HomeMy WebLinkAbout09 - Workers Compensation Third Party Administrator ServicesAugust 27, 2002
Agenda Item 9
City of Newport Beach
Human Resources Department
Memorandum
To: Mayor and Members of the City Council
From: Lauren F. Farley, Risk Manager
Subject: Contract for Workers Compensation Third Party Administrator (TPA)
Services
RECOMMENDATION:
Approve continuation of a joint agreement to provide third party administration
claims services for the self - insured workers' compensation programs of the cities of
Newport Beach and Costa Mesa with Hazelrigg Risk Management Services, Inc. of
Chino, California, for the term September 1, 2002 through August 31, 2005; and
authorize the City Manager to execute the professional services agreement
(Attachment B). This is a budgeted workers compensation program expenditure in
the Self Insurance Fund (# 6010 -8612) and appropriate funds exist in the budget to
cover the proposed contract fees of $155,000 for the city of Newport Beach for FY
02/03.
BACKGROUND:
As a self- insured public entity, the City contracts with a third party administrator
(TPA) to provide necessary claims adjusting services. The City has contracted with
Hazelrigg Risk Management Services, Inc. (HRMS) since July 1, 1995 for these
services under a joint professional services agreement with the City of Costa Mesa.
The partnership with Costa Mesa and the contractual relationship with HRMS was
the result of a comprehensive request -for- proposal process undertaken by the two
cities.
HRMS has provided very satisfactory claims services to the cities for the past
seven years under the format of a dedicated claims unit that exclusively handles
the injury claims of Newport Beach and Costa Mesa. In 1998, at the conclusion of
the initial three -year contract with HRMS, a TPA market survey was conducted to
verify the status of industry pricing against HRMS's proposed increases. The
survey revealed that HRMS's proposed increases at the time were competitively
priced for the cities to continue the contract.
However, due to the length of time since the last RFP, it was appropriate to again
conduct a formal request -for- proposal process to survey the companies that
provide workers compensation claim services, the quality of services available, and
the competitiveness of our current contract pricing. An RFP for claims
administration services was mailed to nineteen (19) Southern California TPA firms.
The eight (8) firms listed on Attachment 'A' submitted proposals in response to the
RFP.
ANALYSIS:
Proposals were evaluated in a joint effort by staff of both Newport Beach and Costa
Mesa using criteria including experience in municipal claims administration, TPA
staff qualifications and experience, ability to perform the services outlined in the
RFP's scope of work, responsiveness to the RFP, and proposed fees. Four firms -
HRMS, EOS, TriStar, and Willis ASC — were invited for interviews.
At the conclusion of the interviews, the candidate pool was narrowed to three,
eliminating Willis ASC. Both cities performed site visits to the offices of EOS in
Irvine, and TriStar in Long Beach. (A site visit to HRMS was not deemed
necessary, as staff was readily familiar with the HRMS offices and operations.)
Following the site visits, extensive evaluation of the quality and cost of services
offered by the three firms was conducted. Each of the three firms presented
themselves as equally qualified and capable.
A comparison of the annual fees proposed showed HRMS with the lowest fees of
the three firms, at $310,000 ($155,000 per city) for the 9/1/02 - 8/31/03 term,
inclusive of the use of the HRMS medical bill review services. Fees proposed for
the second and third year of the contract have been negotiated downward from the
proposal to a 3% increase for the second year, at $319,300, and third year fees
subject to further negotiation in 2004 with a 3% cap. Since 1999, the cities have
paid HRMS an annual fee in the amount of $274,000 ($137,000 per city). This new
fee increase is a total of 13% and represents the first fee increase for these
services in three years. Staff also considered two remaining factors in making its
final selection:
Program disruption that can result by changing administrators and a
change should only be considered when a clear improvement in
service quality would be realized, and;
2. There is an alternative claims administration method which staff
wishes to give in-depth study to in
"Alternatives Considered ", below). Given
would be more administratively efficient
provider until this study is completed
alternative is fully known.
the coming months (see
this potential alternative, it
to remain with the current
and the feasibility of this
It is therefore concluded, based upon all of the information considered, that the
workers compensation claims administration services contract with HRMS should
be continued.
ALTERNATIVES CONSIDERED:
The Risk Managers of Newport Beach and Costa Mesa have periodically
considered two alternatives to contracting for the claims administration services
needed to support the cities' self- insured workers compensation programs:
Purchase first dollar commercial workers compensation insurance and
disband the self- insured programs. This was viewed as a possible cost -
effective option when the California workers compensation insurance
market opened up in the mid- 1990's. However, the initial favorable
premium pricing has not been maintained, and, coupled with issues of less
effective claim administration, many of the public agencies that made the
move to fully insured programs have since re- instituted self- insured
programs and broker quotations solicited by both agencies continue to be
non - competitive with the cities annual self- insured workers compensation
program costs.
Bring the claims administration in -house in a combined program for
Newport Beach and Costa Mesa. Under this type of claims administration
program, all claims would be handled directly by city staff. The costs of
staffing and operating the in -house claims unit would be shared by the two
cities. When considered in the past, this alternative did not present an
improvement either financially or administratively over contracting for
these services. However, a number of program factors are changing and it
is believed that consideration of this approach should receive serious and
detailed study at this time. Similar studies are being undertaken by other
California public entities.
It is anticipated a thorough feasibility study will take approximately 6 months to
complete. Upon completion of the study, if an in -house claims program is truly
viable, staff proposes to present the results of its study to City Council with a
recommendation to implement a self - administered program. Transition to in-
house claims administration would take up to 18 months thereafter to secure staff
with the required technical expertise, procure the necessary computer equipment
and software, develop the claims data base, create a payment system, and
complete other operational components of the program. The proposed eighteen
(18) month transition period would be within this proposed three (3) year contract
which includes the city's standard thirty (30) cancellation clause.
