Facts the Insurance Industry Don’t Want You to Know!

Problems………Insurance Industry………Profits.Evil Doers…….

AttorneysChiropractors

It’s going to get worse!

FactsState Farm…..insures 3 of 5 cars on the road.Own more property than the Catholic church.Own Amberjack Limited, who owns Loyds of

London.“Jack” companies own other insurance

companies.

More FactsOwns the largest banking facility in the

world…………holds “excess reserves”.

A reserve is the amount held back when a client reports a claim. Ex. Amount held in reserve $4,000, claim paid was only $1,800, creating an excess reserve of $3,200)

More Facts……..15,000 claims per day pour into State Farm.

If State Farm saves $4,000 per claim by undercutting reimbursement, it saves $60,000 PER DAY in excess reserves.

Rise of ColossusTEACH, MYND, Decision Point, Injury IQ,

COA, ICE, IMS, MBRS, ADP, HELP systems, Corvel, AIM, Mitchell Medical, and Med-Data.

There are 38 programs in use to determine what a claim is worth.

3 “D”s of Claims Management

DelayDenyDemand

Avery v. State Farm$1.6 billion punitive award due to State Farm

using after market parts made in Taiwan. Why Taiwan? Cheap labor, and in Taiwan no requirement to temper steal, nor build in crumple points. Lead to 600% increase in soft tissue injuries, and State Farm found guilty of fraud.

Strategy…..lower claims by 78%7 step plan, with step 7 just about to occur.

Change of philosophy of claims management.

Where does profit come from?Reducing overhead.Close claim centers.Increase in Policy Count.Increase in Premiums.Investments.Claims Department

Reduction of OverheadStaffingPendings…number of claims an adjuster is

handling. In 1989….60-80 claims, In 2007….350-500 claims.

Consolidation……central claims handling process.

TrainingComputer Processes

Once upon a time…..Search for Profit led the industry to

McKinsey Consulting.BPI…Business Profile Index. Increases

productivity and profits.From this model rose individual programs

such as ACE (Advancing Claims Excellence),

CCPR (Claim Core Process Redesign), ACME (Achieving Claims Management

Excellence)

The Beginning of a new EraMaximize ProfitsMonitor for Leakages and ShortfallsDevelop Procedures and Processes

DataWhoever controls access to data controls the

world!!

Intelligent Software for Claims ManagementMBRS……….AllstateADP………FarmersAIM…….State FarmMitchell Medical System……..State Farm

moving towards this system.

ColossusColossus was created by an Autstralian

company named Continuum.Computer Science Corporation (CSC)

bought Colossus.Colossus was previously calibrated by

McKinsey.Accenture (previously Arthur Anderson)

now does the calibration for the Colossus database.

Computer Science CorporationAll medical billings entered into Colossus

must first have been reviewed by MBRS, ADP, AIM, Mitchell Medical or Med-Data.

CSC own HCFA billing forms and has created centers for receipt and transmitting to insurers.

Computer Science CorporationWill now be managing all data and evaluation

of medical billings for BC/BS.MBRS, ADP, etc., are being fazed out in favor

of universal use of Mitchell Medical.

Creating the processGroup claims by injury

Soft tissue vs. demonstrable

Group claims by dollar valueLess than or more than $25,000

Litigate more claimsUnder $25,000

Creating the processEliminate the plaintiff attorney and the chiropractor from Auto Claims

Adjusters must participate resulting in a favor outcome.Adjusters are bonused if save moneyThey are promoted if they follow the

program’s recommendations.

No ownership of claimNo responsibility for valueTake it or leave it attitudeFrustrationShip the claim out of house

Adjusters must participate resulting in a favor outcome.Take control of treatment costs….PPO with

discounts.Remove the attorney from the equation.Profit from the claim departmentState Farm 2000Farmer’s “Bring Back a Billion”

Adjusters must participate resulting in a favor outcome.No review and quick payment for discounted

HCFA billingsQuicker paymentEventually return to review for payment based

on a reasonable and necessary policy language.

Adjusters must participate resulting in a favor outcome.Claims valuation has changed.Once, you could expect 4 or 3 times the

medical costs.Once, you could negotiate with the seasoned

adjuster and come to an agreement.Once, you could avoid going to trial.All this has change now and forever.

New Valuation FocusInjuries (number and type)Treatment modalitiesSymptomsPhysician typeComplicationsImpairment ratingsDuties Under Duress

New Valuation FocusPrognosisAdd-ons

The Beginning of a new EraSettleyourclaim.comCASH Centers (Centers for Accident

Settlement Handling)…..Step Seven of Mathis’s case management/profit strategy.

Eliminate attorney representation (save 33% contingency fee)

Reduce medical tx costs by 45%.Recapture 78% of claim severity

payments.Recapture 45% of first party claim severity

payments.Eventually, return to even lower claim

settlement payouts

The Beginning of a new EraStaff wears purple….stimulates greed.Under 30, named Virginia.

