There are interesting dynamics in the managed care industry today, as companies merge, are sold, bought, and become venture partners, and have owners that are novices in the workers’ compensation market place. The managed care industry at one time was made up of highly specialized companies that were independent of insurance companies and third party administrators. In fact, one of the selling features of managed care companies used to be their independence and the all but obvious ability not to be the fox guarding the hen house, but an outside firm with high integrity.
That has changed over the last few years, with every major TPA and carrier in the business sporting their own managed care program. Most of those programs are performed by internal hires or companies that are owned by the same venture firm. From a business standpoint, it makes sense for these companies to pay their sister and brother companies, keeping revenue in the same house.
How are the employers, the real clients, doing with this structure? I am compelled to question why an employer would allow their TPA or carrier to self-refer, authorize payment for that work, and pay themselves. Oversight in this area is limited to the information+ given to the employer.
My experience and part of my ongoing role is analyzing programs just like this. I work to see if employers are getting the services they need and are paying the right price for the service. From 2007-2009, employers that bundled all managed services with a TPA were paying, on average, 62% higher in fees than the prevailing rate in the marketplace. Today, that average has dropped to about 48%. However, this is not due to correcting the problem of bundled package cost. Instead it can be attributed to new tools in the integrated approach to managed care (another blog, another time, for sure). The problem of exorbitant fees in a bundled program remains. When’s the last time that you had an independent look at the your program structure? Probably too long.