Details of claims software and the relevance to attorneys and records reviewers

ESSAY By James Mathis

© 2007 The Medical-Legal News and James Mathis

CCPR stands for Claim Core Process Redesign. It is a claims practice procedure policy (CPPP) based on the McKinsey BPI (Business Index Profile). CCPR entails the claim handling processes taught and required to be followed by all employees; the required use of a computerized claim evaluation program (Colossus); the required use of a medical review computer program (MBRS — Medical Bill Review System) to determine how much is owed for treatment — duration, type and frequency; a computer program to determine the amount of negligence offset to be applied to each claim based on the input of data into a liability driver checklist; a computer program that determines coverage application and exposes possible coverage questions that enable declination of policy benefits; a process and format for the performance evaluation of claim personnel (PDR — Performance Development Review); a systemized process for the determination of possible fraud claims based on numerical assignment transfer points arbitrarily attached to broad issues such as number of claimants involved, attorney representation or physician type and identification; and a mandated procedure with a predetermined threshold for transfer of the handling of claims with property damage of $1,000 or less into a unit (MIST — Minor Impact Soft Tissue). CCPR is designed 1) to delay the claim (by the requirement of extensive investigation including a Statement Under Oath of all parties involved), 2) to deny the claim based on the philosophy that where there is an absence of significant damage there can be no injury (there even exist form letters stating this which are required to be sent out prior to a complete investigation being conducted), and 3) to defend the claim with a formal policy known as DOLF (Defense of Litigated Files) in which the retained defense counsel is directed to defeat the claim regardless of its value or possible significance. The DOLF system process involves the bidding of a contracted defense cost of the defense law firm through verdict (the current bid rate is $2,000).

The CCPR claim process requires the average claim personnel to handle 250 to 350 claims and supports this increase in claim inventory by acknowledging the fact that claims personnel are not required to make decisions regarding the handling of claims. This has been automated throughout as described above. For example, Colossus (the computer evaluation software program) relies on identification of 10,720 value-drivers available in any claim. However, the adjuster is only required to complete a Dissection Sheet in the collection of data for input into Colossus for the evaluation of a claim. This Dissection Sheet is a printed one-sided page containing only a very few of the possible drivers for identification. This effectively puts blinders on the evaluating adjuster, thereby limiting the number of drivers plugged into all Colossus evaluations, and may result in a considerable undervaluing of all claims.

There are many more such systematic procedural processes incorporated into the CCPR program that are designed to eliminate individual intellectual analysis of claim issues involving all aspects of any claim, including first and third party payments.

• Advance Claims Excellence (ACE), used by State Farm Insurance: ACE is also a CPPP based on the McKinsey BPI program. It envelopes the claim handling processes taught and required to be followed by all employees and is is very similar to the Allstate CCPR program, although there are differences. Instead of Colossus (which State Farm is only piloting in Texas and New Jersey) this program requires the analysis of claim value to be determined through the use of TEACH (Training, Education and Claim Handling). This is a manual evaluation program involving individual identification of factors for each claim based on predetermined value-driving areas. ACE also includes required procedures for the determination of payment of medical treatment through the use of computerized programs such as Medico, AIM and Mitchel Medical Expert. There are also procedural processes for the identification of possible SIU (Special Investigation Unit — or fraud) claims, treatment abuses in first- and third-party claims, liability determinations and coverage questions. Similar to Allstate’s MIST program, State Farm personnel are required to follow a process of investigation and defense for claims with property damage under $1,000 (Minor Impact Program).

State Farm’s claim handling procedures and programs include all the aspects of the Allstate CCPR program, which is based on the BPI program as well, including the performance evaluation process for its claims personnel (EPR — Employee Performance Review). This process is a derivative of the QPR (Quality Performance Review), which is a derivative of the PP&R (Performance, Planning and Review). These performance review programs are based on “personal accountability”of the claims employee for every payment made on every claim and its ultimate impact on the company’s economic position at the end of each year. By incorporating the initiatives or goals of the ACE/BPI programs into the individual performance evaluation, State Farm develops a profit partner in its claims personnel. The principle of generating profits in the claim department necessarily could lead to undervaluing and underpaying both first-and third-party claims.

• Advance Claims Management Excellence (ACME), used by Farmers Insurance: The ACME (Advancing Claims Management Excellence) program of Farmers is a mirror image of both the State Farm and Allstate programs. This is to be expected as it also is based on the BPI program. More importantly, this is a global claim practice procedural policy not limited to just the evaluation of claims. Farmers uses the Colossus computer software to evaluate individual claim values. Farmers incorporated all the same processes described above in the CCPR and ACE programs of Allstate and State Farm.

• Colossus was created by an Australian company, Continuum. Continuum sold the software to Computer Science Corporation and was barred from marketing or selling a similar software for a period of undisclosed time. It would appear that this time has expired due to the release of Injury IQ and Decision Point. Both of these are computerized claim evaluation software programs.

These programs do not incorporate a multiplier of the medical treatment costs. While it may appear that the claim values result in some claims at a one-to-one and one-half times rate, the value is based on the number of value-drivers identified with each claim and input into the software.

Almost all the major insurance carriers adopted the BPI program into their claim handling procedures. Safeco incorporated it into ORACLE and American Family’s claim practice program, Gain Sharing, also is an adaptation of the BPI program. Almost all insurers have adopted a “best practices” philosophy that directly comes from the BPI program.

Colossus is a software based on a mathematical algorithm that includes multiple equations consisting of numerous variables. These variables are the value-drivers and currently there are 10,720. The software matches these value-drivers to points determined by the individual insurer and ultimately are transformed into a dollar range. •

James Mathis is a former employee of State Farm and Allstate Insurance Companies. Mathis is president of Sequoia Visions, Inc.; www.sequoiavisions.com.