David Patterson had been on the job for a bit more than a year when his boss quit, joining the competition. Within weeks, Patterson was named the new president and CEO, charged with transforming ESIS Inc., a traditional claims-management organization, into a 21st century risk management firm.
In the two years since that appointment, ESIS has become a data-driven operation focused on the changing conditions in its clients' workers' compensation programs.
ESIS, whose roots were in workers' comp claims management, now provides risk management services, from loss prevention and control to claims management for all kinds of property and casualty risks, but workers' comp claims remain at the core of the operation.
"I hope our customers now are starting to think of us as a leading-edge, cutting-edge, sophisticated risk management company," says Patterson, in an interview in his office just behind Independence Hall in Philadelphia's historic district.
Patterson has also had an effect facing inside. He adds that "people walk around here with a bit more bounce to their steps."
ESIS, owned by insurer ACE, has made a big investment in Patterson's strategy. More than $10 million alone has gone into technology to convert the company to a truly paperless claims operation.
Early on, Patterson partnered with Aetna's disability management operation and expanded ESIS' global presence, and late last year ESIS announced the acquisition of a consulting firm specializing in comprehensive environmental risks.
But, more than anything else, Patterson has improved the day-to-day operation of the basic claims-management services that are at the core of the ESIS business, based on his vision of using claims data to drive results.
HISTORY IN MANAGED CARE
Patterson came to ESIS from Kemper National Services, a managed-care operation, where he was CEO before it was sold to Aetna. He joined ESIS in 2005 as executive vice president, claims and account management, before he was named CEO in 2006. It was unusual for a managed-care guy to get the top slot at a third-party administrator like ESIS. But today, when healthcare costs have become the largest and fastest-growing component of workers' compensation costs, he brings a different and vital point of view to claims management.
"When I came here, ESIS was known as a good, solid claims organization with good people and good claims-handling skills," says Patterson, who splits his time between ESIS headquarters in Philadelphia and his weekend home in South Florida where Kemper National Services was based.
With technology functioning as the lamp light, Patterson has guided ESIS through a series of key operational and strategic changes in just two years.
The strategic vision is focused on different ways of lowering the cost of claims using sophisticated data analytics techniques.
"We wanted to be able to work with our clients to show them how--using our data analytics--our programs specifically saved them money, or did not," Patterson says. But more than that, "we want to be able to identify specific areas where either the client or ESIS can do some very specific things to lower loss costs."
It was that kind of holistic assessment, coupled with ongoing process improvements, Patterson explains, that would make concrete to a customer the value of ESIS' services. "We call it 'analytics in action,' and it's where we take the data we gather in the process and make specific recommendations to clients about things that they can do differently or that we can do differently or that the both of us can do differently that will lower loss costs."
The result, Patterson says, is that, with a typical client, ESIS has been able to reduce claims costs by about 12 percent. But he asks that a listener exercise caution when taking in that number.
"I'm cautious when I give out numbers like this," he says. "We've done a controlled study looking at what we did over six months and, with all other factors controlled, it shows that the cost of a claim has gone down around 12 percent."
And last year, the initial investments at ESIS began to pay off. Sales are up roughly 180 percent, Patterson says.
Patterson and management call the overall effort and changes that have been made "ESIS Impact." Drawing upon his managed-care background, Patterson "felt we needed to increase the level of sophistication and integration of our workers' compensation claim model with our managed care." When Patterson took over, ESIS had two managed-care vendors, and he quickly scaled back to one, the Coventry Health Care Inc. national network.
"At Kemper we had our own special integrated managed-care processes that were unique to us, but here at ESIS we have the challenge of not owning a managed-care company," he says. In particular, with one partner, "I could have all the essential medical data in one place. Then we could invest in taking our claims data and the managed-care company's data and merge them together to derive a common holistic database to use for data analytics."
It's that unique data resource effort that merges managed-care and medical-bill-review data with claims data and forms the core of what ESIS is trying to do. In addition, Patterson created a data analytics operation within ESIS.
Related to the managed-care issue was the technology issue. "We wanted to upgrade our technology," he says. "And the biggest improvement we made--out of the box--was going paperless. We now image every document that comes into the claims office. What's also different is that not only is the document attached to the claim, but it's also attached to our global risk advantage system, which is the ESIS propriety risk management information system."
That process took a bit less than two years from conception to full implementation and involved the aforementioned investment of $10 million.