If the feasibility study does not show merit to implementing such a program, then
continuation of the claims administration services contract with Hazelrigg Risk
Management Services, or another company, can be evaluated prior to the
August 31, 2005 contract anniversary.
ATTACHM ENT A
PROPOSALS RECEIVED AND FEE COMPARISON
First Yr Fees*
Administrative Services Corp.
(Willis ASC)
1551 N. Tustin Ave., Suite 1000
Santa Ana, CA 92705 $ 385,000 (plus
unspecified fees
for data conversion)
Cambridge Integrated Services Group
1901 Main Street, Suite 400
Irvine, CA 92614 $ 495,832
EOS Claims Services, Inc.
153 Technology Drive
Irvine, CA 92618 $ 421,926
Fleming & Associates
4250 Pennsylvania Avenue
Glendale, CA 91214
$ 245,000 (plus
unspecified fees for data
conversion)
Hazelrigg Risk Management Services, Inc.
14275 Pipeline Avenue
Chino, CA 91709
$ 310,000 (with
in -house bill review
services and $410,000
without in -house bill review
services)
JT2
34 Executive Park, Suite 220
Irvine, CA
$ 415,600
Sedgwick CMS
701 S. Parker Street, Suite 4000
Orange, CA 92868 $ 714,423
TriStar Risk Management
2835 Temple Avenue
Long Beach, CA 90806 $ 411,000
Fees listed do not include fee reductions available for use of in -house
medical bill review services, except the HRMS quote.
ATTACHMENT B
PROFESSIONAL SERVICES AGREEMENT
(TO BE DELIVERED TO COUNCIL ON FRIDAY, AUGUST 23, 2002)
COUNCIL AGENDA
ATTACHMENT B N 0. q
AGREEMENT FOR WORKERS' COMPENSATION
CLAIMS ADMINISTRATION SERVICES
THIS AGREEMENT is made and entered into by and between the CITY OF NEWPORT
BEACH, ( "CITY "), and Hazelrigg Risk Management Services
( "CLAIMS ADMINISTRATOR "). CLAIMS ADMINISTRATOR's Home Office is located at
14275 Pipeline Ave., Chino, California 91710
where the CITY'S claims will be administered
TERM OF AGREEMENT
The term of this Agreement shall be for a period commencing 12:01 a.m. on
Septemeber 1, 2002 and ending 12:00 midnight on August 31, 2005
2. MINIMUM REQUIRED CLAIM ADMINISTRATION SERVICES TO BE
PERFORMED BY HAZELRIGG RISK MANAGEMENT SERVICES
A. Program Administration
(1) Provide professional and technical staff to perform the services as
described in this Agreement.
(2) Represent CITY in all matters related to the set -up, investigation,
adjustment, processing, negotiation and resolution of workers'
compensation claims against the CITY.
(3) Inform the CITY of changes or proposed changes in Labor Code
statutes, rules and regulations and case law affecting its workers'
compensation claims program.
(4) Assist in the development of policies and procedures relating to the
workers' compensation claims program.
(5) Provide information and guidance regarding the workers'
compensation claims program and specified claims.
(6) Provide copies of file correspondence and documentation as
requested by CITY.
(7) Inform CITY of problem areas or trends, both potential and
perceived, and provide recommendations and/or solutions to
address problem areas or trends.
(8) Attend appointments, including but not limited to meetings,
conferences, Court appearances, and scene investigations.
3.
4.
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(9) Conduct risk management related seminars for department heads
and/or CITY staff at request of CITY.
(10) Maintain and store all hardcopy files for five (5) years after file is
closed.
Claims Administration — Scope of Work — Attachment A
Excess Insurance Reporting
(1) Report to any excess insurance carrier(s) in accordance with policy
provisions. CITY will provide the names and addresses of excess
insurance carriers. Provide CITY with written notification that the
required notice has been made to the excess carrier within ten (10)
days of the notice of claim.
COMPENSATION /PAYMENT SCHEDULE - Attachment A, Scope of Work,
Section H.
TERMINATION OF AGREEMENT
This Agreement may be terminated by either party without cause at any time by
submitting 30 days prior written notice of intention to terminate; provided,
however, that should the CITY determine not to renew this Agreement on any
annual renewal date, no advance notice of termination need be given. The
CLAIMS ADMINISTRATOR shall not be required to perform any of its services
beyond the date of termination and all fees owed to the CLAIMS
ADMINISTRATOR by the CITY will be paid on a pro -rata basis up to the date of
termination. Such notices of intent to terminate shall be sent to the parties
addressed as follows:
CITY:
CITY of Newport Beach
Attention Risk Manager
P.O. Box 1768
Newport Beach, CA 92658 -8915
5. INSURANCE REQUIREMENTS
CLAIMS ADMINISTRATOR:
Hazelrigg Risk Management Services
Attention Arlene Hazelrigg
P.O. Box 669
Chino, CA 91708
Before performing SERVICES, CLAIMS ADMINISTRATOR will provide proof a
Certificate of Insurance for the following:
(A) Workers Compensation Insurance with a minimum of $1,000,000 in
employer liability. Statutory limits, as required by the Labor Code of the
State of California.
(B) Commercial general and automobile liability insurance with a minimum of
$1,000,000, combined single limit per occurrence, to include premises
operations; independent contractual; broad -form property damage
endorsement; and vehicles owned, non -owned and hired.
