It’s been said many times, “People do what you inspect not what you expect.” If you accept this concept as true, then you must make sure your inspections line up with your expectations.
So, what are your expectations when it comes to your Workers Compensation program? My guess is you expect better outcomes, in terms of claim frequency and the dollars paid on those claims.
So here is the next question: Do your carrier/third-party-administrator (TPA) audit questions (the inspection) correlate to your expectation (better claim outcomes)?
This is the question we addressed in our analysis of the standard carrier/TPA claim management best practice audit. The results of our study were eye opening. We found no correlation between the audit score and the outcome.
How could our analysis show 100 audit scores on files that had very poor outcomes in terms of the medical disability guidelines? (MDGs provide an estimated length of disability for each type of claim, based on the ICD-10 code.)
The answer is obvious: There are numerous variables outside the control of the claim management process that have a major influence on the outcome of a Workers Compensation claim, e.g. severity of the injury, comorbidities, etc.
If this fact is so obvious, why have we not developed audit questions (the inspection) that correlate to the actual outcome? The good news: We have accomplished this objective through an in-depth study we conducted on this topic.
Developing Audit Questions That Correlate to Actual Outcomes
As part of our study group, we enlisted several individuals from Willis, our clients and TPAs that possessed extensive expertise on the subject. The team’s sole objective was to develop a series of audit questions that generate a score that correlates to the actual claim outcome. So, what were a couple of our observations?
- We observed no correlation to a best practice claim audit score and a poor claim outcome (days out compared to MDG).
- There was significant correlation to questions related to comorbidity and poor claim outcomes.
- There was some correlation observed for questions related to an effective or lack of an effective return-to-work program.
Here is the major point our team proved: The outcome generated by your Workers Compensation process is influenced by a significant number of elements outside the control of your claim administrator/carrier claim team. They can be doing everything right (100 best practice audit scores) and yet your outcomes can be poor in terms of MDG. The reasons:
- poor hiring practice
- lack of risk control
- no operational support of the return program
The list goes on… This is the reason there was no correlation between claim management and the actual outcome.
Broaden the Audit Beyond Claims
This is why we need to be thinking in terms of an audit (inspection) broader than just the claims unit. Audit questions must encompass aspects of the Workers Compensation process that go beyond claim management – an outcomes-based audit (OBA).
If you are a CFO, or risk manager and your TPA scores an overall “98” on your audit, but your outcomes are still not optimal, what kind of action can you take to improve your process?
Here’s an example of what a normal best practices audit may show:
This paints a different picture on where improvement can be made.
It’s obvious that the return-to-work process needs to be enhanced and that there are many employee-related issues affecting the claim outcomes: e.g. obesity, attorney representation, etc. So, the TPA/Carrier adjuster could be performing extremely high, but a claim could still have a poor outcome due to deficiencies in the return-to-work process and employee demographics.
The OBA we developed is designed to inspect all aspects of the Workers Compensation process, which means the score will do three things:
- Be reflective of the actual claim outcome
- Serve as a leading key performance indicator
- Focus directly on the elements in the process that need improvement
Here are some examples of comparing how three different claims were evaluated by an outcomes-based audit (OBA) and a best practices (BP) audit.
We used the measurement of lost time workdays (LTWDS) anticipated based on the MDG.
The OBA is the future in terms of the way workers compensation processes will be inspected, because the inspection will align with expectation – lower frequency and fewer dollars paid.