Following on yesterday’s post, I received several emails from payers and vendors alike suggesting other pertinent questions payers may want to pose to their vendors. The most common pertained to fee-sharing between TPAs and vendors.
This practice has long existed in comp; TPAs have charged clients to build links to networks, bill review vendors, pharmacy benefit managers, and case/utilization management firms. These charges may appear as one-time fees, but more often as a percentage of the vendors’ revenue from the client. And in some cases, these costs don’t appear unless you look very, very closely.
That’s not to say it is unethical or illegal or immoral or bad business for vendors and TPAs to share fees – but it certainly is a problem if they don’t fully inform their clients. Clients aren’t blameless in this either; many employers have beaten TPAs down on admin costs so far that TPAs have to make up the lost revenue from somewhere – and fee splitting is the perfect ‘somewhere’.
Several TPAs, most notably Gallagher Bassett, pride themselves on full disclosure of fee sharing. Others will disclose if asked, and a couple – SRS (the Hartford’s TPA) and Broadspire – do not participate in commissions (although they may charge an upfront implementation fee, again fully disclosed).
Recently I reviewed proposals from several TPAs for a large self-insured employer in the northeast. Broadspire’s administrative fees were considerably higher than the competition, (who shall remain nameless for obvious reasons). But when managed care fees were added in to the calculation, their bid was quite competitive. Several of the other TPAs had low per-claim adjusting fees, but their estimated fees for managed care services were much higher.
(Broadspire is not a client and HSA has no business relationship with the firm)
What do you do with this?
You may want to require your TPA’s CEO to sign a document (after your attorneys polish the language) stating words to the effect that “We will fully disclose any and all financial transactions involving (TPA) and any and all managed care entities providing services to (employer) and employer’s claimants. This disclosure includes but is not limited to service fees, commissions, implementation fees, RFP and proposal assistance charges, transaction fees, connection fees, membership fees, and any and all other transfer of monies from managed care entities to (TPA).”
Then, ask the same question of your managed care vendors. Hopefully there won’t be any surprises.
Sep
18
Years ago we were asked by a TPA to be part of their “PPO” and that we rebate a percentage, 10-20%$ – I don’t recall, back to them by way of a check. I asked them to provide written confirmation that their clients were aware of this arrangement. No such confirmation was provided and we declined the invitation.
My sense was that this was clear self-dealing and undisclosed fees that put them at odds with their clients and us at odds with their clients who were our ultimate clients since the actual check for our services were written out of client accounts. You are likely hitting on a significant problem.
Making money is fair but all money made off an employer should be fully disclosed and there should be no hidden incentives or deals with subcontractors.
Excellent points! I’ve been driving these issues with my clients for years.
What a circus the medical cost containment arena has become. Mounds of data, reams of paper, loads of pretty graphs and charts, which provide little knowledge about what’s really going on or where the value really lies. They are mostly designed to distract the attention of the buyer from the issues they should be addressing… What measurable value has the vendor brought to the table?
For the most part, I dismiss the claimed financial savings the vendor reports like to tout. That stuff is mostly hooey anyway. Inflated, unsubstantiated and unrealistic claims of savings offered with the rather transparent aim of justifying more and more referrals to their systems.
Rather, I look to see what the UR provider has done to expedite the delivery of care being provided by 80% of physicians engaging in best practices, while at the same time limiting the overuse of the medical system by the 20% or so of the those practitioners not so engaged? At this level, the grades are seldom passing for any UR company operating under the traditional UR model – although there are a few.
The simplest way for an employer to avoid this form of “double-dipping” is to contract for the managed care services directly and separately from the TPA. There is no basis for the TPA charging a fee to “upload” repriced bills directly into their claims system if there is full disclosure and cooperation between the managed care company and TPA. Of course, the assumption is that the representative of the employer knows what needs to be done!