(C) Professional liability /errors and omissions insurance with a minimum of
$1,000,000 per occurrence, to include coverage for all errors and
omissions which may result in financial loss to the CITY.
(D) Fidelity bond with a minimum limit of $500,000 per occurrence, applied
exclusively to the CITY.
(E) During the term of the Agreement, the CLAIMS ADMINISTRATOR shall
purchase and provide copies of the Certificates of Insurance and maintain
insurance coverage that is acceptable to the CITY. Endorsements of
insurance will be required, naming the CITY as additional insured on all
policies; and providing the CITY with a 30 -day written notice of
cancellation, material change, or non - renewal.
(F) CITY shall not be liable to CLAIMS ADMINISTRATOR for personal injury
or property damage sustained by CLAIMS ADMINISTRATOR in the
performance of this Agreement, whether caused by CLAIMS
ADMINISTRATOR, its officers, agents or employees, or by any third
person.
(G) CLAIMS ADMINISTRATOR agrees to defend any legal action
commenced against CITY caused directly or indirectly by wrongful or
negligent acts of CLAIMS ADMINISTRATOR, CLAIMS ADMINISTRATOR'
officers, employees, agents or others engaged by CLAIMS
ADMINISTRATOR and to indemnify CITY against nay loss, liability, cost
or damage, including attorney's fees resulting therefrom.
(H) CITY agrees to defend any legal action commenced against CLAIMS
ADMINISTRATOR caused directly or indirectly by wrongful or negligent
acts by CITY officers employees, agents or others engaged by CITY, and
to indemnify CLAIMS ADMINISTRATOR against any loss, liability, cost or
damage, including attorney's fees resulting therefrom.
(1) CLAIMS ADMINISTRATOR agrees that in the event of loss due to any of
the perils for which it has agreed to provide insurance. CLAIMS
ADMINISTRATOR hereby grants to the CITY on behalf of any insurer
providing insurance to either CLAIMS ADMINISTRATOR herein, a waiver
of any right of subrogation which any insurer of said CLAIMS
ADMINISTRATOR may acquire against the CITY by virtue of the payment
of any loss under such insurance.
(J) Any controversy arising out of this Agreement between the parties shall be
resolved by non - binding mediation under the provisions of California law.
(K) CLAIMS ADMINISTRATOR will be required to obtain, and maintain in full
force and effect during the term of the Agreement, a valid CITY of Newport
Beach Business License.
6. AUDIT
7.
(A) CLAIMS ADMINISTRATOR agrees to cooperate with the CITY in making
any and all claim files, records, reports and other documents and
materials pertaining to CITY's claims available to the CITY for audit by
CITY or CITY's appointed representatives, at any time during CLAIMS
ADMINISTRATOR'S regular business hours upon 24 -hours advance
notice.
(B) The CITY reserves the right to inspect and audit CLAIMS
ADMINISTRATOR's financial records relevant to the CITY's account at
any time during regular business hours upon 24 -hours notice. CITY will
provide necessary information pertaining to claims reported for adjustment
under the provisions of any Agreement.
All claim files, records, reports and other documents and materials pertaining to
the CITY's claims shall be the property of the CITY and shall be delivered to
CITY, or its designee, by CLAIMS ADMINISTRATOR, upon termination of this
agreement. CLAIMS ADMINISTRATOR shall also provide computer tapes
containing all computerized data pertaining to the CITY and their claims, together
with the format thereof upon such termination.
8. PROHIBITION AGAINST TRANSFERS
CLAIMS ADMINISTRATOR shall not assign, sublease, hypothecate, or transfer
this Agreement or any interest therein directly, or indirectly, by operation of law or
otherwise. Any attempt to do so without said consent shall be null and void; and
any assignee, sublessee, hypothecate or transferee shall acquire no right or
interest by reason of such attempted assignment, hypothecation or transfer.
9. WAIVER
A waiver by the CITY of any breach of any term, covenant, or condition contained
herein shall not be deemed to be a waiver of any subsequent breach of the same
or any other term, covenant, or condition contained herein whether of the same
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or a different character.
10. ENTIRE CONTRACT
this instrument contains the entire Agreement between the parties relating to the
rights herein granted and the obligations herein assumed. Any oral
representations or modifications concerning this instrument shall be of no force
or effect. Such representations or modification shall be made in writing.
11. SEVERABILITY
If any provision of this Agreement is held by a competent court to be invalid, void
or unenforceable, the remaining provisions shall nevertheless continue in full
force and effect. The validity of this Agreement and of any of its terms and of any
of its terms and provisions shall be interpreted pursuant to the Laws of the State
of California.
12. INDEPENDENT CONTRACTOR
(A) The relationship of CLAIMS ADMINISTRATOR and the CITY established
by this agreement is that of independent contractors, and nothing
contained in this agreement shall be construed to establish an
employer /employee relationship or to constitute the parties as partners,
joint ventures, co- owners or otherwise as participants in a joint and
common undertaking. CLAIMS ADMINISTRATOR, its agents and
employees are representatives of the CITY only for the purpose of
administering the CITY's workers' compensation claims program as set
forth in this agreement, and they have no power or authority as agent,
employee, or in any other capacity to represent, act for, bind or otherwise
crease or assume any obligation on behalf of the CITY for any purpose
whatsoever, except as specifically required to perform CLAIMS
ADMINISTRATOR's obligations under this Agreement.
13. SELECTION OF PERSONNEL
Assigned personnel, if for any reason, the CITY finds, in its sole discretion, that
the service provided by any assigned personnel is unsatisfactor, the CLAIMS
ADMINISTRATOR will Agree to assign replacement personnel that must also be
approved by the CITY.
