What are your risks if one of your vendors goes bankrupt?

Health insurers have gone belly-up in the past, in some cases leaving hundreds of millions in unpaid claims.

Here’s a potential scenario, where a payer – say a TPA or insurer – contracts with a vendor to handle certain types of medical services. The vendor schedules the patient, the patient gets the care, the provider bills the vendor; the vendor bills and is paid by the payer. 30-60 days later the vendor pays the provider.

At least, that’s how it is supposed to work.

Now let’s say the vendor runs into cash flow problems. Provider payment delays increase, and soon there are complaints from providers to the payer, or worse, regulators.

Some savvy payers who stay on top of this stuff immediately require the vendor pay their treating providers immediately after the payer reimburses the vendor. Others figure it’s no big deal and it will work out.

This goes on for a little while longer, until the vendor’s owners – let’s say a big investment firm – decide to walk away and write off their stake in the vendor. The new “owners” are the debt holders, the firms that bought bonds issued by the vendor’s owners. Now, the value of those bonds has dropped , and the bondholders need to quickly re-organize the vendor to cut their losses.

The new owners declare bankruptcy so they can buy some time while they figure out what to do.

No big deal, you say…companies go bankrupt all the time…someone will buy the vendor, and all will be fine.

Uh, no.

The treating providers who are delivering care to your patients now demand that you – the payer – guarantee payment for past bills and for scheduled care. You protest that you’ve already paid those past bills. The treating providers point out that no one’s paid them, and now that the vendor is in bankruptcy, there is no assurance they will ever be paid all they are owed.

The potential consequences include:

• the patient gets billed, and/or;
• the Insurance Commission weighs in, and/or;
• treating providers refuse to continue or deliver treatment until payment is guaranteed by the payer.

So, payers may have to A) pay twice for the care that has been already billed and paid, and B) do so immediately or risk angry patients not getting treated, calling lawyers, and staying out of work even longer.

That’s the immediate problem – and it has to be addressed immediately.

There’s a bigger problem, though, and it’s almost as urgent. 

If the bankrupt vendor is a dominant player in its niche(s), do other vendors have enough capacity to quickly step in and take over? 

If not, how quickly can they ramp up?

If the answer is “not for a while”, how are you going to schedule treatment, collect and review data, manage care – all those functions the vendor was performing?

If you’re a TPA, the problem is even knottier. How do you go back to your employer/insurer clients and tell them they need to pay again for services they already paid for? Oh, and the vendor in question is one you – the TPA – recommended?

What does this mean for you?

Hopefully…nothing.

 

 

 

Well, who knew a holiday week post on customer service would be so popular?

It appears we struck a nerve there, perhaps driven as much by universal frustration with big “service” companies as anything else.

To that point, here’s an example of a huge business that completely misses the point.

This summer American Airlines allowed flight attendants to give little things to passengers upset about delays or other problems. Frequent flyer miles, drink coupons, seat upgrades, stuff that didn’t cost AA anything but made angry passengers feel that AA cared about the problems the airline caused.

Then, some genius at HQ decided this was a bad idea.

This from Forbes:

Every time some bright young marketing executive tried to make American (or some other airline) more responsive, and more quickly responsive to passengers’ dissatisfaction by empowering front-line workers to offer some form of compensation, the bean counters back at headquarters quickly noticed that the cost of such empowerment escalated rapidly. The result, alas, always has been the dramatic reduction or elimination of front-line workers’ authority to solve customer service issues at the point of contact.

Instead of fixing the problem, the corporate knuckleheads tried to deal with the fallout – but stopped when it cost too much. 

This is exactly what killed US manufacturing, autos, and many other businesses. At the end of their assembly lines, GM, Ford, and Chrysler diverted many just-built cars with manufacturing defects to another mini-factory.

Auto worker using hammers to straighten a hood on a just-built car…

There, very skilled and very expensive workers diagnosed and fixed cars that had just been built. These guys are yesterday’s American Airlines flight attendants, tasked with fixing problems caused by management.

Clearly senior management didn’t understand that if they spent the time and energy and dollars to do it right the first time, they wouldn’t have to a) fix problems with cars they just built, and b) deal with pissed-off customers.

Yes, it takes that time and energy and dollars. But the results are measured in customers kept, service problems eliminated, and extra costs avoided.

Or, you can just wait for your businesses’ version of Honda to come in and eat your lunch.

What does this mean for you?

Find out what your customers want, and do it right the first time. They will love you and reward you for it.

 

 

 

 

HSA’s third Survey of Bill Review in Workers’ Comp and Auto is done – final editing is in process and we’ll have the report out shortly. There’s one key takeaway – it’s all about customer service.

We will dig into the details next week, but first a couple thoughts about “customer service.”

The core of customer service is this: the customer wants to feel valued, that they are important to the seller. There are two basic ways of achieving that – thru organizational policy and by individual employee actions.

I fly American Airlines a lot, and almost exclusively. I’ve long figured that it’s best to have some “status” with an airline because something bad will inevitably happen and when it does you need some stature to get any help at all. In general, that works out. But of late, the “value” of my loyalty has dropped considerably. While I’m still piling up the miles, American seems to have made the corporate decision that it is now “Too Big To Care.”

AA is the world’s largest airline, flies everywhere, and probably thinks it can do what it pleases and we’ll just have to deal with it.

Verizon has a similar Too Big to Care perspective. As the dominant wireless carrier, they are all about maximizing revenue from each customer, and in my experience give their service staff little leeway to fix problems or come up with creative solutions.

USAA has long had a reputation as the best personal lines insurer, but of late it’s customer focus seems to have been shoved aside in favor of snappy TV ads during football games. You have to put your dollars somewhere, and it’s cool to be an exec in a company your neighbors see on the tube.

These three organizations are surveying me all the time about service, about how smiley the flight attendants are, how fast they answered the phone, whether I was happy or not with the encounter with customer service.

Wrong questions.

These are questions intended to rate, reward, and penalize the folks on the phone, at the counter, at the airport. Instead, the should be asking customers what upset them about the service or how they change their policies to do better.

Because most times it’s not the person, it’s the policy.

For example – Dumb corporate edicts about closing flight doors 10 minutes before “departure” time may help on-time performance stats, but they piss off late arriving customers. The bigwigs are missing the point – who cares about on-time performance if you can’t get on the damn plane?

What these companies are missing is understanding that people care about how they are treated as individuals, which means these huge organizations have to give their service people the leeway, training, and flexibility to solve the customer’s problem.

And this isn’t apologizing and offering to rebook on another flight sometime in the next couple of days in seats by the rear restroom. It is keeping the plane’s doors open, or giving a credit when a customer misreads a confusing policy or doesn’t exactly comply with a process designed to make the seller’s workflow easier.

So, what does this all have to do with bill review?

These three companies are all Too Big To Care.

With consolidation increasing in work comp, it’s possible some vendors may get Too Big To Care.  In fact, it’s likely. 

That opens up opportunities for others, for companies that understand what patients, providers, employers want and need, and give their front-line staff the ability to deliver on those wants and needs.

What does this mean for you?

Customer service starts with understanding that customers want to feel like you care. It’s a ton of work to figure this out, but the rewards are long, stable, and profitable customer relationships.