Cutting Costs Without Overloading The Claims Handler – Part 2 Of The Series

By Marc Lanzkowsky – April 6, 2010

Trying To Save Money But Can’t Figure Out Which Road To Take?

Last week I offered the first of two solutions to reduce costs in key claims cost cutting areas when hiring full time staff is not an option. As I noted in the post, 2 Cost-Cutting Solutions To Get Work Done Without Overloading Claims Handlers, overworking claims handlers with additional tasks not part of their core job function – to evaluate and settle claims – can result in some aspect of their job suffering. Key cost cutting initiatives, such as Anti-Fraud and subrogation recovery, get put aside by the handler and never get the fullest attention needed to be successful.

Having achieved improved results in my prior life, I suggested both outsourcing and hiring a dedicated part-time employee to handle certain tasks. The first example I presented centered on having an outsourced vendor put a resource “on-site” for improved results. In the context of an Anti-Fraud solution, having the vendor “on-site” resulted in more fraud reports to the states, improved claim handling through knowledge transfer, and lower costs. The program was a success.

This example tackles a similar problem of trying to improve results without the need to hire a full time employee in the area of litigation management bill review.

Claim Handlers Really Don’t Do A Good Job Of Cutting Legal Bills – A Part Time Hire Solves The Problem

Conventional wisdom has been that claim handlers are in the best position to review legal bills on the claim files they work on. The reality is legal bill review, for most claim handlers, is a dreaded task considered a necessary evil.  In addition, I find that some claim handlers rarely cut inappropriate charges because they develop a working relationship with the attorney and do not want to hamper that relationship for what are felt to be minor issues.  However, when the bill review process is separated from the claims handler, many of these concerns or conflicts go away. Handlers can focus on managing claims and developing open working relationships with counsel and billing issues can be addressed by others.

Possible Solutions

In looking for a proper solution I considered vendors that review legal bills as well as bill review software.  Legal billing vendors that provide the service usually get paid based upon the amount of money they save. This type of review can create problems and can sometimes be perceived as a conflict.  I was not trying to create an adversarial relationship with counsel, so this idea was put aside. Bill review software provides an excellent job of catching billing discrepancies that frankly can’t be caught manually. Unfortunately, billing software requires a larger capital investment, IT involvement, and time to implement. While the projects often pay for themselves through reduced legal fees, at the time, it was not a road that I was able to follow. What I needed was an attorney who understood the legal process and could work with, and speak with, counsel on billing issues. As I was working in a claims organization that hired many lawyer/claim handlers it seemed like a natural solution.

How To Make It Work

While I did not want to hire a full time attorney, I was approached by someone who knew a stay-at-home attorney looking to work 20 hours a week in a flexible environment. Being able to provide that kind of work load is sometimes not possible for many companies, however, given what I was looking for, the solution to my problem seemed to have found me. At the time, the company I worked for had an excellent claims system (since I helped design it I was always going to say this) which made it easy to set up a part time employee remotely. A new process was designed to allow claim handlers to send our litigation bill reviewer invoices for compliance analysis and review.  At first it was decided to limit reviews to invoices with known issues and ones over a certain dollar amount. Bills could be forwarded electronically, reviewed, analyzed and returned to the handler with suggested changes. A form letter was instituted where disputed charges were listed and explained. The new program was in place and it worked.

In the first year the program reviewed over $15 million of legal invoices. On average, legals bills were reduced by 10% with most of the reductions due to billing errors, duplications and failing to comply with agreed upon rates. The most fascinating findings came when we opened the services to Third Party Administrators doing work on the company’s behalf. It turns out that bill review reductions were 2-3% higher for work being done for the TPA than for work being done for in-house claim handlers. No matter what the reason, the bottom line was over $1.4 million dollars saved in the first year alone.

Lessons Learned

• Claim handlers, despite being close to the claims process, were not in the best position to review legal bills
• Attorney’s seem to be a little more cautious reviewing their billing submitted to the company directly than when submitted to the TPA
• A small amount of diligence can result in huge savings – these savings add up and were clearly worth the small investment to retain a part-time employee

The solutions I offer here, and the prior post, are not limited to world of SIU and litigation bill review. Hiring a part-time employee, or “on-site” vendor,  to manage any initiative is a great idea when specialized knowledge is an appropriate way to get better results and the need for a full time employee is not needed. As noted, subrogation and salvage recovery are great areas that can also benefit from these types of programs.

I have just offered up two solutions to the age-old problem of trying to do less with more. While the solutions are not new, sometimes to become more effective you need proper execution and new ways to look at old problems.