Two Aon execs have published a piece on workers compensation managed care in Risk Management that is uninformed, self-serving, and reflects a lack of appreciation for the true cost drivers in comp. I try not to comment on other consultants' work, but this article demands a response .

Briefly, the article by Charles D. Reuter, senior vice president and Heidi Mader, assistant vice president with Aon Consulting, Inc in New York office calls for workers comp insurers to either "follow the herd as the industry has become accustomed or…lead the charge to innovative, results-oriented solution development". Unfortunately, the charge they intend to lead is right off a cliff, with a long stop at Aon to purchase their proprietary workers comp network analysis software application. While I have no problem with consultants selling their services (after all I do every day) I have a big problem when the services will NOT deliver the results the consultant claims.

In this case, it appears the problem lies in Reuter's and Mader's ignorance of the basic cost drivers in workers comp. They tout three components of their "strategic framework for optimizing financial performance for workers compensation organizations":

--data mining and warehousing
--medical network opportunities
--performance guarantees

The first is a no-brainer. The second utilizes Aon's newly-developed proprietary technology to "address these competitive differences in the workers compensation arena to allow for adjustment and valid comparisons using a standard network evaluation tool." Fine so far, but the article goes on to note: "incremental savings for a workers compensation organization can be substantial, representing a significant cost reduction opportunity (all other factors such as utilization and medical management performance are assumed equal for the sake of this discussion".

What utter nonsense. Discounts have been proven to have little to no impact on total workers comp medical expense. If discounts were the answer, states with the lowest fee schedules would have the lowest cost. Look at Massachusetts and Florida, states with very low fee schedules and their attendant total medical costs. Until their fee schedule was INCREASED, Florida's medical expenses were well above industry median according to the Workers' Compensation Research Institute. So, Aon's proprietary technology addresses one of the least important components of medical cost - price per service. It does nothing to address utilization or medical performance.

Finally, performance guarantees. I have constructed several of these programs in the past, and have extensive experience in this area. The article off-handedly comments that performance guarantees will have to factor in "new, integrated medical and indemnity performance metrics". Nice idea, extremely difficult to implement, and even harder to evaluate. But, lots of consulting needed.

The article concludes with a mention of consumerism and web sites and other stuff, noting that it will be more important for workers comp payers to utilize the web to educate claimants, providers, etc. Again, nice idea, but a lot of claimants do not have web access, there are problems inherent in publicizing medical guidelines (who owns them, for example), and pharmaceutical recommendations that are too extensive to cover here.

There are at least a dozen other major and minor problems with the article and the thinking or lack thereof behind it which I don't have time to write and you don't have time to read.

The net is this type of uninformed, superficial, obviously commercial hype is a disservice to those of is in the consulting business who really know what we are doing and want to deliver results, not land huge engagements.

What does this mean for you?

Do not hire consultants because they have a big name or for any reason other than they know a lot, have different ideas, are willing to learn a lot about your business, and are committed to your success. Grill them thoroughly, and beware of platitudes, generalities, and barely covered ignorance.