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Beyond the Digital Transformation Hype

Insurance carriers and third -party administrators (TPAs) are well aware that emerging technologies are poised to change the industry. But, to many, it feels like the rhetoric has gone off the rails. You can hardly greet a consultant or surf the business pages without being told that digital reinvention is a do-or-die imperative.

More insurers are adopting and contending with a world influenced by machine learning, artificial intelligence or the Internet of Things. More are deploying robotics or blockchain.

A multitude of obstacles stand in the way of those left behind. Their organizations are often long on enthusiasm but short on vision. Senior executives, mindful of quarterly results, are excessively cautious about the near-term expense of IT innovation. Employees are prone to resist disruption that challenges skillsets or threatens jobs. And resource-stretched IT departments are hard-pressed to reinvent anything while struggling to keep existing systems running.

The good news is that these obstacles can be overcome — assuming tech leaders know where to start and adopt an effective approach. Below is advice on how to proceed, garnered from top performers in the industry.

Start simply — Find a vendor with a proven insurance-industry track record who can help conquer discrete challenges, such as automating adjustments or on-boarding new customers. Some consultants, hungry for seven-figure contracts, may advocate radical and immediate change across the organization that is over their head. Smart, targeted change tends to be the better approach. Forget about the big bang overhaul all at once, particularly if the company lacks vision or commitment. Instead, start small to build evidence and snowball your effort. Target minimally viable projects and iterate to get bigger.

See also: Culture Side of Digital Transformation  

Empower bridge builders — Partners can be the best source for finding talent fast, rather than stumbling through the difficult process of attracting and building it in-house. Outsourced teams of specialists driving cloud native solutions can move quickly and transfer expertise. The coders these vendors can attract are valuable. Competent coders who can collaborate well with your whole company are priceless. They’ll help you get your ideas out of the IT trenches and into strategic meetings, where they belong. And they’ll bring forward the company’s best ideas and biggest challenges. Find these people and partners, and cultivate them.

Be strategic — Fomenting a digital revolution requires forethought, planning, networking and disciplined execution. Just as a general doesn’t go to war by pointing his troops toward the enemy and shouting “charge,” a digital leader needs to understand what they are up against, where the pitfalls lie and how to best achieve her organization’s objectives with the people and assets at her disposal. The leader needs to be able to present convincing use cases up the chain of command.

Target early, conspicuous wins — Projects that streamline operations, achieve cost savings or provide visible improvements to the customer experience can help demonstrate the tangible benefits of digital transformation. An experienced insurance-industry tech partner may be able to quickly alleviate operational challenges, such as capacity spikes and customer-experience deficiencies in claims intake. Such quick wins can build momentum; they should be pursued even if it means delaying initiatives seen as urgent to IT, such as legacy-system modernization.

Be mindful of budget — In today’s environment, where all CEOs say they are running a technology business, the IT department needs the best talent available. Obviously, talent doesn’t come cheap, particularly with the current supply-demand imbalance. Given that nearly every industry from mining to warehouses, finance and retail is undergoing a shift to digital, there aren’t enough engineers and data scientists available or coming through the education system to meet the demand. Initiatives that help the CIO make a case for additional funding can mean the difference between an IT team that can barely keep up with the trouble-shooting backlog and one that propels the company into the future.

Cultivate allies — A battle is best fought by a coalition of the willing who can provide resources, ancillary support and political backing. Likewise, a CIO or director of technology needs to find executives within the organization who are enthusiastic and knowledgeable supporters of digital change. When IT departments choose to forge ahead without obtaining adequate buy-in from the business side, they can fail. Similarly, when seeking help from outside vendors, strong working relationships are critical.

Think broadly — Once you have achieved the critical mass of credible success stories, a viable budget and executive support, you can tackle the “transformational” aspect of digital transformation. That is, you can begin to revamp the organization’s culture to operate more like a nimble tech company than one weighed down by bureaucracy and legacy systems.