The result, Patterson explains, is that an employer now has all of the data and all of the documents for a particular claim, which gives them more flexibility, more access and a much better picture of a claim. That means, for example, an employer doesn't need to schedule an in-office visit for a claims review. It should be able to be handled from the client's desktop in his or her home office.
PICKING THE BEST DOCTORS
With the investment in data gathering and data analysis in hand, ESIS has proceeded to develop a series of new processes, products and procedures that the company expects will have the lower loss cost result. One of the most visible is called ESIS ExPO, a data-driven system that identifies the best doctors within the ESIS preferred provider network.
To set up the system, ESIS initially examined more the 750,000 claims and 3 million medical bills in its new, holistic claims database. It looked at 11 physicians' claims information metrics, ranging from average claims duration, to litigation rates, to average claims costs. For the initial study, ESIS examined only primary-care doctors, although they will be looking at specialists in the coming year.
The study found that a small group of doctors excelled at treatment--their patients returned to work faster, recovered faster from similar injuries and had lower claim costs. These doctors received a special designation as a member of a special network, ESIS ExPO. They represent only about 2 percent of the doctors in the managed-care network.
When a client uses the ESIS system, and calls up doctors in a specific region on the Internet, those doctors with the ExPO designation are at the top of the list of available network doctors. Clients don't have to use the ExPO doctors--all of the network doctors are available and listed--but it does give an employer additional information about the effectiveness of the medical care that wasn't previously available.
"The client benefits if, in fact, the ExPO doc truly delivers better care, not less expensive care, because the injured employee returns to work sooner. That benefits employers with both lower claims costs and having the employee back on the job," Patterson says.
He adds that the new ExPO system has been received enthusiastically by clients, and he believes it's a large part of the reason why ESIS' retention rates and sales improved last year.
ExPO is only one part of ESIS Impact. Other changes Patterson has implemented include:
- Using either data provided by a client, or developed together with ESIS, to define specific goals for performance: ESIS offers performance guarantees. "In the past we would describe all our good processes and say to a client why we thought we could do a better job. Now we do a more analytical presentation, work with clients from a financial standpoint and quantify why we would be a good partner," Patterson says.
- Because of the database analysis, ESIS identifies which factors working together could increase the cost of a claim. These factors are identified at intake, the time that the injury or claim happens, and are based on data analytics and metrics developed from the new claims and managed-care database. In the initial data analysis, these factors were developed across the ESIS book of business. Now the company is beginning to implement specific factors for an individual client's book of business that can identify what causes specific increased costs in their operations.
- ESIS now uses clinical nurses at the beginning of the claims intake process and, Patterson adds, the service comes at no additional cost to the client. The new claims intake system uses "triggers" based on the presence of certain factors (like type of injury and demographics) that would cause a clinical nurse to immediately look at the claim and start investigating it right away.
The nurse would send the analysis and recommendations to the adjuster. The new process also involves mid-case triggers that help adjusters and claims managers recognize patterns of treatment, based on factors identified in the data analytics that could portend a problem with the claim.
- Medical-only claims happen when there is an injury but there is no time lost from work. These claims often go unmanaged by TPAs, except for medical-bill review. ESIS established what it calls "MOM" or Medical Only Management Centers. The claims are subject to the same kind of data analytics as other, more serious claims.
And, if certain factors come together (a specific treatment, diagnosis or pharmaceutical, for example), another "trigger" will be sent to a clinical nurse to review the case. The system gives the adjuster some early warning signs that something may be happening that could cause the claim to get off track.
- ESIS uses a pharmacy benefit manager, but has customized the pharmacy program into its claims technology, making it more instantaneous. For example, if a worker goes to fill a prescription at a pharmacy and there is a problem, an exploding pill appears on the computer screen of the claims adjuster. If that exploding pill appears, the pharmacy must talk with the adjuster and get approval before dispensing the prescription.
Patterson expects 2008 to be a good year for ESIS as the implementation and refinement of its new programs proceeds aggressively. "I like to think of ESIS as a risk management company--TPA sounds a bit hollow."
He says the company's more than a workers' comp, auto claims or loss adjustment company.
"We're the process from beginning to end," Patterson says. "Our risk control operations focus on preventing claims and reducing frequency. More and more, we're a global company--with new offices in China and Singapore. We can partner with our clients in any location. That makes us far more than just a claims operation."
JACK ROBERTS is editor in chief of Risk & Insurance®.
March 1, 2008
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