14. VENDORS
All SERVICES provided by outside providers /vendors shall be approved by the
CITY in writing and billed at actual cost with no "mark -up" by CLAIMS
ADMINISTRATOR.
15. CONFIDENTIALITY
CLAIMS ADMINISTRATOR shall treat information, reports and analyses
obtained or developed pursuant to this Agreement as being confidential. Prior
written consent from the CITY shall be required before any information, in any
format, is disclosed to any third party. It is further agreed that ADMINISTRATOR
shall produce, maintain and dispose of all such information reports and analyses
in a manner to guarantee reasonable safeguards to such confidentiality.
16. MATERIAL PROBLEMS AND REGULATORY CHANGES
CLAIMS ADMINISTRATOR will advise the CITY on any material problems or
need for improvements in any matter related to this agreement, including advice
relating to changes and proposed changes affective the CITY's Workers'
Compensation program.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Orange County, California as of 2002.
CITY OF NEWPORT BEACH,
A Municipal Corporation
DATED: .2002 BY:
APPROVED AS TO FORM:
DATED: , mt&t 74 2002 BY:
Bludau, CITY Manager
, CITY Attorney
NAME OF CLAIMS ADMINISTRATOR: Hazelrigg Risk Management Services
DATED: .2002 BY:
(name & title)
Gi
Attachment A
Scope of Work
F. Overview and Approach
1. Understanding
One of the major reasons the founder established a third party claims administration firm in
.January 1988 was to provide personalized service to the cities that she managed while working
as a claims adjuster. The firm was designed to specialize in municipalities and to provide
customized administration to fit the individual needs of each client. Many of the original clients
have worked with the owner and FIRMS' staff for over twenty years. All of HRMS'
administrators are State certified and have extensive background in the specialized
administration of cases involving State mandated presumptions, industrial disability retirement
plans, 4850 benefits and a special handling of sworn safety personnel e,aims. The administrators
have an average of 12 years claims adjusting experience and have been with HRMS for about ten
years.
In regard to the dedicated unit that is currently assigned to the Cities of Costa Mesa and Newport
Beach, all unit members understand the Cities' expectation and required scope of work. Through
the years working jointly with the Cities, the unit has fine -tuned the administration of the
program, where it is flowing almost seamlessly. The unit is committed to providing exceptional
work, and we believe the Cities will agree that the unit understands the work, and that they are
getting the service that was promised.
2. Approach
a. Since we are the current administrator for the Cities, no transition would be implemented
to transfer and convert the files. Should the Cities select another administrator, HRMS
will provide a smooth file and data transfer. There would be no additional cost for the
transfer.
b. Claims procedures from initial notification of a claim through case closure:
Early Intervention
We believe that effective cost containment goes far beyond just our medical contracts. Solid cost
containment starts with the examiner, who should always be cognizant of the bottom line. This is
why we take great care to hire very proactive, experienced and technically strong examiners that
are familiar with the requirements of the Labor Code and the potential abuses that can take place in
the system.
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We take a strong philosophical approach toward early and effective intervention on all of our new
losses. We believe that through early file intervention, successful communication between the
examiner and the injured worker can take place. By establishing a good rapport early on, we know
that we can lower the probability of umtecessary litigation.
Set -up of Claim
At HRMS, all of the new losses are set up within five working days upon receipt from our office.
This "set -up" process includes a documented three -point contact, claims narrative and plan of
action.
The three -point contact includes the content of the communication with the employer, injured
worker and provider. The claims narrative includes a description of the injury, place of
treatment, treating physician, diagnosis, prognosis and treatment plan. The plan of action
documents what our plan is with regard to authorization, treatment and claims adjustment to
bring the file to cost effective closure within a reasonable time frame.
Further, by intervening early, the examiner can direct the injured worker's medical needs to a
contracted clinic or physician that specializes in workers' compensation related injuries who is
aware of the desires of the employer with regard to medical cost containment and return to work.
At HRMS, every new loss is audited in compliance with our standards in set -up time,
documentation and claimant contact. Every closure is also audited at month end to ensure that all
benefits and notices were delivered timely. The compliance to these standards is built into an
examiner's review so that the examiner has an incentive to perform up to par in these areas.
We believe that the fruits from early file intervention such as lower litigation rates and shorter
claim lives will lead to significant cost reductions on the Cities' aggregate inventory.
Return to Work
Tremendous savings for an employer can be derived through an effective return to work
program. The most obvious of which would come from a significant reduction of temporary
disability payments. Further savings can result from the benefits of lower litigation rates on cases
where there is no lost time. Plus, our lengthy experience in claims administration has taught us
that likelihood for permanent disability (on equally severe injuries) decreases significantly on
medical only versus indemnity files.
Among the more appreciable cost control techniques utilized by HRMS is our practice of
focusing administrative awareness on the advantage of establishing early return -to -work
programs. We assist human resource personnel in developing useful procedures with which they
can structure temporary light duty and modified work positions. HRMS' staff is proficient in
creating approaches to encourage a quick return to duty. This helps management avoid the
hazards inherent under ADA and FMLA regulations. The pitfalls in these federal mandates are
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often seen by employers as a reason not to adopt early return -to -work policies. Coordination
between the HRMS adjuster and the various Cities' personnel departments has been shown to be
very effective in this regard. Such coordination is even more important now that Moorpark has
been decided.
From a personnel standpoint, when modified work positions are identified in advance of need, an
early return to work assignment for an injured employee does not become a management
scheduling hardship. The employee acquires a sense of usefulness and acceptance in the
workgroup, which has been proven to be a positive factor in the recovery process.
