Cost Per Service Is Not Effective

Total agreement with this blog post by Joe Paduda from the perspective of a workers' compensation Third Party Administrator.

Motivating and providing incentives for excellent outcomes is far less expensive overall than negotiating individual encounter rates. Individual encounter price per service encourages additional volume of services by lowering each cost. There is usually little actual savings for the program, what we have seen is an increase in overall program cost. See Mr. Paduda's blog for excellent examples.

The interesting parallel between the medical cost per service pricing in the country is the same when the P/P department is tasked with the handling of acquisition of workers' compensation TPA services. Flat rates have become the standard, without the flat rates the P/P departments cannot do spreadsheet comparisons. And they typically have no responsibility for the total cost of the program, they are only measured for their effectiveness by the TPA cost comparison. This is driving claims services away from the adjuster / recovering worker relationship and towards 'best practices' which tend to serve as a lowest 'measureable' common denominator. When the bond between the adjuster/examiner and the recovering worker is broken, the total cost of the program rises significantly.

Cost per service does not work effectively with medical care, and works even less effectively than alternative methods of charging for professional claims services.

Read Mr. Paduda's blog here...