If you’re wondering why your TPA has been changing specialty managed care vendors more often than you are used to, it may well be because the TPA is getting paid to change.
Word from several sources at the comp trade show is some managed care vendors have deals whereby the commissions/fees they pay the TPA for the privilege of doing business are increasing with volume.
The way it works is simple, if not necessarily, or even usually, in line with clients’ best interests. The vendor agrees to pay X percent for the first Y dollars of revenue, X+ for the next Y dollars, X++ for the next Z dollars, etcetera.
But some vendors are applying the higher payment levels retroactively. Yep, if the TPA delivers Z dollars, the X++ commission rate applies to ALL revenue. That’s why employers are being told they can get these services at very low – or no – cost. Hat seems like a great deal is – for the TPA. Unfortunately the TPA’s interests are not always, and in some cases are most definitely not, aligned with the employer’s.
Here’s an example. If a PT vendor controls utilization, and prevents cases from exceeding a reasonable number of visits, the employer wins. But if the case goes on and on, and the vendor does not or cannot or will not end the treatment, then more bills mean more ‘savings’ which mean more revenue for the vendor – and not coincidentally, the TPA.
What does this mean for you?
If your TPA hands you a deal that sounds great, watch your wallet. What drives revenue for many TPAs is driving up your costs.
Nov
20
It continually amazes me when I learn about back-door efforts to be paid by vendors in secret arrangements. Years ago one of our TPA clients wanted us to bill our usual fee to them, upon which they would pay us a discounted fee back in exchange for being a ‘preferred’ vendor. We said we would be glad to consider this if they provided us written documentation that their clients were aware of this arrangement. The conversation ended.
TPA’s have a fiduciary responsibility to their clients that is not met when they receive payments and incentives that are not aligned with their client and not known to their client. They should behave in much the same way as they would if they were ‘FPA’s (First party adminstrators), or in house staff.
How to deal with this is simple: Any employer contract should state that all fees for services are to be paid directly by employer to TPA, and any rebates or fees received by the TPA from 3rd parties in service of the employer must be disclosed and rebated as an offset to employers account.
What is so hard about that and why would it be any other way?
On more than one occasion over the year, I have seen individuals responsible for selecting vendors base their decisions on personal preference rather than the best interests of their clients or shareholders. Thankfully this is not the norm.
The client should insist, and the broker/consultant should advise, that TPA’s are hired to “process” claims and all other services the client needs should be separately identified and negotiated by either the client or the broker/consultant. Ain’t no more effective way to deter TPA’s covert revenues.