During our three -point contact, we will inquire of the Cities what modified positions are
available and relay that information from the onset to the treating physician. We will continue to
work with the Cities and the physician during our disability phone calls until the employee
reaches a level where he /she can return to modified duty.
Medical Management Procedures
At HRMS, we believe that efficacious monitoring of a treatment protocol comes through open
communication with the employer, injured worker and provider (in that order). Once we have
established the initial communication from the employer and the employee, we can detennine
what body parts are injured and authorize accordingly.
Every treatment procedure requires our express verbal or written authorization. We will not
approve treatment to unrelated body parts or disorders. Treatment protocols and their
corresponding bills that are not approved will be objected to therewith.
Nurse Case Management Procedures
If temporary disability extends beyond 4 weeks or treatment extends beyond 90 days without a
clear discharge date or permanent and stationary date, our examiners will intervene at that point
to see that the proper specialist is in place through a phone call or letter to the provider. If the
provider is still unclear, then the examiner has the option to refer the case to NUI "Se Case
Management or establish a Labor Code 4050 consult evaluation. We find that a lot can be
accomplished through phone calls to either the treating physician or the injured worker.
We take a practical approach to the utilization of Nurse Case and Field Case Management. We
do not believe that we should use a nurse on every case. We believe that to do such would
unnecessarily burden the file with superfluous charges. We judge the criteria for nurse case
management on a case -by -case basis where there is a positive cost benefit derivative. We believe
that when good medical protocols are in place, a seasoned examiner can manage the medical
aspects of an "average" less complicated file more efficiently than a nurse case manager can.
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In all, we estimate that just less than 10% of our Indemnity files require a Nurse Case
Management referral. Ow experienced claims examiners use their discretion on when these
services are-necessary through the following guidelines and with the concurrence of the client:
a. Surgical Cases:
When sur r hospitalization is requested, the examiners will refer the case to our Nurse
Case Manager (NCM). This in -house NCM can provide same day service on authorization if
necessary. She will thoroughly review the file for the treatment appropriateness and will
authorize reasonable treatment and fees consistent with their pre- negotiated rates.
Surgical cases that are generally referred to Nurse Case Management include:
i). When there is a need to determine medical necessity of a surgical procedure.
ii). Complicated post - operative needs (ie: home health vs prolonged hospital stay, confusing
DME needs).
iii). Any In- patient procedures.
iv) Any claimant that needs special attention.
v). Need for Medical Reserves Estimate.
b. Non - Surgical Cases:
i) Any case that is complicated and needs special attention for which the Nurse Case
Manager should attend the medical appointments.
ii) Old files that need file review /case analysis and medical direction.
iii) Confusing files: That also needs to be reviewed with analysis and to have the claimant set
up for a second opinion or Peer Review.
iv) Disability beyond 4 weeks.
v When the client requests nurse case management.
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Medical Network Management
We have a very strong repertoire of providers that supply our clients with significant savings. We
recommend an initial meeting to compare rates and fees with cost containment providers so as to
ensure that the Cities are maximizing their potential. Once these providers have been identified
and agreed upon, the examiner will authorize treatment and bills accordingly. When legally
prudent, we will not authorize treatment for out of network providers and will object to their bills
therewith.
We take great care to assure maximum network usage by requiring contractual relationships with
the assigned facilities. These relationships require treatment protocols for each category of
industrial illness, ie. foreign bodies, lacerations, soft tissue injuries etc. We will also designate an
agreed upon panel for specialist referrals; all of whom should be network providers whenever
demographically feasible. We will do this by submitting a list to all industrial clinic that outlines
our preferred provider network for hospitals, surgery centers, diagnostic centers, durable medical
equipment, orthotics and prosthetics.
Treatment plans from our contracted providers are referenced through established guidelines as
recommended by Presley Reed, M.D. software (Medical Disability Advisor). Both in network
and out of network providers are profiled on a 21 -day calendar schedule. Measurements of each
open case continues of progress review of the treating physician to compliance with reporting
and billing requirements.
On the rare occasions when, due to factors outside of our control, treatment is channeled to an
out of network provider, we still aggressively require reasonable treatment levels and strict
adherence to the official medical fee schedule. Our professionals have a number of tools at their
disposal to assist in the out of network management process inchiding, but not limited to,
Retrospect Review, Peer to Peer Review, Concurrent Review and on site nurse case management
visitations.
Standards and Performance Measurements
At HRMS, we realize that we are, first and foremost, a service organization. In fact, we attribute
our strong, steady growth rate, and our high account retention, to our conunitment to excellence
in service. Our exceptional service and reputation have allowed us to grow steadily in a very
competitive market, in spite of a limited marketing endeavor.
When it comes to excellence in service, we do not believe that we can over - emphasize the
importance of compliance to standard operations procedures and high standards. Our ability to
achieve these high standards is made possible through our exceptionally low caseloads. Caseloads
are kept below State mandated maximum levels, allowing our staff the time to pro - actively manage
their files, rather than just reacting to events. Such highly individualized service returns dividends
in the form of better employee relations, lessens the life of the claim, and ultimately results in
lower claim costs. Currently, our average indemnity caseload is less than 150 files.
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We take great care in identifying key standards that we believe will ultimately affect the bottom
line costs of our clients. Our standards are as follows:
❑ 48 Hour Claimant Contact: 90% or better is Satisfactory
o Average Set up Time: Average of 7 days from knowledge to complete the entire set up
including 3 point contact, initial investigation, plan of action, documentation, reserve
setting and payment of indemnity benefits.
❑ Percentage of timely Set -Ups: 80%
❑ Closing Ratio: 95% or better monthly
❑ Mail and Bills Processing Time: 2 Days
❑ Clerical Instruction Sheet: All done within 7 days
❑ Diaries: 95% current within all times
❑ File Documentation: 98% on files
Compliance Measurements
These standards are measured and accomplished through the following reports and procedures.
