Death By A Thousand Cuts

In workers’ compensation, self-insured employers have the option of being self-administered, meaning they have internal staff who handle the claims, or they will utilize a third-party administrator (TPA) who will handle the claims for them. Most self-insured employers fall into the latter category.  

TPAs can be great. In many cases, farming out the work of claims administration to someone who has the infrastructure to support claims administration can save money and time. TPAs already have medical provider networks, bill review services, utilization review services, nurse case management services, nurse triage services, subrogation services and a host of other resources.

But remember, you’re getting charged for all of that. In fact, you're being charged for those services on top of the fee that you pay to the TPA for claims administration services.

You'll likely pay a monthly fee to the TPA for claims handling, but all of the services I listed above are also charged at the claim level, for each service.

Let's take bill review as an example. If your TPA contract charges $10 per bill reviewed, and you receive 50,000 bills across all of your claims annually, you're paying half a million each year just for bill review services. But your contract doesn't mention half a million, it only lists a $10 per bill charge.

Does your contract add a PPO charge on top of the bill review charge?

Does your contract mention whether or not there is a charge for duplicate bills?

Can we see how this can get out of hand pretty quickly?

Charges for medical management and ancillary services can feel like death by a thousand cuts, and in some cases, exceed the amount of money you’re actually paying your TPA for claims handling. Some things to keep in mind if you’re trying to determine the total costs paid on these fees.

1.       Know your volume: number of bills annually, number of nurse case manager hours used, number of nurse triage calls made. Know. Your. Volume. This helps you calculate total cost by multiplying the volume against the line item charge.

2.       Consider annual increases: many TPA contracts apply an annual increase, often tied to the Consumer Price Index or a set percentage. Make sure to consider that when budgeting for future years.

3.       Know who decides when a service is used: if you’re paying the TPA for nurse case management services, who decides when a nurse is assigned? Does authority go through you or does the adjuster decide on their own? If you do not retain authority it will make it difficult to budget for future years since you do not have control over the volume.

There are several other things to consider when it comes to TPA contracts, certainly too many to list in a single blog post, but it's important for you to start thinking about these things as we near July 1st which is the beginning of the fiscal year for many organizations.

One last piece of advice: pull and analyze your own data. You can ask the TPA to pull it for you, but I’m a “trust, but verify” type of person. I’ll take an excel spreadsheet, a Coke Zero and some pivot tables and formulas over a glossy TPA report any day of the week. Excel is your friend. Learn to love it. TPA errors happen. Sometimes they are not intentional, sometimes intention looks suspicious. Either way, you won’t know unless you review the data yourself.