All successful companies measure their performance. Non-financial measurements might include number of defects per 1,000 units, number of units produced per shift, or average number of days between unit production and final sale. Financial measurements on a company level often include profit per unit produced, net income as a percent of sales, total income produced, net income earned, etc. Measuring the performance of your workers’ compensation claims handling is just as important for the success of your work comp program as your company’s performance measurements are to the success of your company.
Non-financial performance measurements in workers’ compensation often tie in with the quality of the claims handling by the work comp adjusters. Measuring the performance of the individual adjuster, the supervisor’s unit, and the claims office against prior performance will indicate if the claims handling is improving, declining or staying about the same.
Claim Handling Criteria That Can Be Measured
Objectives outlined in the claims office’s Best Practices provided excellent criteria on which to measure the employer’s performance, the adjuster, the adjuster’s unit and the claims office. Claims handling criteria that can be measured includes:
• Number of days from employee injury to employer notification
• Number of days from employer notification to claims office notification
• Number of days from claims office notification to employer contact
• Percentage of insured’s contacted timely
• Number of days from claims office notification to employee contact
• Percentage of employees contacted timely
• Number of days from claims office notification to medical provider contact
• Percentage of medical providers contacted timely
• Percentage of claim investigations completed timely
• Percentage of wage statements requested timely
• Percentage of compensability decisions made timely
• Number of days from claims office notification to first indemnity payment
• Percentage of indemnity payments made timely
• Percentage of medical bills paid timely
• Percentage of files with timely reserves
• Percentage of files with timely reserve changes
• Percentage of files with timely filing of ISO inquiry
This is not meant to be an all-inclusive list of criteria that can be measured. There are other non-financial measurements that can be made. A review of your Best Practices will provide you with other criteria that can be measured.
More prominent is the usage of financial measurements to measure claim handling performance. Financial measurements are easy to come by with simple computer programming to spit out the data requested.
Financial Measurements to Measure Claim Handling Quality
Financial measurements frequently used to measure claim handling quality include:
• Average cost per claim
• Average amount paid for indemnity benefits
• Average amount paid for medical benefits
• Average amount paid for legal expenses
• Average amount paid for medical management expenses
• Average amount paid for vocational/rehabilitation benefits
• Average amount paid for adjusting expenses
• Average amount paid for all expenses
• Average cost of lump sum settlements
• Average number of days open for medical only claims
• Average number of days open for lost time claims
• Lump sum settlements as a percentage of total claim cost
It should be noted that depending on the number of workers’ compensation claims an employer has, one or a few catastrophic claims can distort the financial measurements on a short term basis.
Some employers try to rely only on financial measurements to judge claims handling quality. That is a mistake. While the financial measurements may improve, if the overall claim handling quality is sub-par, the financial measurements are not as near as good as they could be.
Track Both Non-Financial and Financial Performance
By tracking both the non-financial and the financial performance measurements, both on a monthly basis and on an annual basis, the employer is able to see overall trends. This allows the employer to work with the claims office to focus on areas where specific improvement is needed and to work to improve the overall claims handling product.
For assistance on setting up measurements of your performance, or for evaluating your on-going performance in controlling your workers’ compensation claims, please contact us.
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com.
Editor Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.
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