The Claims Audit Process

In times past claims audits were a stringent requirement in every insurance company, TPA, and self-insured self-administered company. These exercises were essentially claims performance evaluations that were conducted by the claims technical unit associated with the Home Office or Region.

The reviews were largely accomplished in-person. The paper claims files were examined, and then the audit forms were completed on each case. Typically, the claims adjusters, claims supervisors, and claim manger were given the opportunity to sit with the claim auditors and discuss the findings on a per case basis as well, as overall trends that were highlighted by the reviewers. A formal claims “wrap-up” session was also presented on the last day of the review.

Having been on both sides of this equation in my career, the most valuable portion of the experience was the in-person nature of the exercise. It allowed the field office staff to meet with the Regional and/or Home Office claims technical staff, while simultaneously affording the reviewers to meet with the field staff. The human interaction was of inestimable value to both parties. There is nothing like being able to eyeball another human being when discussing something as important as their work product.

Approximately two decades ago, most claims organizations transitioned from pure paper files to a mixed version with outside correspondence in the paper files, and adjuster notes and investigation documentation on computer screens. Claim audits were still largely completed in person, as it was impossible to review the entire claim without the paper file.

By the mid-to-late 90's, most claims organizations transitioned to scanning technology, which allowed the discontinuation of the paper files. Now everything was storable on the claims computer. This allowed audits to be done from afar, with no in-person interaction.

The entire file was now viewable on the computer system. Additionally, a significant unallocated expense saving (the cost of sending the auditors on week-long claims review trips) was now obvious to the CFOs. Complete the audits via computer, and use the phone if either the field office staff or Home Office/Regional staff had any questions.

Although this seemed like an excellent way to cut expenses while still affording a technical claims review to be completed, the decline of the human interaction ultimately had an impact, which was often pejorative. Not being able to sit down face-to-face with the adjusters if you were an auditor, or with the HO/Regional staff if you were an adjuster, removed a key feature of claim audits. This was the ability to meet people and develop some insight into their thought process from authentic communication in one-on-one discussions.

Although the universal claim philosophy has always been res ipsa loquitor (the file speaks for itself), and if the file didn't contain something, the conclusion was that it wasn't done, the lack of being able to simply stand-up and walk over to the adjuster to ask a question now became a casualty of technology. The telephone is not a perfect substitute for in-person interaction and never will be. Email communication (increasingly used as a substitute for the telephone) is not even a close approximation.

What is lost in a computer claim review from afar is the person-to-person communication experience that allows learning opportunities, a probative exchange of information and views, and a collegial trust factor that develops from in-person human interaction. Yes, the entire file can be assayed from the HO or Regional Office, and the contents can be determined to either meet or fail minimum internal quality assurance requirements. But the ability to sit down with the field staff (or the field staff with the auditors) is lacking in such a claim review.

Given the focus of the majority of companies on keeping travel costs down, it is unlikely that the majority of claims audits will be as frequent as was done in the past, and those that are completed will probably still be done via computer rather than in-person. The “quaint” tradition of human interaction as a matter of routine during these claim performance evaluations is another instance of technology rendering human interface unnecessary.

Although in-person meetings during claim reviews may not be necessary, something is inevitably lost when people do not meet with people to discuss the work product of one of the group, and how the standards of review are applied by the other. The impact of that missing interaction is impossible to qualify and quantify, but it does exist. In combination with the cutback of many internal training departments, the claims adjusters remain somewhat sequestered during times when the exact opposite seems to be needed.            

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About the Author:

John D'Alusio has over 30 years experience in P/C insurance with executive management positions in administration, field operations, and claim technical areas. Mr. D'Alusio has had many articles published in industry periodicals, and is also a contributing author to the LexisNexis published, “Complete Guide to Medicare Secondary Payer Compliance.”  He writes a monthly column for Risk & Insurance Magazine and is a quarterly columnist for AMComp Magazine.

His Risk & Insurance column is located at:
http://www.riskandinsurance.com/workerscomp.jsp

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