Hiring a new TPA – evaluate them with this one simple question

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A TPA can make or break your claims management program, so knowing how to select the right one is a million dollar skill.  At PARMA 2014, there was a lot of talk surrounding the Ross Shafer’s keynote session on finding simple solutions to complex problems.  Evaluating TPA’s is no different.

TPA’s are an essential component to your claims management program.  They interact with your staff, keep your good employees happy, and keep fraudulent claimants from getting benefits and money they don’t deserve.  They also impact your bottom line.  So, if you can only ask the TPA one question to evaluate them, what is it?

May I see your data?

The question is – “May I see your data?”  This question gives you a concrete look at all those outrageous claims their sales people give you.  Data speaks volumes.  Here’s just a few of the things you can learn by looking at their data:

  • Real caseload rates for each adjuster
  • How fast do they really close claims
  • Are they detail-orientated
  • Do they “reserve” appropriately
  • Will their data actually help you prevent claims

Details are key in claim data files.  They let you determine key risk control strategies and implement real world solutions to solve the problem.  There is a dirty little secret in the TPA industry and its destroying risk control efforts, increasing claim management costs and leaving organizations with no real idea as to what is happening inside their own organization.  The dirty little secret is that there are no controls for adjuster claim coding.

Imagine this, someone slips and falls on a sidewalk and injures their lower back.  Someone cuts their finger using a hand tool.  Two years later when you look at the claims data, you see that the “body part” field lists both injuries as “foot.” This is a real problem because a back injury is typically more expensive than a foot injury and a foot injury is typically more expensive than a finger injury.  This simple miscalculation repeated 100 times leads risk managers to focus efforts on footwear PPE and other strategies to address foot injuries, when the real problem may be lifting issues or trip hazards.  This simple coding error also throws off average claim costs, total incurred by body part and the like.

In a recent study more than 3,000 claims were re-coded based on real claim descriptions and they found that their top 3 problems were actually their third, fourth and sixth leading issues.

Selecting the TPA

When it comes to selecting a TPA – yes, you want a good price and a friendly staff.  But you have to ask yourself am I getting good data for that price?  The only real way to evaluate them is to see their data.  So, if you can only ask one question, ask the question that gives you more than one answer.  May I see your data?



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