Li End of the Week Report: Every Monday morning each unit supervisor is charged
with reporting a weekly assessment of their unit's compliance to the manager in
selected areas for their unit. This is done to minimize backlogs.
❑ Claimant Contact and Set up Report: All new set ups are audited internally on a
weekly and monthly basis for compliance on 'claimant contact' and `set up time.
This is reported to the manager by the auditor. The results are addressed in the weekly
supervisor meeting.
❑ Departmental Monthly Report: All monthly closings and new incurrals are audited
on a monthly basis to determine compliance levels with regards to claimant contact,
set up time, DWC notices etc.
A financial and procedural compliance analysis is compiled in a monthly report by the
manager. This tracks our inventory status, closing ratio, salvage percentage, mail
processing, claimant contact, set up time, subrogation and other financial data.
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:I Internal Audits: We have audit forms that are filled out on randomly selected files.
We strive to complete four per Examiner per week. These are used to identify
compliance in claims handling procedures ie. Timeliness of payments, DWC notices,
set up, claimant contact and documentation as well as to identify areas for growth in
claims handling efficiency. These are to be used constructively to help the examiner
continually improvement their claims handling skills.
❑ Over diaries: The manager and supervisors have over - diaries on their examiner's
caseloads to ensure quality claims handling and follow up. Issues of concern are
addressed immediately.
Claim Closure Techniques
At HRMS, we are pleased to report a consistent track record of 100% + annual closing ratios of
our office aggregate inventory. This ratio is not just a factor of opens to closed but also factors in
re -opens and medical only conversions. Such a continuous track record helps keep your
examiner's inventories low, which beneficially impacts their ability to spend more analytical
time strategizing cost effective resolution to your files.
Consistent high closing ratios are usually reflective of two practices which (as explained above)
are monitored and tracked heavily at HRMS:
Early file intervention: Early communication and file investigation keeps severity
down through prompt rapport building with the injured worker. Such a rapport
decreases litigation ratios. Lower litigation rates lower the likelihood of permanent
disability. Files with no permanent disability have a much shorter life span.
Diary compliance: HRMS examiners review all files every 30 -45 days. These
reviews include a synopsis of what transpired during the last period and a plan of
action to bring the file to closure. This brings constant direction to file to a resolution
state.
In compliance with State regulations, injured workers with no permanent disability are sent a
permanent disability denial letter along with panel qualified medical examiner information. If
there is no response in 30 days, we close out the file.
As a guideline, all files with permanent disability are forwarded to the DEU for a rating.
Nevertheless, our examiners do perform an initial rating of the report to commence disability
advances.
As a guideline, we close out the matured future medical maintenance files when there is sufficient
evidence to suggest that the injured worker has discontinued treatment on a permanent basis. This
is usually evident when the injured worker has abandoned treatment from 6 months to a year. We
close out executed compromise and release files upon the payment of the award.
14
Written Procedures and Documentation
At HRMS, we believe that our standards, performance measurements, and policies and
procedures are above the industry.
Every staff member has a Policy and Procedure Manual that is reviewed and updated for each
client.
All mail is reviewed on a daily basis, and pertinent information is updated on the individual claims,
computer file notes. On a case by case basis, individual claim issues will be identified and plans of
actions developed to address the issues and the plan for closing of the claim. These plans of actions
will be updated when the file is reviewed on regularly scheduled diary dates or when significant
issues arise on an individual claim.
Settlement Procedures
Upon receipt of appropriate medical documentation, HRMS will rate all reports and calculate the
remaining exposures on the file. Although greater weight is usually given to the treating
physician's report, HRMS adjusters are trained to take various other factors into consideration
when weighing reports. Often times, this may involve input from the Cities.
Generally speaking, if the injured worker continues to work for the Cities, we most likely will
recommend a Stipulation. However, if the injured worker no longer works for the Cities, we will
provide the Cities with a recommendation for a future medical buy out through a Compromise and
Release in addition to the Stipulation recommendation.
HRMS will conduct settlement negotiations on behalf of the Cities with the opposing attorney. We
are confident in our examiners' skill in resolving cases prior to trial. We attempt to establish and
maintain a good working relationship with applicant counsel in order to reach final settlements
quickly, fairly and at the lowest possible price.
Prior to recommending a settlement, we will provide the Cities with an in -depth analysis of our
options including an evaluation of potential costs in terms of time and money. Concluding our
analysis will be a suggested direction for action we can take. HRMS will always contact the Cities
to obtain authorization before entering any settlement agreements. With many of our current
clientele, we are accustomed to obtaining written settlement authority on all settlements. if such is
the level of involvement required by the Cities, we are eager to oblige. Nevertheless, we also
recognize and honor your time constraints. Therefore, if the Cities desire not to get involved in low
exposure settlements, we honor that request as well. We recommend an initial meeting to discuss
comfort levels on settlement and reserve authorities.
HRMS adjusters prepare Compromise and Release Agreements and Stipulations with Request
for Awards in specific cases on our claims systems. As indicated above the unit supervisor will
maintain first tier approval before the examiner makes settlement recommendations to the Cities.
15
Excess Insurance
When reserves exceed a reserve threshold for reporting to the re- insurance carrier, HRMS
employees will draft the appropriate documentation to forward to the re- insurer. Our RMIS system
is capable of alerting us to such retention levels. Further, we have the capability to report these
cases on line, if the re- insurer is so inclined to receive notification in electronic format.
