the 35 percent to 38 percent range on average. But he said, in some cases the company can find savings for clients of as high as 50 percent to 60 percent.

Savings like that in the competitive workers' comp and group-health space are not to be taken lightly.

In workers' comp, Donlan said his company is working with four out of the top seven third-party administrators, a "large" carrier and a variety of different ancillary service vendors. He said the company is conducting approximately 8,000 workers' compensation medical case reviews per month.

On the group-health side, Donlan said the company works with three of the top five payers, processing approximately 120,000 medical utilization cases monthly.

"This segment continues to grow and expand with some very large outsourcing organizations taking notice and working to build out their own clinical capabilities," Donlan said in an e-mail to Risk & Insurance®.

Several third-party administrators in workers' comp contacted for this story either declined comment or didn't respond to phone calls and e-mails that asked whether they offshore medical utilization review.

So why might they be ducking the question?

For one, according to Mark Walls, vice president, claims at St. Louis-based workers' compensation carrier Safety National, third-party administrators which offshore medical utilization reviews might worry their reputations would suffer should it become widely known that they engage in the practice.

"If you look at it, in theory, it shouldn't matter where the records are reviewed," Walls said.

"But in practice, it is a completely different story."

For one, he said, there is a perception among judges that preside over workers' comp cases that a medical utilization review that was conducted offshore might not be credible.

Walls said there have always been prejudices on a state-by state basis. A judge in California, for example, might question the credibility of a medical review conducted by a nurse, or a physician, for that matter, in another state.

"With something offshore there could be a stigma," Walls said.

Walls said the fact that workers' compensation cases are adjudicated by judges, not medical professionals, is a pre-existing complication that ties into the perception problems offshore reviews suffer from.

"I don't fault the judges, they are doing what they are trained to do," Walls said. "But one of the biggest flaws that we have is that we have judges making medical decisions and that creates a lot of problems."

Other questions around the offshoring of medical utilization reviews are in the area of medical data security and transparency of communication.

"When you are dealing with offshore you are dealing with time zone differences, you are dealing with a lot more e-mail traffic and there is a much greater opportunity for things to slip through the cracks," said Jeff Kramer, the director of medical and disability service, commercial markets claims for Liberty Mutual.

Kramer said approximately 85 percent of the nurses used by Liberty Mutual for medical utilization reviews are in-house. He said the company does utilize outside vendors for utilization review of medical use by nurses but none of those nurses are offshore.

MediCall's Donlan said his company is maintains good quality in its reviews and doesn't have a data security problem in its operations.

"This is not a pure offshore play," Donlan said. "None of the patient data ever leaves the U.S.," he said.

Donlan said the company's network is based in Salt Lake City and that the nurses in the Philippines sit at "dumb terminals" which connect to Salt Lake City through T1 lines.

"There are no printers, there is no way to extract data in our operational center," Donlan said.

MediCall is accredited by URAC, which has taken steps recently to limit the use of offshore medical personnel in medical use reviews.

New URAC standards which went into effect in February allow U.S.-licensed nurses that are offshore to conduct medical utilization reviews. But those same standards will not allow offshore doctors to conduct medical utilization reviews.

"URAC is clearly taking a view that it is okay to offshore the nurse piece as long as they are licensed in the U.S. but it is not okay to offshore the doctor piece," Prium's Gavin said.

Offshoring of nurse medical utilization review is not only URAC-approved, it's also increasingly a factor affecting pricing in the market, Gavin said.

"What I have noticed anecdotally is that competitors of ours are pushing lower and lower on price and as a result of that I don't know if we are sure they are using off-shore resources but I have a strong suspicion that they are because if you do the math, we can't figure out how certain service providers are hitting the price points they are hitting," Gavin said.

May 21, 2012

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