When a procurement process in the City of Phoenix resulted in the selection of a new third-party administrator (TPA) to manage the city’s workers’ compensation claims, the transition process was a major undertaking. The city had never before transferred claims to another vendor, and so the staff was uncertain as to what to expect. They had several concerns: Would the transition go smoothly? Would the city lose valuable data and end up costing the taxpayers money? How would city employees view the move?
Today, with the integration behind them — it was completed in July 2009 — Phoenix has a fresh perspective on how even large, complex workers’ comp programs can successfully move from one TPA to another.
Through planning, hard work, and strong coordination with the new TPA partner, Phoenix was able to transfer workers’ comp claims totaling $94,627,452, balance "to the penny," and stay on schedule. It was a feat that at the onset seemed difficult to achieve.
While there have been a few expected hurdles, the experience has been positive and proves that with careful planning and communication, successful claim transfers are possible.
Sleepless Nights
Phoenix is the fifth largest city in the nation. It consists of 32 departments and functions, including engineering and architectural services, fire, police, public works, water, streets, aviation, budget and research development services, and public transit. The city employs approximately 15,500 full-time employees and experiences an average of 2,200 industrial claims per year. Changing TPAs involved transferring 1,241 open claims, ongoing management of 12,000 closed claims from the previous administrator, as well as adding new claims beginning in July.
For decades, the city’s workers’ comp program was state-run. In 2003, Phoenix became self-insured and hired a TPA to administer the program. At the end of the contract, the city put the TPA opportunity out to bid. While it may have been easier to stay with the prior provider, the city felt that "testing the waters" was necessary to ensure that city employees receive the best treatment for their workers’ comp injuries and to safeguard the fiduciary duty to taxpayers by seeking competitive pricing.
It was important to ensure a thorough and fair selection process. The city created a selection committee that included representation from employee unions and associations, as well as the workers’ comp supervisor and the risk manager. Together, the committee developed a rigorous request for proposal (RFP), one that was carefully constructed to cover all critical transfer processes and specifically focused on problems and areas of concern from the previous contract.
The following areas were critical in the TPA selection process:
§ Experience in the government sector. Phoenix required an experienced TPA to provide guidance through the transition process.
§ Adequate staffing levels. Many TPAs were cutting staff due to the economy, potentially impacting service Levels.The city required a TPA that could perform tasks efficiently and respond to needs promptly.
§ Location of key contacts. The city desired that key contacts be local to ensure accessibility and responsiveness.
§ Technology. Phoenix was not interested in a legacy system. The best choice would be a system that offered the latest innovations to ensure optimum results from not only the file transfer, but also the ongoing claims management process.
§ Service history. In addition to experience, the city wanted a TPA that was established, stable, and had a history of service. Quality service to its employees was a critical requirement for Phoenix.
Phoenix received proposals from seven of the top TPAs in the nation. The RFP was issued on Dec. 22, 2008, and the proposals were due by the end of January. By early spring of 2009, the city had made its decision. It awarded a three-year contract to Avizent, a national TPA with a reputation for serving both public and private sector clients.
Ensuring a Smooth Transition
The staff learned a great deal through the selection process. Here are recommendations from Phoenix for other organizations that may be considering a change in their workers’ compensation programs:
1. Develop a strong RFP. Because Phoenix had never faced the possibility of transitioning claims before, staff wanted to be sure the RFP was comprehensive and focused on program needs and the critical areas mentioned above.
2. Ensure there is excellent communication and coordination. The new TPA had a single point of contact for the transition process, a feature that is highly recommended. This helped staff develop a strong rapport with the new provider. Information was clearly communicated and questions were answered. There were regularly scheduled conference calls and in-person meetings to ensure that everyone was kept informed and engaged during the transition. This level of collaboration helped to drive resolution and buy-in at all levels. Phoenix believes that listening is a key attribute in this process. Make sure the TPA doesn’t just dictate but listens to your concerns and incorporates your agency’s ideas.
3. Bring in all constituents. Phoenix had a number of stakeholders, including employee unions and associations, to consider during this process. Staff recognized that if one group had concerns about the process, then it could affect the entire program. The city made sure the successful vendor was willing to sit down with all parties to listen and address their specific concerns. This process helped identify problem areas that may have created issues down the road.
4. Understand the data "mapping" process, and request frequent tests to identify and correct errors. When you transfer workers’ comp data, it is vital that all information — such as claimant name, age, date of injury, provider — comes with the claim. This is where most data transfers fail or take an excessive amount of time. Often, you are transferring not just from vendor to vendor, but from one software program to another. It’s easy to lose data or transpose information. It is critical to have data mapping to ensure that all key elements are transferred accurately, with no gaps. The city’s new TPA was able to scrub the data, and run several tests to identify and correct any missing information. Errors in data transfer would have resulted in delays in care coordination, coverage, and lost revenue to the city.
Perhaps the most important advice is, "don’t be afraid." Go out and explore potential changes. With proper planning and a strong RFP, it is possible to effectively and efficiently transition a workers’ comp program in order to offer better claim services for your organization.
Dave Booth is the personnel supervisor, safety section, of the City of Phoenix’s personnel department. He may be reached at 602-262-4665 or dave.booth@phoenix.gov.