We will monitor all cases to assure compliance with the reporting standards dictated by the
Cities' reinsurance carriers. Further, where the self - insured retention level is exceeded, we will
submit billings and collect paid loss reimbursements from the excess carrier on a timely basis
and forward these recoveries to the Cities.
We will identify and process all claims eligible for reimbursement from the California
Subsequent Injuries Fund and/or State Fund. HRMS will prepare the necessary
documentation to submit to the State and/ or State Fund for reimbursement to the Cities.
Medical Control
At HRMS we believe that efficacious monitoring of a treatment protocol comes through open
communication with the employer, injured worker and provider (in that order). Once we have
established the initial communication from the employer and the employee we can determine
what body parts are injured and authorize accordingly.
Every treatment procedure requires our express verbal or written authorization. We will not
approve treatment to unrelated body parts or disorders. Treatment protocols and their
corresponding bills that are not approved will be objected to therewith.
Rehabilitation
Unlike other firms that supplement service fees through the use of in -house rehabilitation
counselors, we maintain our independence from all vocational rehabilitation firms. HRMS
recommends utilization of at least two qualified independent firms with certified vocational
rehabilitation counselors on staff to serve our clients professionally and at reasonable rates.
Selected arms will also furnish job analyses and work feasibility studies in order to facilitate an
inj ured worker's timely return to duty.
HRMS will provide notice of entitlement to vocational retraining services to injured workers when
legally required, and will monitor these services for compliance with the Department of Industrial
Relations Rehabilitation Unit. HRMS provides full vocational rehabilitation services and benefits
as defined by Labor Code Section 4635. This is done at no extra charge to the file.
16
Salary Continuation
We currently administer over a hundred public entities. Due to our many years of service, we have
acquired extensive experience in the specialized administration of cities involving 4850 benefits and
salary integration/supplemental pay as well as industrial retirement plans.
During our 3 -point contact with the Cities, we will document the compensation benefit that the
employee will be receiving from the Cities. HRMS will then issue vouchers to the Cities for
accounting/payroll. Should the employee's disability exceed the Cities' salary continuation, HRMS
will be in contact with the Cities to coordinate further benefits.
Cost Containment Results
Successful medical management ultimately leads to lower claims costs, which translates into
significant savings for our clients. At HRMS, we believe that we have a proven record of
containing costs. Recently, we researched the results of our Diamond Bar office for the fiscal
year 2000 - 2001. Specifically, we compared our aggregate closed claims costs on indemnity
files that closed in the year with the average costs on indemnity files in California. The averages
for the State of California can be found through the WCIRB 2000 annual report (See Appendix
VII). The industry average based on this report is $36,000. We are very pleased with our results.
Our average closed claim costs is $16,381.40. This amount includes reimbursement for the
Educational Code, Salary Continuation programs and Labor Code Section 4850 benefits, which
at times can exceed all other costs of the claims. This reflects the aggressive claims handling and
utilization of the cost containment programs that HRMS has in place.
We also compared our average medical expenditures on our indemnity files that closed in the
year 2000 with the average paid on an indemnity file in California. We are also very satisfied
with these results.
$20,000 - .___ ---
$15,000 I -- -
$10,000 - - - --
$5,000 - - -- --
$0
576___......__._._..__- �.. �_._..-_._.._ ..- .__'___.. ... ...........,.._. _.........- ..............._ _.
17
{
,
Cost Containment Reporting
For those clients that desire a report of the medical management cost containment savings, we
can supply them with a report to our clients in an Excel format that outlines their program's
savings. This report can be mailed in paper or electronic form.
The claims manager can also supply the Cities with detailed monthly reports specifying their
closed claims costs and trends thereof.
c. Reserving Practices and Philosophy
Our reserving practice procedures allows us a 90 %+ confidence level. However, annually, we
would advise the Cities' auditors or actuaries to add on an additional 25% for any unexpected
reserve development.
All initial reserves are reviewed and approved by claims supervisors. Subsequent reserve
increases will require supervisor intervention on aggregate losses of over $25,000 incurred.
Manager intervention occurs on aggregate incurred reserve levels of $100,000.
Immediately upon knowledge of a claim from any source, HRMS' adjusters prepare a
comprehensive reserve worksheet to determine the amount of the expected loss. The worksheet
requires that the claims examiner document the reasoning behind the forecasted expenditure.
Reserves are reviewed in all cases on a 30, 60, and 90 -day basis, or at any time when
circumstances dictate re- evaluation. There are numerous details considered in establishing
reserves. Those factors include the nature and extent of the injury, whether or not the case
involves lost time, the amount of investigation required, if the case is being litigated, and if there
exists any possibility of having to provide vocational rehabilitation benefits.
All reserves changes of over $25,000 gross incurred will be reported to the Cities through e -mail
outlining the factors affecting the reserve amount, facts of the accident, nature and extent of the
injuries and any other pertinent investigation details.
Because our claims examiners are fully trained in rating medical reports, their expertise in
accurately assessing the extent of possible, or probable, temporary or permanent disability is
noteworthy. This skill, coupled with the requirement to document the rationale behind the
incurred loss, leads to the setting of actuarially responsible reserves.
HRMS' supervisors review and approve all reserve changes within the module. The claims
manager has to approve all reserve increases over $100,000. As another step in this process,
HRMS' internal auditors will randomly review files for reserve adequacy.
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d. Service Providers and Allocated Expenses
Financial Independence
HRMS is strictly a claims administration firm. By doing so, we maintain independence from
service providers associated with the workers' compensation industry. Independence allows us to
offer complete objective assistance to injured workers, as well as the employer. By being
independent, we have no in -house requirement to choose pre - designated investigators,
rehabilitation vendors or attorneys. This autonomy avoids frustration and eliminates tendency to
provide ancillary services that may be in question. HRMS is free to select the provider with the
best reputation for quality and service at the most cost - effective price to the Cities.
