A few years ago a large national third party administrator (TPA) got into a lot of trouble when a Fortune 500 client noticed some major irregularities in the closing and re-opening of claim files. The client noticed that an abnormal number of claims that were closed were being re-opened by the TPA. The risk manager of the client decided to find out why.
Salary Bonus Program Based on Closed Claims
The TPA had instituted a salary bonus program where adjusters who met different performance criteria received a small monthly bonus. One of the performance criteria was to close as many old claims each month as new claims received. The purpose of this particular performance criteria was to move files to closure as quickly as reasonable. What the adjusters figured out was a way to circumvent the intent of the performance measurement in order to make their numbers look good.
In the last week of each month, the adjusters who had not closed as many old claims as new claims received would select files that had little current activity and close them in the computer system.
Adjusters Game The System
The following week in the new month, the adjusters would re-open the claim files and continue to handle them. Obviously, this was not the proper way to handle file closings.
Only Close Claims When All Known Activity Is Completed
A workers’ compensation claim should not be closed for any reason other than when all known activity to be completed on the file has been completed. If any of the following situations exist on a work comp claim, it should be left open:
- the employee has not completed all medical treatment
- the temporary total disability indemnity has been paid and concluded, but the employee is continuing to treat with the medical provider
- the employee has completed the medical treatment, but all medical bills have not been paid yet
- the employee has temporary total disability benefits that have not been paid
- the employee has completed all medical treatment, and all medical bills have been paid, but the employee is still receiving weekly or bi-weekly payments for permanent partial disability or permanent total disability
- the widow(er) is still receiving weekly, bi-weekly or monthly death benefits
- the medical bills have all been paid, all indemnity benefits have been paid, but there are still outstanding bills on the claim for the defense attorney, nurse case manager or other provider of service.
If there is a possibility that another dollar can be spent on the claim, the file should not be closed.
During a recent claim file audit, the worker’s compensation claims manager wanted to argue whether or not claims with all indemnity benefits paid, but with on-going medical maintenance treatment should be classified as open or closed. The claims manager had several old-dog files where the employees had permanent medical problems and occasionally went to the doctor. In several of the old-dog claims, the employee was making a once a year visit to the doctor. The claims manager had closed the files and was making payments on the closed files each year. This was another situation where the manager’s performance was being evaluated based on the number of files closed.
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 co-author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:.
Workers’ Comp Roundup Blog: https://blog.reduceyourworkerscomp.com/
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