The solid work of a supporting actor can make or break a film. And while it’s possible for great efforts to be underappreciated, there’s at least the possibility of recognition. When it comes to controlling claim costs, claims audits rarely, if ever, get the credit they deserve. They can (and often do), however, play a critical role in measuring and improving the overall effectiveness of claims programs.
“Many property and casualty (p&c) carriers have not yet examined how to enhance claims operations to reduce costs,” writes Gary Jennings in Why Auditing Is A Springboard To Cost Reduction. “Claims audits are an efficient and cost-effective method for evaluating how well a program has been structured, developed, and maintained.”
So what does a well-executed and efficient claims audit look like? The specifics may vary but generally speaking, a claims audit should be designed to measure not just the performance of adjusters, but all of the elements that make up the claims process and, ultimately, impact outcomes.
What to Measure in Claims Audits – Best Practices or Outcomes?
Best Practice Audits
Typically, the questions that make up a claims audit are designed to ensure that adjusters are adhering to industry best practices and following specific claims handling instructions or service contracts. These types of audits may also measure how adjusters are performing against proprietary benchmarks and whether reserves are adequately set and maintained.
While this approach is proven to be effective in identifying points in the claims handling process where improvements need to be made, or specific areas in which additional instruction or adjuster training may be beneficial, there can be unintended consequences.
“Many claims administration programs… have adopted best practices to manage claims,” writes Jennings. “This is a good start toward more favorable outcomes; however, the program’s emphasis may eventually shift to processing claims by following a checklist rather than managing claims through a combination of technical claims knowledge, appropriate procedural steps, effective time management, and action plans.”
Rather than an exercise undertaken merely to catch errors on the part of adjusters (a punitive “gotcha”), Jennings points out that claims audits should instead be seen “as a method for improving the full suite of claims management activities in order to achieve better outcomes.”
Outcomes-Based Claims Audits
Better Audits for Better Outcomes: The Case for Outcomes-Based Claim Audits provides an overview of results from an in-depth claims auditing study that was conducted by a group of representatives from major companies including the Gap, Foot Locker, Saks/Lord & Taylor, Corvel, and Willis Towers Watson.
The group conducted both a Best Practice audit and an Outcomes-Based audit on a group of 54 claims. Outcome-Based audit questions fell within categories that the group determined had a significant impact in the claims process—quality of adjuster, overall employee health, and quality of medical care. The basis for “outcome” was days out of work compared to medical disability guidelines (MDGs).
The major point of the study is summed up this way: “The outcome generated by your Workers Compensation process is influenced by a significant number of elements outside the control of your claim administrator/carrier claim team. They can be doing everything right (100 best practice audit scores) and yet your outcomes can be poor in terms of MDG.”
Three factors are cited as examples of what can impact outcomes: poor hiring practice, lack of risk control, and no operational support of the return-to-work program.
Note: At RMIS 2016, in a presentation entitled “The New Frontier: Outcomes-Based Claim Audits,” details of the study and its results were shared. Slides of their presentation are available here.
The results of the study call for a broadening of claims audits to extend beyond the claims unit and a focus on claims management alone. In other words, audits should take into account the entire scope of the workers’ compensation process rather than merely focusing on the performance of adjusters.
Do You Have the Right Solution in Place?
The ability to design, manage, and measure the results of claims audits that account for all points in the claims process (claims management and other areas that impact claim outcomes) can be limited by a reliance on disparate systems, including the use of legacy claims management software. The adoption of an integrated, SaaS claims system can be transformative.
Origami Risk is a scalable, cloud-based platform with all of the functionality required for the handling of claims across all lines of coverage. Also available is a configurable claims auditing solution that streamlines the process of creating, tracking, and measuring the results of your claims audits.
To ensure that data from all parties involved in the claims process is available for auditing purposes, Origami Risk seamlessly integrates with internal systems and third-party software. This allows for the secure exchange of data between Origami Risk and other sources, including underwriting, legal, HR, accounting, and payroll applications, as well as benchmarking and evidence-based guidelines data, the systems used by medical billing and nurse case management providers.
*Cue playoff music*
“[T]he best character actors find a way to gain notice even though their roles are small and the thanks they get is even smaller,” writes San Francisco Chronicle pop culture critic Peter Hartlaub.
Claims audits, like character actors, may never receive the credit they deserve. Yet when designed to take into account all aspects of the claims process, they can stand out as an effective means of improving outcomes and reducing costs. The right claims solution can help in the process.