See also: 5 Digital Predictions for Agents in 2019  

Digital transformation is meant to pave the way toward a more efficient and profitable future. For the moment, however, many insurance executives are concerned by the scope of what lies ahead. Some worry whether they have enough of a grasp on what is hype and what is real in the digital space to lead their companies through the initial steps of the journey. Others are daunted by accounts of digital initiatives gone awry and, conversely, by the winner-takes-all competitive dynamics inherent in tech-driven industries. Yet there is no doubt that change is coming. By following the advice summarized in this article, carriers and TPAs can start on the path of digital transformation and take control of their digital destiny.

How to Improve Claim Audits — and Profit

A session at RIMS 2016 illustrated how to methodically examine and review the right activities in claims audits to improve the bottom line.

Speakers in this session were:

  • Jenny Novoa, senior director of risk management, Gap
  • Joe Picone, claim consulting practice leader, Willis Towers Watson

They explained that, in a claims management context, an audit assesses compliance with the carrier and industry best practices and special handling instructions. A “typical” claim audit determines if the TPA/carrier’s performance is meeting its obligations in the service agreement. It also determines adequacy of reserves, benchmarks the TPA/carrier and adjuster performance, measures against best practices, provides constructive observations and recommends and identifies areas for improvement.

A group came together from some major companies including Gap, Foot Locker, Saks/Lord & Taylor, Corvel and Willis Towers Watson to study the claim auditing process. This study explored different areas of the process and was conducted over the course of about a year.

The mission of the study was to determine several things, including:

  • Does the claim audit fairly measure the outcome of the claim?
  • Is there’s a better way to audit the claim?
  • How is “outcome” defined?
  • What factors are important in defining claims outcome?
  • Does a best practice score really equate to a good outcome?

The study group came up with categories of what matters most in the claims process, including: quality of the adjuster, overall health of employee and quality of medical care. They looked at various audit criteria for retail business with the basis for “outcome” being days out of work. They also had a set of specific audit rules.

See Also: How to Manage Claims Across Silos

The group used a large sample of questions by category and compared the Best Practice Audit (BPA) with the Outcomes-Based Audit (OBA). Results were very different.

A few observations from the study:

  • BPA audit scores did not identify any of the 28 claims with poor outcomes.
  • OBA identified just 10 of the 28 claims with poor outcomes.
  • The average OBA audit score was 91, and the average BPA score was 97.
  • The OBA overall audit score is much more in line with the overall outcome of the universe of claims audited.

More takeaways:

  • The team proved that audits must be designed to really affect not just the performance of the adjuster but all elements of the claims process.
  • Review your questions. For example — each question should be individually reviewed with regression analysis to determine correlation levels. Questions that have no correlation should be eliminated and those that do show correlation added.
  • Know that BPA can score 100, but the claim can still have a bad outcome.
  • OBA is a better predictor of outcomes than BPA.

The group determined the correlation between a best-practice compliance audit score and outcome may be lost if the wrong activities are audited. Critical activities that are never audited may cause poor outcomes in a claim. Again, only when you methodically examine and review the right activities do you improve the bottom line.

Thought Leader in Action: At U. of C.

An organization the size of the University of California system—10 campuses, five medical centers, a student body of 239,000 and nearly 200,000 faculty, staff and other employees—requires the close attention of individuals who help assess and manage risk and insurance. Kevin Confetti, the UC deputy chief risk officer in the Office of the President, is one of those people who keeps the University of California operating and its employees satisfied.

Born and raised in Pittsburg, CA, Confetti grew up in a hardworking blue-collar family with parents who worked at DuPont and at U.S. Steel. While in high school, he aspired to be a teacher and football coach, and he attended UC Davis, where he played on the varsity football team and graduated with a B.A. in rhetoric and communication. After graduation, he hung up his cleats and got his first real job working in claims adjusting for Cal Comp, where he found he really liked the variety of work. That experience led him to promotional opportunities at Fireman’s Fund, Ernst & Young and Octagon Risk Services. Serving for five years as a claim unit manager at Octagon—the UC system’s third-party administrator (TPA) at the time—Confetti was hired by the UC system in 2006. Now, he’s in the process of achieving his ARM (Associate Risk Management) designation.

kev
Kevin Confetti

Within the UC system, Confetti reports to the chief risk officer, Cheryl Lloyd, and he provides overall management of self-insured workers’ comp (aka “human capital risk”), employment practices, general and auto liability, medical malpractice, construction risks and $50 billion of property risks. Confetti said the UC system’s various campuses and medical and research facilities are actually quite autonomous, while the Office of the President strives to manage the overall risks without using too many mandates. It’s a program that responds to needs as it sees fit, and it helps set up system-wide policies.