Once upon a time……The future can be clearly seen in this

concert of computer programs working in unison to gather information, control treatment costs, evaluate claims at the lowest level, eliminate negotiation, eliminate attorney representation and settle claims directly with the public.

The focus is to recapture all profit being lost by paying claims.

MMI“The patient has reached MMI concerning the

cervical/t/l vertebrae, however the patient will continue to need to stretch and exercise to improve the muscle and ligaments and supporting spinal soft tissue, in addition to need both active and passive care for future exacerbations/aggravations, at a cost of approximately $2000 per year for five years, based upon a reasonable degree of chiropractic probability.” See page 71 of notes.

What can be done?This is the perfect window of opportunity.

For the first time you can actually control the acceptance of patient treatment and the evaluation of claims by the insurance industry!

Basically, you can help the adjuster become more efficient in claims management, affecting their bonus and incentives.

Solutions….Claim must be managed from the beginning.Networking with physicians and attorneys

who know how will make the difference.Both physicians and the attorneys must use

forms suitable to Colossus from the very start of the claim.

Solutions….FormsAttorney pre-checklistDUD (duties under duress) and LOE (loss

of enjoyment)Physician intake form/discharge formPhysician request formCommon code sheetSupplement HCFA formBody Shop Questionaire

Value Drivers….10,720.Colossus arrives at a valuation by

assigning points to each value driver.

Points go into baseline data, and being managed every 6 months by Author Anderson.

Some of the VDs can have mulitipliers.

Value drivers must be in notes and attorney demand.

ValuationEach injury has it’s own equation consisting

of VDs and multipliers.

Each of the value drivers with the corresponding multipliers interacts with each inside the equation so as to create a total sum of points.

ValuationThe sum of points for each equation is added together

AND

in some instances also interacts with other injury equations resulting in an even higher sum of total points.

ValuationAfter all equations are added together other

add-ons are considered: Current medical expensesCurrent income lossFuture medical expensesFuture income lossAn amount for disfigurementAggravating issue amountLoss of consortium

Indentify all injuriesROMHeadachesSpasmsDizzinessVisual disturbancesSleep disruptionRadiating painAnxiety/depression

Indentify all injuriesImportant factors to remember…………

Was an injury mistakenly documented as a symptom of another injury?

Are there tx records to support anxiety and/or depression?

Are there records to support complaints which reflects a TMJ issue?

Gathering InformationSeparate “initial” from “subsequent”

treatment.Recongnize when there might be issues of

causality, duration, and frequency.Extensive testing doesn’t increase claim

value.

Gathering InformationWhat type of physician is providing

treatment?Are there visits to a physician which could be

separated out as either an office visit or some form of therapy or manipulation?

Was there a referral to a specialist and by whom?

Gathering InformationWas there a prior injury being treated?Was there a subsequent injury?Were there any gaps in treatment?Was there a delay in the treatment

beginning?

Active care 3x more valuable than passive care!

Gathering InformationIs there a final prognosis?

Is the prognosis undetermined?Is the treatment concluded and no complaints

remain?Are there ongoing complaints but no more

treatment being recommended?Are there ongoing complaints and additional

treatment is recommended? (No accepted by a DC).

Is the prognosis guarded at this time? (Not accepted by a DC, and not common)

Gathering InformationWas therapy provided, such as PT, MT,

pool therapy or acupuncture?Was this therapy provided longer than 90

calendar days?How many times per week was it provided?Was medication prescribed?Was it prescribed longer than 30 days?How heavy a dose is prescribed to be taken?Were there more than one prescription?

Gathering InformationAdditional considerations:Active vs. passive careSleep disruptionBed restDUD: duties under duressLOE: loss of enjoymentImmobilization of any kindAmbulanceEmergency Room

Gathering InformationIf there was Hospitalization or Surgery:How many times?Duration?ICU?

Gathering InformationCost of care is not a value-driver, only an

add-on.

What can the attorney do?Motion for “partial summary judgement” for

medical bills.

Hand: Loss of range of motion w/ pain.

40% impairment of the thumb16% impairment of the hand14% impairment of the arm8% impairment of the whole body.

8% impairment for just a thumb helps put it in perspective for the jury!

FraudYour attention to these programs is very

important. You must act within the first 30-45 days of the claim being assigned.

Understand segmentation.You must be aware of who the support

personnel is working on claim.Adjusters are bonused on claims referred to

fraud unit.

FraudInsured reported accident didn’t happen.Informant notifies insurer of fraud.Unexplained damages

Severity of impact (minor to major)Location of damage

System indication of possible fraudPrior NICB referral

FraudIndication that accident was setup.Staged accidentJump-inSuspicious hit and runSwoop and squatTreatment may not have occurredTreatment received from listed vendorClaim reported 20 days or more after the date of

loss.

FraudLoss with first 90 days of new policy.There are multiple claimants.Unrelated claimants have same doctor and

same attorney.Treatment started more than 15 days from the

DOL. Other reasons.

Copyright © 2012 Dr. Ronald J. Farabaugh