A properly incentivized third-party administrator must share in the challenge of a claim and not profit from failure. Limitless managed care fees provide no credible incentive to resolve work comp claims.

Barry Thompson

Most claim providers enjoy a flow of “savings” fees and shadow revenue. One major TPA boldly reserves “Medical Savings Fees” at 20% of incurred medical. Ponder that in the face of ever-rising medical costs and more stockpiles of churning claims. Where is the value?

This absurdity needs to end. We can await a massive awakening of states’ attorneys general, but in the meantime I propose an Employer’s Managed Care Bill of Rights as set forth herein: 

• A per-file cap on managed care fees. I suggest this be equal to the core adjusting fee. Perhaps this will move the industry to properly increase adjusting fees and give the buyer a more holistic sense of comparative value rather than being fooled by the lowest cost-per-claim proposal, only to be stuck with limitless “savings” fees and churning claims.
• When a file reaches the fee cap, a TPA’s services must still include all preferred provider organization discounts and fee adjustment efforts, or else suffer an actionable breach of service.
• Pure payment transparency. The TPA payment register should show the exact amount paid to the storefront provider of a service. Specifically: the durable medical supplier or pharmacy, doctors, diagnostics, independent medical evaluation, physical therapy, etc. Claim providers must realize they smell of shadow revenue when the “check register” simply indicates payments to an intermediary or to categories like “pharmacy” or “durable medical”.
• No bonus fees whatsoever in any contrived format for return to work or saved workdays. The TPA’s core adjusting and nurse fees should be all that is required to support RTW. The employer’s cooperation and support is the only critical factor in RTW success. Why should the employer pay a fee to make the TPA’s job easier? On the contrary, to truly incentivize claim outcomes, the employer should get fee credits for each RTW.
• Repetitive treatments from the same provider should be charged only one adjustment fee for the first visit. There is no logical need to charge an adjustment fee to the exact same bill from the exact same PT provider for a set series of visits. Stop this greedy insult.
• There should be no savings fee for a flat medical bill denial. None. It is a joke to charge a savings percentage of a full cost denial. Worse, most schemes allow only six months to revert the fee if the denial is reversed. In California, six months can pass before claimant’s attorney even gets his first continuance. Denied medical bills are a top reason for litigation. TPAs play with fire, given this perverted incentive.

The industry has passed the tipping point in absurdity regarding profit streams that wrongly incentivize claim providers. I would love to work with any employer that wants to include a “bill of rights” with its next contract, or with any industry group that wants to make this a standard.

Barry Thompson is a risk management consultant, and founder and president of Risk Acuity LLC. This column was reprinted with his permission from his LinkedIn blog.