‘Managing the Impossible’, an analysis of catastrophic case management firm Paradigm’s results and comparison of those results to those achieved by work comp insurers, has been sitting on the upper right corner of my desk for a couple of months now.
I’ve read it, re-read it, discussed it with Paradigm staffers and a couple of their clients, and started to post on this at least twice. Each time other hotter issues popped up, and this got pushed back into the corner of the desk.
This may be similar to how Paradigm has been dealt with by many in the payer community. Sure, those cat cases are important, and yes, we really need to do something about it, but hey, I have a really important meeting on the latest PeopleSoft upgrade to go to, and I really need to review the latest case closure report, and…
So the urgent takes precedence over the important. And make no mistake, catastrophic cases are very important indeed in work comp. According to an analysis by NCCI, half of all medical expenses are for 6.2% of claims.
Six percent of medical dollars are spent on 0.3% of claims. By my calculation, that’s $1.8 billion annually on a very few claims. The real dollars are much larger, as cat claims account for a very large chunk of the industry’s reserves.
Many payers have set up dedicated teams to handle cat claims. Staffed by senior claims reps supported by legal and medical experts, these are variously known as ‘high exposure’, ‘large loss’, or ‘complex claim’ units. While there’s undoubtedly a lot of experience embedded in many of these units, it is simply impossible for a single payer to have the depth if expertise in specific types of cat claims that is resident in Paradigm. No insurer has seen as many TBIs, burns or spinal cord injuries; if they had they’d be long out of business.
Yet despite the demonstrated expertise and documented results of Paradigm, many claims execs refuse to objectively consider referring cat claims to Paradigm (or a similar entity).
Why?
Experience tells me some are threatened by the potential that an outside firm could actually handle a claim better than their own people. Others blindly believe (with inadequate justification) that no one outside their company could possibly do a better job.
Paradigm isn’t blameless. The company has stumbled in their efforts to build a succesful sales and marketing program. At times they have been insensitive to the threat they pose to clients’ entrenched processes and personnel. That said, there’s no question they have far more expertise in cat claims than any single payer, and their financial model is usually compelling.
Note: Paradigm is not a consulting client and has no business relationship with HSA or myself.
Jun
18
Let me add an observation or three about the reluctance of insurers to use what i call expert medical advice on medically complex claims.
1. Poor understanding of the effect on the tail. you can break down the cost of a large claim into (1) medical costs through MMI, which for a very complicated injury consumes upwards of a year and a half or even two years of care; (2) indemnity throughout the claim lifetime, and (3) on-going medical care (home care, etc.). For a cat claim, the largest single component is (3). One should not beat up (too much) on the insurers for not having, early in the claim lifetime when Paradigm would get involved, a clear picture of the total potential exposure and the potential impact of Paradigm on (3). one of Paradigm’s biggest challenges is to make (3) and its impact on that visible to the insurer in the first month post injury. I have interviewed actuaries and they are no help because their data bases do not separate out and analyze cat claim exposures.
2. Hard to compare projections. Paradigm typically has a more aggressive (and confident) estimate of functional recovery than implied by the treating doctors. It is difficult for insurers to compare Paradigm’s explicit goals with the implied, inconsistently articulated goals, of the treatment team.
3. New and strange, even if intriguing. The Paradigm service model, in contrast to that of Best Doctors, calls for the insurer to pay Paradigm a large fixed amount to cover all medical care for the first 18 or 24 months, AND for Paradigm to stay on the case until the patient reaches a specified functional level. This is a great boon to insurers; it is in effect the greatest use of pay for performance within the workers comp community. It is new and strange to many.
I manage our large loss unit which includes the catastrophic claims in multiple jurisdictions. I am a big advocate of Paradigm as I continue to have success after success utilizing their expertise and services. The examiners I supervise are the best of the best, but they are the best at managing claims. Paradigm is the best at managing the medical portion of catastrophic claims. Combining the best examiners with the best medical management program is always a winning combination.
As a former insider at Paradigm Joe’s comments about how the claims community views Paradigm is right on. Your description of pushing the Paradigm info to the corner of the desk more than a few times is real world for Paradigm sales and marketing folks. Dealing with the pressures of venture capitalists destroyed the momentum created with the original management team which had one of the most competent WC veterans in the industry at the helm. When they started to bring on puppets outside of the WC arena the model changed and then the revolving door of mgt started. Instead of a CFO type who knows zero about WC… the company needs to get back to core mgt which has to include a WC pro. Paradigm nees to keep their eye on the ball which is all about injured workers and achieving maximum outcomes for their complex injuries.
As a carrier CEO with a strong workers’ comp underwriting background, I most respectfully disagree with your suggestion that the reason more carriers are not using Paradigm has something to do with company claims personnel feeling threatened by the potential that an outside firm could handle a claim better, and that Paradigm is somehow not marketing their services as well as they could.
Senior carrier management is under no such illusion and wants the best outcome with catastrophic claims and would gladly use Paradigm’s services with the right kind of catastrophic medical comp claim. I believe that the problem is that Paradigm’s services are expensive, and early in the claim insurers often don’t know just how bad the medical claim will be and are reluctant to spend the money.
In our experience (based on 12,000 claims) we found that 85% of all cases fell into routine treatments and 15% did not. 50% of the cost was in those 15%, but through “best practices” standardization we were able to decrease total costs by 15%.