Self-insured employers, insurers, third party administrators, and government entities all use workers’ compensation claim quality audits to measure the performance of the claim adjusters, supervisors and over-all claim staff. Common uses of claim file audits include measuring compliance with Best Practices, verifying the accuracy of reserves, identifying leakage, preventing fraud, and improving subrogation recoveries. As self-auditing often results in the inability to see the forest due to all the trees, claims management frequently turns to an outside independent claim file auditor to ensure an unbiased and objective opinions in the claim audit.
Both Closed and Open Claims Files Should be Audited
Critics of claim file audits often complain that audits are retrospective, as the Best Practices have already been missed or the leakage has already occurred. The critics are correct if only closed files are being reviewed. However, when open claim files are audited, and the audit results are acted on in a timely manner, substantial savings can be had.
When open workers’ compensation claims are reviewed, issues that have been missed often can still be corrected. Once the claim is paid and closed it is too late to investigate compensability, arrange for an earlier return to work, provide proper medical management, adjust incorrect reserves or negotiate a better settlement.
A complete claim file audit not only provides a report on the correct or incorrectness of individual files, but also includes an aggregate report of the various claim handling procedures that have been reviewed. The most common way of tabulating or scoring an audit category is based on 100%. Usually, a score of 90% or higher is considered acceptable and a score of 95% or higher is considered good. Hence, a score of 96% in the category of medical management would be good, but a score of 76% would indicate a lack of quality in medical management and the need for the adjuster to improve in this area.
When the claim file audit is limited to open files, the adjuster/supervisor/claims manager has the opportunity to correct files where an important part of proper claims handling has been missed. In the above theoretical example where the claims office scored 76% in the medical management category, the aspects of the medical management that have been missed could be completed. This would positively impact the overall medical cost of the claim and possibly also reducing the indemnity portion of the claim by getting the injured employee back to work faster.
Management Benefits By Identifying Weak Spots In Claims Handling
By identifying both individual files where claim handling errors occurred and by identifying claim handling categories where either an adjuster is weak or the entire claims office is weak, management benefits in several ways, including:
• Management is able to focus training resources on specific issues, whether with a single claims adjuster or the entire claims office
• Data provided can be used by claims management to support the need for procedural changes, additional personnel, or personnel restructuring
• Reserving data can be used to verify the accuracy of, or the need to adjust, coverage underwriting
By having an independent claim file audit, the self-insured employer, insurer, third party administrator or government entity can use the information gathered to improve the overall quality of the claims handling, and in doing so, significantly impact the cost of workers’ compensation claims. For more information on how an independent claim file audit can improve claim quality and reduce the cost of 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, Director of Operations, 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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