Why Don't Comp Payers Change?

Tuesday, June 22, 2010 | 0

By Joe Paduda
Health Strategy Associates

I was talking at length with a good friend who works for a large payer last week, discussing the process of getting the organization to make significant, and very much needed, improvements to their managed care program.

This got me thinking by no means is this situation unique to that one payer. If anything, resistance to change is a consistent thread throughout the workers comp payer/buyer/service industry. Pondering this over the weekend I came up with a few warning signs of and reasons for the resistance.

<b>Warning signs</b>

Statements such as "we've always done it that way", "that's our policy", or "that's how we handle X here" can indicate pride and consistency, traits that are often excuses for not thinking more and deeper about specific issues. Policies are good, as long as they're ruthlessly examined under a very bright light on a regular basis.

Long, exhaustive, exhausting studies and analyses and research into a new idea, especially those that involve a large committee of folks with lots of other, higher priorities. Committees are where good ideas go to die.

A culture of fear, where junior staff wait to hear what the boss says before chiming in; where criticism is pointed and personal, where people are afraid to speak up for fear of being criticized or chastised.

A resistance to comparison and measurement, where managers seek to report the data that demonstrates positive results (or at least results that help them achieve their bonus targets) and don't look for ways to compare their performance to competitors or the industry as a whole.

<b>Why?</b>

There is a cultural issue in comp, and perhaps in the larger property and casualty industry that has significant negative influence on the ability of companies to evolve and improve.

People who say 'no' succeed; risk-takers do not. Risk takers seek to write the somewhat questionable policies, try different approaches, ask 'why not' instead of 'why', look for creative solutions to old intractable problems, seek answers outside the industry instead of always relying on the time-tested. Sure, these risk-taking efforts aren't always, or even often, game-changing successes, but occasionally they do work brilliantly, and even when the improvement is incremental, it is improvement.

The 'no' people don't write the risks that fail to meet every criterion, stick to the book when 'managing' claims, don't direct injured workers in states that don't provide explicit authority, complain that the laws don't support tougher stances. They don't look for the 'how to', they complain about the 'why not'.

More specifically, there's a financial gravy train that drives TPAs and insurers that makes it difficult to try new approaches in managed care.

That gravy train is fueled by managed care fees, fees that in many cases are larger than the earnings from claims administration, and can represent a big chunk of an insurer's profit margin. Fees, whether from case management, utilization review, bill review, networks, or other services, contribute to the overall organization's financial results, making it tough to consider programs that might actually reduce the amount 'earned' by managed care programs.

Never mind that these new programs will also reduce medical costs. In fact, I can, and often have, made the argument that the current large generalist PPO reimbursed on a percentage-of-savings basis is actually driving up workers comp medical expenses, and the data I've seen bears that out.

Yet the vast majority of payers are still wedded to this old model.

What does this mean for you?

More evidence that change in the comp industry, however much it is needed, will be difficult and frustrating. Precisely because of that difficulty, those organizations that adapt and evolve will find themselves better positioned than their moribund competitors.

<i>Joe Paduda is owner of Health Strategy Associates, an employer consulting firm based in Connecticut. This column was reprinted with his permission from his blog, at http://www.joepaduda.com</i>