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What do risk managers want?

How do risk managers analyze workers' compensation? I thought I would answer that question by visiting with two teams in the Chicago office of Marsh, the giant risk advisor. One team works in its software unit, CS Stars, and with its flagship risk management information system, Stars. (CS Stars also sells transaction software such as claims and bill-review systems). The other Chicago-headquartered team advises employers on workers' comp claims-payer and vendor selection. Together, both teams serve more than a thousand clients, so their analytical services probably mirror what's on the mind of risk managers.

I learned that risk managers are piling onto their plates bigger servings of data for operations analysis and thicker insurer and vendor studies. Workers' comp for them is a daily operations task, not just an annual trip to the insurance market. We have reached the stage, barely conceivable in 2000, where despite some holdouts--mainly among insurers--workers' comp claims-payers and vendors share information routinely.

Information moves through more channels. To maintain Stars as a unifying platform for all workers' comp-related data, staff have built ties with more than 400 data sources--insurers, TPAs and medical management vendors which have tripled in number in the past five years. Employers increasingly want to link Stars to HR and other corporatewide systems so that claims data can accurately match employment and benefits information. Stars is moving, with risk managers, out of a silo and becoming an enterprise risk management solution.

The RMIS has a worker health and safety audit function, one of the early additions after Stars was born in 1990. A first report feature works online, but some risk managers prefer a hybrid solution that includes telephonic reporting by employees who are inexperienced with online systems.

Risk managers want speed and can get it. Jeff Markowitz, president of CS Stars, told me that the number of Stars installations with daily claims data feeds has tripled just in 12 months.

"One of the fascinating things in the past year," he told me, "is the rise in demand for integrated data, and that means very tight IT relationships with TPAs and other sources."

Marsh's workers' comp practice, led by Mark Noonan, measures claims-payer and vendor performance. The consultants audit for problems in compensability decisions, disability and medical management, and claims management. The team says it is able to compare the performances of rival TPAs, PPOs and bill-review firms. This is a neat trick as vendors tend to use unique data definitions and accounting conventions in part to frustrate accurate comparison. Noonan's people get the data from vendors after pledging to use it only for the audit at hand, not to make industrywide rankings. But they did share with me some general findings.

For $100 in medical charges, they say that fee schedules, nurse reviewers and proper control of duration of disability can reduce payments to $50. PPO discounts reduce payments by an additional $20. There is a lot of room here for variances in vendor performance.

Neither the CS Stars team nor the consulting team addresses the performance of individual or classes of doctors. This is troublesome if Marsh is opining on provider networks. Srivatsan Sridharan, a vice president on Noonan's team at Marsh, told me that the company is looking to develop some metrics in 2008.

I feel these two teams may know more than anyone else in our field about the economics of workers' comp and the reality behind sales promises by TPAs and managed-care firms.

PETER ROUSMANIERE is a Vermont-based columnist for Risk & Insurance[R]. He can be reached at
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Title Annotation:WORKERS' COMP
Author:Rousmaniere, Peter
Publication:Risk & Insurance
Date:Jan 1, 2008
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