To do his job well, he said he needs to be a good communicator, a good listener and someone who facilitates collaboration and cooperation among his various facility risk management teams. He described the job as, essentially, convincing his campus teams that something is the right thing to do.  He loves the variety of what he manages, and his passion is to save the UC system money, whether it’s $1 or $1 million, so those savings can go to the UC system’s mission. Confetti said, “Leadership requires the ability to convince others in the UC system of the value of our propositions and decisions.”

With an in-house risk management staff of 10 to 12, Confetti serves each campus risk management department (ranging from about two to three at UC Merced to 12 at UCLA) as clients. The UC system uses Sedgwick as its TPA for its self-insured programs, which provides in-depth metrics, data mining and monthly and ad hoc reports. Sedgwick also provides assigned analysts in virtually every UC risk area.

Confetti also manages the UC Risk Management Leadership Council, which meets monthly on various campuses. In addition, his office hosts a Risk Summit conference once each year for every campus and facility risk management team. These teams come together to discuss trend statistics and emerging issues that are key risk factors for each unit as well as the overall UC system. While each campus team does things a little differently, they all operate with a similar mindset that fits within the UC system’s overall objectives.

At the moment, Confetti’s biggest area of concern is cyber security; cyber issues can be difficult to identify and prevent and can be one of the most destructive risks, threatening things such as power grids and other infrastructure. The UC system employs several different IT structures, and, because most insurance coverage excludes cyber risk, the risk is extremely dangerous from a risk manager’s perspective—especially given the size and nature of electronic data managed by the UC system.

A second issue Confetti is currently concerned with is the risk to students and faculty from active shooters or other terrorist-minded groups.

A third risk he’s focusing on is the use of drones; Confetti said the federal government, businesses and institutions haven’t been able to effectively manage the growing number of drones operating freely in the U.S.

Confetti said he would tell newcomers to risk management that technology continues to propagate new risks. He advised, “Be willing to take on risks, but learn from your mistakes and know that you don’t have all of the answers. You have to take risks to move forward, but negative experiences should provide the knowledge and skills to mitigate risk more effectively. … Be flexible and open to new ideas. … Avoid reliance on statistics. Data will give you a trail of facts like breadcrumbs to show you what trail you need to follow. But get out of the office and make the rounds to see and hear what’s going on.”

How to Find Best Work Comp Doctors?

As is the case in any professional group, individual medical provider’s performance runs the gamut of good, bad and iffy. The trick is to find good medical providers for treating injured workers, avoid the bad ones and scrutinize those who are questionable. To qualify as best for injured workers, medical providers need proficiency in case-handling as well as medical treatment.

High-value physician services

The first step is to clarify the characteristics of the best providers, especially in context with workers’ compensation. One resource is an article published by the American College of Occupational and Environmental Medicine in association with the IAIABC (International Association of Industrial Accident Boards & Commissions) titled, “A Guide to High-Value Physician Services in Workers’ Compensation How to find the best available care for your injured workers” It’s a place to begin.

The article notes, “Studies show that there is significant variability in quality of care, clinical outcomes and costs among physicians.” That may be obvious, but it also verifies the rationale for taking steps to identify and select treating doctors rather than pulling from a long list of providers to gain the discount. The question is, what process should be used to select providers?

Approach

Although considerable effort from scores of industry experts contributed to this article, the approach they recommend is complex, time-consuming and subjective. In other words, it is impractical. Few readers will have the expertise and resources to follow the guide. Moreover, one assertion made in the article is simply wrong.

Misstatement

The article states that it would be nice to have the data, but that the data is not available. “Participants in the workers’ compensation system who want to direct workers to high-quality medical care rarely have sufficient data to quantify and compare the level of performance of physicians in a given geographic area.”

Actually, the data is available from most payers whether they are insurers, self-insured, self-administered employers or third-party administrators (TPAs). However, collecting the data is the challenge.

Data silos

The primary reason data is difficult to collect is that it lives in discrete database silos. The industry has not seen fit to place value on integrating the data, but that is required for a broad view of claims from beginning and throughout their course.

