In Misguided Subrogation Conversation, Outcomes Are What Matters

An item crossed the Cluttered Desk last week that provided a terrific example of the oft misguided focus that we see in the workers’ compensation industry. It is a distraction that can waste our time, cost us money, and, worst of all, further harm already injured workers. It started with a court challenge and then an innocuous blog article. That was followed by a “news” article that completely missed the true issue at hand. It then continued with a response from a company drawn into a battle that was really not theirs to begin with; save for our industry’s penchant for bright and shiny distractions.

In this case, the company Paradigm Outcomes is the bright and shiny distraction. The resulting conversation that has been shaped by misperception should really be our concern. Please bear with me while I ‘splain the background on this.

The original story was about a court challenge related to limits on an insurance carrier’s subrogation rights to specific and direct medical costs incurred in the treatment of an injured worker. A carrier who had hired Paradigm to manage the care of a severely injured patient was challenged for attempting to recoup the entire cost of Paradigm’s service via third party subrogation. That effort was disputed in court, and while it was rejected, the question was referred back to the Texas DWC for a final clarification.  

Paradigm’s model involves what is called “Outcomes-Based Contracting,” where pricing is based on their projections of what will be required in the care of said patient. It provides the carrier with a consistent known expense. If costs run over the estimated amount, Paradigm must absorb it. The court essentially said in its issued decision that any profit earned by Paradigm, or any other vendor (remember, shiny object du jour), cannot be included in third-party subrogation attempts by the carrier, as it was not viewed as a direct benefit provided the injured employee.

A column in the publication Claims Journal written by Gary Wickert discussed the case, as well as the challenges this may present to carriers regarding the use of catastrophic and complex case management services. A follow up news article in Claims Journal was much more pointed and seemed to focus on Paradigm and their pricing model as the sole issue with which people should be concerned.  

That prompted a published response from Kevin Turner, CEO of Paradigm’s Catastrophic Care Management Division, outlining the challenges presented to all by this discussion. He indicated the Claims Journal piece was misleading, as it “focuses solely on subrogation without embracing the larger picture. Like the parable of the blind men and the elephant, it draws broad implications based on an incredibly narrow point of view.”

Full disclosure – Paradigm is an advertiser on WorkersCompensation.com. That doesn’t change the point that Turner is correct in his assertions that outcomes matter, and the use of experts who can produce desired results is important in workers’ comp. For media to focus solely on vendor profit while ignoring the broader ramifications of the court challenge itself is a disservice to the injured workers who need that type of complex care.

We all occasionally hire experts to perform tasks that we do not have the time nor expertise to perform ourselves. My wife and I listed our home for sale last week and contracted with a Realtor to manage that effort. I know that I will pay a flat percentage of the sale price for the services. Costs for the professional photographer, open house ads, custom signage (required by my deed restricted community) and more are not my concern. Neither is the time required to market and show my property, as well as coordinating the labyrinth of activities that will occur when a contract is in place. Could I have done all these things myself? Certainly, but not with the efficiency and expediency I expect to see using a skilled professional. 

And the cost of doing so will be a legitimate and necessary expense in the sale of my home.

The real issue here is that subrogation standards have not kept pace with the reality of today’s claims management procedures and requirements. For a variety of reasons, the job of a claim adjuster has become much more centralized while becoming far less involved in the day to day issues that an injured worker must face. Some of that evolutionary trend is the result of cost consolidation in the industry, but part of it has also been driven by increasing regulatory requirements. In our current process driven, paperwork intensive environment, specialized services offered by third party vendors are absolutely essential if we are to have a chance of providing positive outcomes for the injured workers in our care. 

Providing quality skilled services to an injured worker will include the profit a vendor company requires to perform them. In subrogation cases, having those expenses denied decreases the likelihood of their use, which will translate into less skilled treatment and poorer outcomes for the people they were intended to help. And the issue isn’t limited to complex care. If courts and regulators insist on eliminating recovery rights for all ancillary services required in an injured workers care, less and less will be available to those workers.

Turner points out this is not a new issue, or some new development that has suddenly cropped up. He tells readers that their customers are sophisticated and know the restrictions presented in some jurisdictions when it comes to cost recovery. The problem is that incidents like this focus everyone’s attention on only one type of recovery, when it is a workers’ recovery that should be the overriding concern.

After all, it is why our industry exists in the first place. 

The conversation needs to be instead focused on what matters. Skilled third-party services are essential in today’s world of workers’ compensation claims. That means that the full cost of those services are most likely legitimate expenses that must be considered. The Texas DWC has an opportunity to clarify what is important; that providing services that can improve the life of a catastrophically injured worker is the paramount concern. That would mean that the expense of providing quality care will not be deterred or denied by the potential for a lack of recovery. 

If they don’t, a far more important recovery will be what is really at risk. 

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