Managing Service Providers
Uncovering inconsistencies in an insurer’s or third party administrator’s service performance can ultimately strengthen an employer’s partnerships with the organizations managing injured-worker claims.
Advocates of independent reviews maintain that vendor management quality assurance audits conducted by independent reviewers can reveal weaknesses that impact an employer’s workers’ compensation program.
Yet other observers argue that independent quality assurance audits are becoming a thing of the past and their value diminishing.
Still, about 25 percent of self-insured employers and those with large deductibles seek the audits, said Dan Marshall, chief claims officer U.S. at Aon.
“It is only the most sophisticated buyers that want to look under the hood, so to speak, and get a gauge of the performance of claims service providers,” he said.
Insurers and third party administrators, meanwhile, employ their own teams to conduct highly structured quality assurance, or QA, reviews of their internal claims operations.
They test whether their employees adhere to internally mandated standards and whether their claims managers comply with negotiated service levels. They also evaluate the performance of external claims service providers.
“TPAs [and insurers] do a significant amount of internal quality assurance before a work product goes out,” said Jenny Killgore, VP of insurance services at Athenium Inc., which provides insurers with quality assurance systems for evaluating claims, underwriting processes and vendor-management practices.
Whether insurers and TPAs use internal resources or contract with outside companies for nurse case management, legal defense, MSA compliance, surveillance and other claims management services, QA reviews can reveal whether services are optimally deployed.
Reviews conducted by a TPA’s or insurer’s internal QA team also help those organizations strengthen their employee training programs and learn whether service inconsistencies exist among widely dispersed regional offices.
They also help retain customers as competitive market pressures and QA practices have pushed insurers and TPAs to improve their services over the years, several experts agreed.
But an independent review can help reveal whether employers are indeed well served by the internal QA processes of the claims management organizations they contract with, said Jim Kremer, senior manager, insurance and actuarial advisory services at Ernst & Young LLP.
Independent reviews can help confirm that an employer’s claims-management instructions and service agreements are consistently met and whether the company’s dollars are wisely spent.
“Leading practice would be a focus on claims management quality overall, especially outcomes.” — Jim Kremer, senior manager, insurance and actuarial advisory services, Ernst & Young LLP
“You have standards that are in place at every carrier and third party administrator,” Kremer said. But, he asked, “Are those front-line adjusters, and frankly their supervisors, adhering to those standards?”
QA reviews can assess timely claim intervention, reserving, pharmacy management and medical data management, among others. Audits should evaluate adherence to leading claims-management practices and impact on claims outcomes, Kremer said.
“Large employers have performance guarantees in place, hence requiring audits,” Kremer said. “Leading practice would be a focus on claims management quality overall, especially outcomes.”
An independent review might find, for example, that workloads unintentionally encourage a TPA’s adjusters to relinquish control of claim files to specialists more often than optimal. That can cause employers to pay for nurses or attorneys to complete tasks adjusters are capable of handling.
“There is a cost to that and you certainly don’t want to assign routine tasks that an adjuster should be doing to a nurse case manager or to an attorney,” Kremer said. “That is very expensive and produces what we call ‘expense leakage.’ We see it quite often when we are out auditing in the marketplace.”
Other common findings include inadequate supervision of adjusters and failures to optimally reserve for specific claims, brokers said.
One opportunity for improvement commonly found during Sedgwick Claims Management Services Inc.’s internal audits involves the inability of adjusters to connect with injured employees during attempted follow-up telephone calls, said Darrell Brown, Sedgwick’s chief claims officer.
Observers say that has become an industry-wide problem, especially with the increased use of cell phones.
That inability to connect slows claim management decisions and can result in the increased use of investigations when adjusters don’t receive responses to their queries or when claimants believe they are not being properly cared for, Brown said.
“You can’t have a good outcome if the injured employee is having a bad experience,” Brown said.
During the request for proposal process, when employers shop for new TPA partners, it’s common to ask to see results of the TPAs’ internal QA reviews, said Thomas Ryan, research leader for Marsh’s workers’ compensation center of excellence.
“Sometimes they will sanitize the results [of internal QA audits] and share those with us,” Ryan said. “Others are a little reluctant to do so. But they will at least give us some high-level findings.”
Once a TPA is selected, contract language provides employers with the ability to conduct audits.
Thing of the Past?
Not everyone agrees, however, on the value of QA audits.
Automated claims-handling systems with embedded quality assurance components make independent reviews less necessary today, said Jerry Poole, president and CEO of Acrometis, which provides automated adjuster desktops.
“The quality assurance audit will be a thing of the past,” Poole said.
He said that when making claims decisions, Acrometis’ adjuster systems conduct QA in real time, while audits provide a retrospective review.
Real-time QA provides beneficial data about certain adjuster tasks, such as whether specific claims actions are completed within certain timeframes, Kremer said.
But the systems still cannot sufficiently evaluate certain factors, like the intensity of a claim investigation, he said.
Internal risk management staff at Albertsons Safeway constantly monitor the performance of the TPAs servicing the grocery chain’s workers’ comp claims, and medical outcomes are continually measured, said Bill Zachry, group VP of risk management.
Yet Albertsons Safeway also obtains an independent audit every four or five years, Zachry added.
The Hartford, meanwhile, relies on an internal team, comprised mostly of nurses, to conduct evaluations of the business partners that provide workers’ comp services.
Those services include utilization review, field nurse case management, vocational rehab, pharmacy benefit management, transportation, interpretation, physical therapy and medical provider networks.
QA evaluations are conducted before contracting with such partners, said Dr. Marcos Iglesias, VP and medical director for the insurer. Then each is trained on The Hartford’s QA expectations with follow-up audits. &