August 14, 2019
It is no secret that the age of big data is upon us. Try to remember the last presentation or seminar you attended where someone didn’t utter the buzzwords “analytics”, “metrics” or “predictive modeling”. Whether it’s an entertaining concept, like Sabermetrics calculating the optimal launch angle of a line-drive home run, or something a little more mundane – yet more practical for us insurance junkies - like workers’ compensation claims closing ratios, big data is everywhere. No matter the industry, companies are trying to invent new ways to measure and improve processes.
Before those of you who claim to be “old school” simply dismiss this article as another push for further automation, rest assured that this is not a plea for new metrics that require an advanced degree in statistics. Rather, we are using data to prove many long-held best practices remain as such. The days of paper files, carbon paper and fax machines may be gone; but what happens when you apply data analytics to tried and true claims concepts? Isn’t it fun to have the proof to back up what we already know? What if you could use modern programs and systems to enhance the very basic principles of our industry?
If you have ever sat through formal workers’ compensation claims training, you’ve been told that claims need to be reported as soon as possible. Large carriers have been studying the data for decades, and repeatedly, the results have spoken for themselves. The sooner a claim is reported, the less costly it will ultimately be for the employer. This simple concept, early intervention, should be second nature to employers and TPAs, yet so often we see where claims fall through the cracks and fail to be reported in a timely manner.
We are constantly questioned by prospective clients about new ways we are working with RMIS technology and predictive modeling to improve results. The short answer is: many. Our RMIS partner, Origami Risk, has a lot of unbelievably intuitive features that provide great overall program enhancements. Before we look into those enhancements, however, shouldn’t we be sure that the program is first firing on all cylinders? To use the weightlifting analogy, does it really matter how much you can bench press if you can’t jog a mile? Why focus on a number, just to see it improve, when something else, much more fundamental to your overall health can’t be performed with ease? The same theory should apply to your risk management program. This is why Thomas McGee includes a reporting lag time gauge, front and center, in our client dashboard. Before focusing on a bunch of new initiatives, employers should make a concerted effort to improve lag time – a statistic that is vital to the overall program performance.
Recently, a client – brand new to Thomas McGee, but long established as a self-insured employer – asked us to look at creative ways to drive down costs in their program. After onboarding the client and migrating their historical data to our system, the answer was obvious. They were running an average of 21.1 days from the time an incident occurred, until it was reported to the TPA. Lag time was out of control. This single, rudimentary metric (the one that has been preached by large carriers for decades) had simply been ignored by the prior administrator. Rather than reciting the decade’s old studies from the early 1990’s, we thought it would be best to break down this new client’s data, to illustrate the real effect to their program. The results, as expected, were a gaudy visual of the importance of early intervention.
Claims reported five or more days after the date of incident averaged 25% higher costs than claims reported on the actual date of loss. Claims reported more than 2 weeks after the date of incident were 33.38% more expensive.
Using the same timeframe, the average costs to defend each claim increased by an even higher margin.
The data suggests that we could save nearly $3,000 per claim, just by receiving notice of all claims within 5 days… an effort that is, essentially, without any additional costs to the client.
Imagine the expression on this new client’s face when we showed them all of the intricate and advanced metrics we could have used to drive down costs, but instead we wanted to focus on the basics. Fixing the problem was easy: first, emphasize the importance of early reporting to every employee. Once that concept is hammered into the culture, then begin to utilize the modern RMIS tools that allow us to report claims more conveniently, as well as monitor the progress. Simple concepts, like providing each location with online portal reporting access, and utilizing nurse triage after-hours reporting are ways that can easily reduce lag time.
As we continue to study claims data, utilizing new metrics is not only a means for finding ways to continually improve, it is necessary as risk management programs evolve over time. Relying solely on new and advanced metrics, however, can lead you astray from the very basic concepts that have been in place for years, concepts which, as illustrated above, remain essential to minimizing claims costs. Blending data with long-validated best practices concepts needs to be a priority for any organization looking to get control over claims costs.
By: Dan Greco, Director