by: Greg Gaughan, Co-founder & CEO of TempusDirect , January 2022
Liability coverage is based in tort, which means the successful adjuster requires leverage in the absence of the certainty that contract coverages and fee schedules provide. When negotiating with both unrepresented and represented claimants, it is critical to provide adjusters with the data, rules, and process to use leverage effectively on a scaled basis.
Unrepresented claimant bodily injury (URBI) early settlements are typically consensual, emphasize speed, service, and customer experience. They set up well for the direct to provider (DTP) payment model, allowing carriers to use Tempus’ scaled leverage with providers to reduce specials reimbursement and eliminate “lump sum” leakage. Moving the specials negotiation from individual claimants to providers allowed the introduction of time and certainty leverage, while maintaining the efficiency and consensual nature of the lump sum model. This shift and application of leverage in URBI ended a 30+ year run of lump sum payments at 100% and made DTP an industry best practice.
Attorney represented claimant bodily injury (ARBI) is less consensual and more complex, due to the attorney-client relationship which prohibits most of the benefits of the DTP model found in URBI. ARBI lacks the single transaction efficiency of URBI, and involves a staged negotiation of demand and offer, followed by a series of counteroffers. Negotiation training for adjusters on settling attorney demands seems simple enough as the mechanics of the attorney - adjuster negotiation have not changed in many years. The question then is why does leakage remain so prevalent in demand package specials, and where exactly does the leakage occur?
ARBI leakage occurs when adjusters lack the data and leverage to reduce hospital and other emergency service bills that contain public to private cost shifting, and inflated retail pricing. Unlike professional service bills, there is not a widely available UCR benchmark to apply to hospital bills. Carriers do apply healthcare reference pricing, and many have adopted a public Medicare reference benchmark (multiplier adjusted) as a negotiation leverage standard. While helpful, these benchmarks alone fail to address the leverage requirements of a multi-stage attorney negotiation. Adjusters need data and leverage for each stage of a negotiation because few if any negotiations are one and done, and you cannot use the same leverage twice.
Here are three examples with the same 100K bill that demonstrate the current & future use of negotiation leverage:
No Leverage
Litigation adjuster negotiates a 100K hospital bill, the treatment is not attorney directed care and is related to the mechanics of the injury. The adjuster has no specific data or leverage to support their arguments and relies on claims and venue experience to establish value and negotiation strategy. This adjuster may be 100% right in their evaluation of a bill as inflated, but claims do not settle because an adjuster is right. Claims settle because an adjuster is prepared with persuasive arguments backed by strong leverage. Without any data or reference, the adjuster must concede large increments of money in the counteroffers to settle the claim and avoid costs of suit, which is not a feasible option for LAE or inventory management.
Not Enough Leverage
Same scenario, and now adjuster uses a public Medicare rate benchmark, set at 150% to adjust for the private auto market. The Medicare rate creates a good negotiation “anchor” or floor for negotiations but loses impact and utility when the attorney counters and negotiations move to a round 2 or 3. Adjusters may resort to other healthcare benchmarks, but most hospitals do not share pricing data on the numerous healthcare, state specific websites. Adjusters must apply a non-formulaic method of “chunk” negotiating to get the bill settled, often to “split the difference” – a key indicator of a failed or no negotiation strategy and leakage. In sum, Medicare provides a good anchor, but the adjuster lacks a ceiling, formula, or data to calculate amounts to incrementally adjust counteroffers if necessary. This counteroffer leakage is the ARBI cost containment blind spot for many carriers.
Staged Leverage
This time the adjuster validates the 100K hospital bill for collateral source and/or fraud (10-15% frequency) to be sure they are not paying on something they do not owe (Tempus Claims Validation - TCV). Next, they create a staged negotiation strategy that sets both a floor and ceiling, or a bracketed value for the claim supported by data at both ends. The Medicare rate is the floor, and the Tempus Live Benchmark (TLB) is the ceiling creating a narrow, bracketed value range to negotiate within and to set counteroffer increments in advance.
TLB represents the actual, accepted rate from this provider for these charge types in Auto. It is not an oblique reference to healthcare rates, it is direct - what this hospital accepts based on thousands of previous negotiations with Tempus. After Tempus validates the bill and eliminates any possible preliminary leakage before the negotiation starts, they provide the adjuster with a proprietary accepted auto rate ceiling and powerful leverage to support final settlement, up to and including adjuster offering to take fiscal responsibility at the low TLB rate. Adjuster has staged leverage, and they will not run out of leverage or back into a corner as the ceiling is the strike price in the market.
About Tempus: Our Innovation
Tempus is the first and only company to offer 3rd party liability medical bill validation and a proprietary data benchmark solution. Importantly, these solutions solve real problems that no one else can. While ubiquitous, demand package bill review software still cannot see and validate what the attorney does not put on the bill. Moreover, no other company has Tempus’ provider history, relationships, and agreements to create national accepted auto rate benchmarks. Finally, our URBI and ARBI innovation has attracted strategic integration partners enabling us to take this solution into a streamlined claims system and bill review rules based workflow. Fast, efficient, low priced, high ROI.