At a minimum, claim data should be collected from medical billing or bill review, the claims system and pharmacy (PBM). The data must be collected from all the sources, then integrated at the claim level to get a broad view of each claim. It takes effort, but it is doable. Yet, there remains another data challenge.

Data quality

Payers have traditionally collected billing data from providers, through their bill review vendor. The payer’s task has been paying the bill and sending a 1099 statement to providers at the end of the year. All that is needed is a provider name, address and tax ID so the payment reaches its destination. It makes no difference to payers that providers are entered into their systems in multiple ways causing inaccurate and duplicate provider records. One payment is a payment. The provider might receive multiple 1099s, but that causes little concern.

What is of concern is that when the same provider is entered into the payers’ computer system in multiple ways, it can be difficult to ascertain how many payments were made to an individual provider. Moreover, when the address collected by the payer is a P.O. box rather than the rendering physician’s location, matters become more complicated. This needs to change.

The new request

Now payers are being asked to accurately and comprehensively document individual providers, groups and facilities so the data can be analyzed to measure medical provider performance. They need to collect the physical location where the service was provided and it should be accurately entered into the system in the same way every time. (Note: This is easily done using a drop-down list function rather than manual data entry.)

Most importantly, a unique identifier is needed for individual providers, such as their NPI (national provider identification). Many payers are now stepping up to improve their data so accurate provider performance assessments can be made.

High-value, quality medical providers can be identified by using the data. However, quality data produces better results. Selecting the best medical providers is not a do-it-yourself project. Others will do it for you.

What Is the Business of Workers’ Comp?

At the risk of alienating most people within the workers’ comp world, here’s how things look from my desk:

Most workers’ comp executives – C-suite residents included – do not understand the business they are in. They think they are in the insurance business – and they are not. They are in the medical and disability management business, with medical listed first in order of priority.

That statement is bound to lead more than a few readers to conclude I’m the one who doesn’t know what I’m doing. For those willing to hear me out, press on – for the rest, see you in bankruptcy court.

Twenty-five years ago, the health insurance business was dominated by indemnity insurers and Blues plans; big insurers like Aetna, Travelers, Great West Life, Met Life and Connecticut General and smaller ones including Liberty Life, Home Life, Jefferson Pilot, Time and UnionMutual. Where are those indemnity insurers today?

With the exception of Aetna, none is in the business; the only reason Aetna survived is it took over USHealthcare, or, more accurately, USHealthcare took over Aetna. The Blues that became HMO-driven flourished, as did the then-tiny HMOs – Kaiser, UnitedHealthcare, Coventry. Why were these provider-centric models successful while the insurers were not? Simple: The health plans understood they were in the business of providing affordable medical care to members, while insurers thought they were in the business of protecting insureds from the financial consequences of ill health.

The parallels between the old indemnity insurers and most of today’s workers’ comp insurers are frightening. Senior management misunderstands their core deliverable; they think it is providing financial protection from industrial accidents, when in reality it is preventing losses and delivering quality medical care designed to return injured workers to maximum function.

That lack of understanding is no surprise, as most of the senior folks in top positions grew up in an industry where medical was a small piece of the claims dollar. Medical costs were considered a line item on a claim file or number on a loss run, and not “manageable” – not driven by process, outcomes, quality.

Think I’m wrong?

Then why is the industry focused almost entirely on buying medical care through huge discount-based networks populated by every doc capable of fogging a mirror (and some who can’t)? Even with those huge networks, why is network penetration barely above 60% nationally? Why has adoption of outcome-based networks been a dismal failure? Why do so few workers’ comp payers employ expert medical directors, and, among those who do, why don’t those payers give those medical directors real authority? Why do non-medical people approve drugs, hospitalizations, surgeries, often overriding medical experts who know more and better?

Because senior management does not understand that success in their business is based on delivering high-quality medical care to injured workers.

At some point, some smart investor is going to figure this out, buy a book of business and a great third-party administrator (TPA) for several hundred million dollars, install management who understand this business is medically driven and proceed to make a very healthy profit. Alas, the current execs who don’t get it will be retired long before their companies crater, leaving their mess behind for someone else to clean up.