Paduda: You Get What You Deserve.

At any one time, there are a lot of buyers looking for workers’ comp services – investigations, IMEs, bill review, pharmacy, claims, specialty services – you name it, there are RFPs in play.

Because work comp is a shrinking business, there are fewer claims to service every year, so the service entities are fighting over an ever-smaller pie. Because WC services is a very mature and consolidating industry, the sector is very price-competitive and scale is a major attribute.

These two realities force vendors (and make no mistake, they/you are a “vendor”) to bend the knee before the potential buyer, to acquiesce to almost any requirement or demand, to slash price to make it to the finalist stage, and to agree to pretty much anything the potential buyer asks for.

Let’s leave aside the reality that buyers’ RFPs usually focus on the wrong stuff, ask way too many questions, are damn near impossible to accurately evaluate, and have scoring systems that are often ignored (does anyone believe that price isn’t the most important buying point in the vast majority of proposal evaluations?)  As often as not the potential buyer demands a quick turnaround for proposals, then prolongs the decision-making process. The buyer may or may not ask more questions, request more concessions, seek additional data – but often respondents hear crickets well past the date the buyer is supposed to get back to them.

Vendors attempt to contact the buyer to seek information, clarify proposal points, or just find out what’s going on – but often these attempts are met with endless rings, unreturned emails, and/or statements that procurement/purchasing is sole point of contact.

Most often the potential buyer stays pat, perhaps using the other vendors’ offers as a way to squeeze down pricing from the incumbent while requiring the incumbent to upgrade portals, reports, turnaround time, and/or communications standards to match what that had been offered by those losing competitors.

Which leads us to “winner’s remorse”.  You’ve given away the farm to keep or get the deal, there are Service Level Agreements out the wazoo, the new customer requires that your most senior Account Manager handles the implementation, and your IT folks have to build all the connections but the new customer’s IT team is sorely over-stretched and hard-pressed to respond to questions. Oh, and somehow you need to make a profit on this.

Your choices are stark.

You can either breakeven – at best – while potentially compromising your service to other clients, or

Figure out how to create more revenue by charging separately for “add-on” or special services…rush orders, higher level appeals, reporting, customized panels, “nurse review” services…the list is endless.

Before you dismiss this as “not how we do things”, ask the vendors who responded to your last RFP.  The answers – if you are brave enough to ask the questions – will tell you a lot.

By Joe Paduda

Joseph Paduda, the principal of Health Strategy Associates, is a nationally recognized expert in medical management in group health and workers' compensation, with deep experience in pharmacy services. In addition to consulting with managed care organizations, employers, health care providers, insurers and private equity firms, Health Strategy Associates conducts regular surveys on managing work comp pharmacy costs, utilization review, bill review systems and claims systems.

Paduda is also the prolific author of the controversial Managed Care Matters blog and a founder of Health Wonk Review, a collaborative blog on health care policy.

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