August 20, 2012

While many Workers’ Compensation programs focus almost exclusively on medical and indemnity costs, Kelly Services Inc. took it a step further in 2003 by discovering a substantial cost included in the allocated loss-adjustment expenses (ALAE) of its third-party administrator (TPA). A deeper dive into its ALAE revealed Kelly’s medical-bill-review (MBR) fees provided a sizable cost-saving opportunity.

Mike Tilley, Kelly’s vice president of Workers’ Comp, engaged an independent consulting firm, David Donn Consulting Inc., which provides advisory services on bill-review cost containment. Working with David Donn, Kelly implemented a highly customized MBR model with its TPA. By the end of the one-year pilot using the new model, Kelly’s average gross savings rate increased by 8 percent to just under 50 percent—while its bill-review fees declined by 4.2 percent—resulting in a gross financial improvement in excess of $2 million.

“Learning more about the not-always-transparent nuances of our managed-care program was like getting an MBA in this often-overlooked area of opportunity,” Kelly noted in its award submission.