How do you measure the success of your claim administration programs and the effectiveness of your carrier/third-party administrator (TPA)? Is it cost per claim or number of claims and total severity, lag time, PPO penetration and savings, or litigation rates? Maybe it is a combination of some or of all. Measuring all of these can be good, but does it tell you what you really need to know?

Have you thought about what your carrier or TPA measures in the claim department and what they deem successful or worthy of setting goals and expectations? Are your programs aligned with your claim team and the accomplishments that set them apart in the industry?

A claim department is driven by claim inventory. They staff to it and they set performance expectations based on the number of claims they handle. They are focused on the dollars associated with the inventory. They are obsessed with the cycle time of a claim and how to diminish it. They create special teams that focus on the disposal of older claims, the handling of minor claims, and the management of complex claims.

So when faced with creating a scorecard to measure the success of your claim administration and the effectiveness of your carrier/TPA, companies should measure the same things as their partner. Measuring open claims inventory will help you to set clear goals and expectations that prove the success or lack of success of the programs you administer.

Tracking inventory will tell you where your claims are in age and in dollars. Just measuring the number of claims or the average cost per claim will not necessarily help you to determine the effectiveness of your carrier/TPA. For instance, your carrier/TPA could be closing a large number of claims and could be reducing your claim count. The question is, are they closing the claims in the inventory in a manner that is concluding all years of open claims? Or are they only focusing on a particular subset of claims?

Working on old years can lend to letting newer claims snow ball and develop into older claims. But working on newer claims can lead to older claims moldering with no resolution. The claimants become comfortable with the routine of periodic medical care and receipt of benefits, and settlement becomes next to impossible. It's important to look at all years of inventory and to monitor the inventory to make sure that all years are being worked consistently. Older claims should be resolved and newer claims paid and closed before they can blossom.

When you break down the open inventory by year, you can see if there is a trend in any particular year that could prohibit or accelerate success. It could be a shift in statute or implementation of a program. An example could be seen in 2003, when the Florida statute was changed to dramatically limit the benefits claimants could receive. In this instance, you may see a trend developing in the prior years. Attorneys could be holding back on settlement of those claims because they suddenly seem to have more value than the claims after 2003. You also can see if an implemented program is yielding results if there are less open claims in a year in which you started a safety initiative. This could indicate that you've made an impact on severity.

Separating the years can help you to plan for the future, and you may take initiative to target certain years to diminish the inventory. This could be accomplished with the commitment from your carrier/TPA to develop a strategy for that group of claims that may be different from the goals set overall. You could plan a settlement target for that year or have a claim reviewer paying attention solely on the claims in a particular year.

Once the inventory is staked out, you can then take a look at what's being closed and the outcome of the closure. Did the claimant return to work with your company, another company, or was the claim settled with a resignation? It's a great way to measure the success of your return-to-work culture. You can set meaningful goals and expectations based on the percentage of claimants who return to work with your company. To take it one step further, you can measure the number of days each claimant stayed out of work.

The key to return-to-work metrics is to only monitor what has been closed. The closed claims tell you the full story and you can build percentages based on return-to-work categories and averages based on lost time days. This will add more meaning to the percentage of litigated cases and potential correlation between litigation and higher claim costs.

When you start to think like your carrier/TPA and build measurements that align with the core goals and expectations set in the claim office, you will be speaking the same language and should be able to get better buy-in from claims management that will ultimately lead you down the road to success. Of course, your carrier/TPA needs to be flexible and in tune with your risk management goals and objectives. Together, you can work to drive business costs down.

Kristy L. Burch, CWCL, is a worker's compensation supervisor in Orlando, Fla. She can be reached at klburch@darden.com.

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Measuring Success in Workers&#039; Comp Claims

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