Monday we discussed the sleazier side of work comp services sales – payer decision makers with their hands out and the creative ways they profit from their positions.
Today, it’s back to a topic we covered years ago – fee sharing between services companies and payers – mostly TPAs.
It is no secret that almost all TPAs profit from managed care services – some by providing those services with internal resources, others from access fees paid by external vendors for the privilege of working with the TPA, still others do both.
That’s not a problem; TPAs have to make a profit, and their per-claim fees are under constant pressure from employers and brokers looking to demonstrate their ability to negotiate ever-better deals from their TPA.
Those per-claim fees are easy to measure, negotiate, and display. What’s much tougher to track are the costs of add-on services; bill review, network access, PBM, specialty managed care, case management, UR, litigation support, investigative services, MSAs, and on and on.
Almost all claims use some of these services, some use all. And when they are provided by external vendors (or internal suppliers, for that matter), the employer pays more. Again, that’s fine – these services add value (in most instances) and are needed.
What’s not fine is not disclosing the fee-splitting arrangements between the TPA and service providers. Actually, let me refine that – what’s not fine is telling employers no such splitting occurs when it does. Some TPAs tell their customers that they get paid by vendors, and aren’t going to disclose those payments. Again, that’s OK – employers know they are paying “extra” to the TPA for claims and related services, and they know they won’t find out how much “extra” that is. Caveat emptor.
And that happens – a lot more than you’d think, and in very creative ways. There are per-service fees, IT connection fees, rebates of fees, marketing fees, you name it – all kinds of descriptions of charges that increase costs for employers.
Some TPAs tell their customers there are no such arrangements, either outright lying or dissembling by creatively avoiding the question. They do this by interpreting the question as literally as possible. Thus the TPA can say “no we don’t get paid commissions” because the vendor pays the TPA an “IT connection fee.”
Kind of like Bill Clinton and his definition of “sex”.
So, what’s an employer to do? I’ll address that in detail later this week.
I’m sending this to all the employers I know.
Self-insured employers could be covering kickbacks when they pay a vendor and nobody is telling them? How can a TPA truly manage risk when kickback revenue increases as claims losses increase? Where are the adults in the room? This all seems completely backwards! I thought that it was illegal for insurance companies and providers engage in kickbacks on claim losses; why can TPAs do it?
While I agree TPAs make money from managed care, I think that there are plenty of ways TPAs game fees on the claims side, outside of managed care, to protect or increase their profit margin.
See Calif. LC 139.32 effective 1/1/2013 which requires “interested parties” disclose “financial interests” in other entities providing services in connection with workers’ compensation claims. Are they?