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A new scandal in workers compensation

CorVel and Gallagher Bassett are the subject of a highly critical article in the South Florida Sun-Sentinel, that could be subtitled “When bad claims management and bad managed care meet bad employers, it’s bad news.” In this case, Broward County School District’s internal audit uncovered a raft of problems with the District’s $34 million annual workers compensation program. The article itself looks like it was co-authored by Carl Hiaasen and Dave Barry, two of South Florida’s keenest observers and funniest writers.
Iin addition to the District itself, the two entities receiving the harshest criticism are CorVel, the District’s managed care “partner”, and Gallagher Bassett. GB receives slightly more than $2 million a year to “manage” the program, while CorVel was paid $2.7 million during the 2003-2004 school year. Here are some of the more interesting quotes from the article in the South Florida Sun-Sentinel which reviewed an audit of the workers comp program by District auditors.
“Examples of waste or botched oversight range from using a pediatrician to treat adults to paying a claims investigator for working more than 24 hours a day, three times in one month
“Auditors are also sharply critical that Itasca, Ill.-based Gallagher Bassett subcontracts medical duties, such as selecting doctors and assigning patients, to another firm, CorVel Inc. of Irvine, Calif., but will not give the district a copy of the agreement to evaluate.”
“In one example cited, the firms (CorVel and Gallagher Bassett) spends (sic) $2 million a year to assign a field case manager to supervise nearly every case no matter how minor, a service that usually includes escorting patients to a doctor’s office. Other workers’ compensation companies usually reserve that level of service for catastrophic cases, said Reilly and Shaw. In one case, the district paid a case manager $2,800 to accompany an asthma patient at the doctor’s office.
Auditors chose five doctors at random from CorVel’s list. One had four malpractice settlements since 1992. CorVel has only rejected two out of 1,200 doctors it uses, one for questionable service and one for demanding payment up front.
Additionally, referrals for physical therapy for specific patients were based not on a therapist’s track record, location near the patient or expertise. Instead, therapists were chosen alphabetically, based on which firm was next on an approved list, auditors said.”
In perhaps one of the more stellar examples of understatement, the report noted “It appears the district has taken a casual interest in the operations, resulting in higher direct costs including excessive medical, indemnity [lost time], litigation, monetary settlements, permanent impairment ratings and personnel costs associated with replacement or substitution for injured workers,” auditors wrote.
To quote Dave Barry: “and I’m not making this stuff up.”
One wonders if this will lead to an official inquiry, as the relationships between managed care entities, TPAs, and employers have been the recent target of subpoenas and news articles.
Actually, it is likely not a question of “if” but “when”.
What does this mean to you?
Make sure your managed care relationships are clear, explicit, and public, that all transactions are transparent, and you hire the right managed care firm. Unless you want to see your name in print.

One thought on “A new scandal in workers compensation”

  1. Joe:
    Thank you for sending this. Your timing is appropriate from my perspective. I am currently engaged in a litigation matter as SME. The case involves these two particular entities.
    Would you send me a responding email with a telecom contact number?
    Thank you.
    Richard M. Sabetta
    Managing Principal
    Risk Navigation Group, LLC
    5 Cold Hill Road South, Suite 18
    Mendham, NJ 07945
    973 876 4254 cell

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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