TPA Operations and Ancillary Services
As many of you have heard Mike Marsh talk about the past decade, with the pressure on claim TPA operations that do business with flat rate claim service charges to do "more with less", many of the national and regional TPAs are going into the bill review and nursing businesses. The shell game that is being played is quoting a less than cost flat rate per month or claim, then making up for the losses by assigning claims to nurse case managers, bill review services and vocational professionals that are owned by the TPA. In most cases, the ownership and revenues are not fully disclosed, in some cases alternative names are used and the internal referrals are not made public. While there may be some marginal efficiency and coordination advantages to the TPA internal referral (pay themselves) routine, when the process is not fully transparent the insurer or self-insurer risk the increased cost of unnecessary or unsupervised internal referrals. The RFP process generally doesn't provide for a 'full cost of program' response for TPAs looking to manage claims for a prospective client, brokers and consultants typically focus on the monthly cost or length of contract cost per claim flat rate as a way to judge applicants and award claims handling contracts. We have been told many stories of abuse of the 'casual' situation of internal referrals by a number of former national TPA adjusters. And one story related recently by a client of another TPA was particularly egregious, not only was there no transparency, the client was not told of the ownership of the entities to which services were being referred (lied to?). Midland Claims Service, Inc. and Industrial Injury Claims® uses trusted, insured, experience and honorable external business for its medical case management, bill review and voc rehab services...companies that specialize in the territories in which they serve. We believe in transparency...and in judging claims services by the overall cost of the program, the holistic approach. Isn't that what insurance companies and self-insured organizations need, controlled, predictable loss costs...including the TPA services and all ancillary service fees?
This situation has recently been commented upon by Joe Paduda, who is quoted in the following article posting by the National Council of Self-Insurers written by senior editor of Business Insurance, Roberto Ceniceros.
July 16, 2013 - Memo to Members of National Council of Self-Insurers
Workers’ compensation third party administrators are building their own managed care operations.
Aside from increasing their revenue, the growing number of TPAs offering their own managed care products also is driven by complaints of insurance companies and self-insured employers, regarding a lack of transparency in TPA markups for managed care services, coordinating data to improve claims management and the ongoing rise in medical expenses.
While some TPAs have purchased workers comp managed care companies outright in recent years, hiring managed care executives with the expertise needed to build in-house services is more common, said James Bradley of the Reny Company, a medical management organization in Plano, Texas. James was at the 2013 NCSI annual meeting at the Rancho Bernardo Inn in San Diego.
Managed care services that TPAs have focused on “internalizing” include bill, utilization and peer review services. The services can improve data coordination for better claims outcomes. “It also captures all that top-line revenue for TPAs that otherwise would be paid to an outside entity,” said Joe Paduda of Health Strategy Associates in Connecticut. “The TPAs get to keep that.”
Mr. Paduda and other observers say that TPAs are internalizing services in part because they can earn more revenue and profit from providing managed care products than from administering claims. Charging payers a percentage of savings derived from bill review services and achieving discounts from preferred provider networks can generate substantial profits, they said.
These services generate significant revenue and profit for some TPAs, said Kimberly George, Chicago-based senior vice president of managed care practice and client services for Sedgwick Claims Management Services, a NCSI member.
But improving the value for insurers and self-insurers is questionable when such services focus solely on obtaining discounts and not on improving injured workers’ care, Ms. George said.
The total value that insurers and self-insurers derive from TPAs consolidating managed care services depends on the effectiveness of the TPA. “Everything else being equal, an integrated program is better but all else is not equal,” Mr. Paduda said. “If you are getting all of your services from one entity, some of them may be good, some of them not so good, some may be indifferent.”
The above is from a recent article in Business Insurance by Senior Editor, Roberto Ceniceros.