Attorneys, Doctors, Rehab Counselors and Investigators
A panel of service providers to be utilized for the Cities is prepared jointly by HRMS and the
client. These providers usually know the needs of the particular client and have an established
relationship with the employer. if the provider is providing quality work at reasonable rates, then
we maintain the same vendors and work with them. Ultimately, the client controls the panel of
providers utilized on its account.
General Claims Handling
Investigation
Pursuit of Fraud
At HRMS, we take the pursuit of fraud very seriously. Over the past years, we have had
remarkable success at reporting workers' compensation fraud, which has resulted in several
successful prosecutions.
Our claims manager has a strong background in fraud investigation. As the SIU Director for a large
workers' compensation carrier, he orchestrated the investigations of over 50 successful
prosecutions and convictions. As our internal SIU program overseer, Mr. Adams has helped us
successfully investigate several claims to successful prosecution. He has an in depth knowledge of
the Insurance Codes 1871.4, 1875 and 1877 as well as Labor Code 139.3 and Criminal Codes 418,
487, and 550.
HRrMS fights fraudulent activity through an aggressive internal SIU program. Our procedure is to
report any suspected fraudulent activity to the supervisor and claims manager immediately upon
suspicion. Our examiners are afforded a fraud checklist to assist them in the identification process.
Generally speaking, they report all suspected fraudulent claims immediately upon suspicion.
19
l
Our examiners have undergone and continue to receive extensive fraud training twice a year. From
this they have developed and acute awareness of the four types of fraud that can impact a self -
insured workers' compensation program. These are: 1) Claimant Fraud 2) Provider Fraud 3)
Employer Fraud and 4) Forgery. They also have a solid understanding of the number of insurance
and criminal code statutes that apply to the arena of workers' compensation.
The supervisor and manager will maintain an active "SIiJ" diary on all identified fraud cases. The
examiner and supervisor will jointly prepare a case synopsis. Once this is done, the manager will
review the case and formulate an investigative plan of action. Once the evidence is obtained to
report the claim, the manager and supervisor will prepare a case synopsis to the corresponding
District Attorney's office along with the appropriate Fraud Department forms.
The examiners assigned to the Cities of Costa Mesa and Newport Beach program have received
extensive fraud training from in -house personnel as well as outside training. The examiners are
trained on the checklist procedure for fraud identification and will follow the office procedures for
reporting and investigating such.
All fraud referrals will be formulated in a monthly report to the corresponding Cities'
representatives. This report will include the number of claim denials, District Attorney referrals,
arrests and convictions. A savings report will be presented showing withdrawn liens, reserve
savings and fraud investigation expenses.
Investigations
A preliminary detenination of compensability in accordance with the California Labor Code is
made following a review of the Employer's Report of injury or Doctor's First Report of Injury. If
a question arises regarding compensability, we will contact the Cities' representatives to gather
more data. Based upon the information obtained, HRMS will suggest an appropriate course of
action. This recommendation may include a delay or denial of the claim. Final determination of
compensability, however, will generally rest with the Cities. The initial decision to either accept
or deny a claim will be made within time frames mandated by the State.
At HRMS, every claim is investigated. However, care is taken to eliminate overuse of outside
investigators. In many cases, AOE /COE issues can be resolved by HRMS' claims professionals
during our three -point contact process.
Communication as soon as possible after an injury has occurred has been proven to be a key
element in the potential scope of the claim. For this reason, we use the "48 hour -three -point
contact" approach. We make every effort to contact the injured worker, the employer, and the
treating doctor within 48 hours of our knowledge of a work - related injury. This allows us to
retain more medical control, evaluate the circumstances giving rise to the industrial accident,
take necessary action to prevent possible expansion of the claim and establish a rapport with the
injured worker.
20
However, in cases where the employer has serious questions concerning the legitimacy of a
claim, we find it cost effective to refer such matters out for investigative services to support a
potential denial. By having a concrete statement in hand, we are able to solidify the facts early on
so that they do not change in the future.
We also recommend investigation referrals on subrogation cases where the potential recovery
may significantly exceed the costs of the investigation report. On such cases, we will refer out to
a provider to take pictures, determine the fault ratios and identify the third parties.
Matters in which we may employ the use of an investigator include:
A) Factual AOE /COE disputes
B) Subrogation: where recovery potential exceeds $1,000.
C) Labor Code 3600 (a)(10) "post termination" claims
D) Psychological claims
E) Questionable Cumulative Traumas
All investigation assignments are to be completed within 30 days of assignment.
Index Bureau
Part of our commitment to investigate all claims includes our pledge to index all the Cities'
claims. As a long - standing subscriber to the Index Bureau, HRMS reports all new claims to the
Index System. Consistent with our current policy, HRMS will send all of the Cities' claims to the
hmdex Bureau and will copy all such reports to the Cities' Safety and Risk Managers.
Surveillance
As with all investigation referrals, it is our practice to discuss any subrosa activities with the
Cities' contact prior to the assignment. We recommend only referring out for such services
where there is a reasonable suspicion that there is malingering on behalf of the injured worker.
Before such a referral, an examiner does a cost/benefit analysis to determine if the subrosa has
the potential to derive the savings necessary to employ the expense.
Matters in which we may engage in subrosa include:
a) We have reason to believe that the injured worker is working while collecting temporary
disability or salary continuation.
b) We have reason to believe that the injured worker is engaging in activities outside of their
restrictions.
c) The injured worker's permanent disability is grossly inconsistent with reported activities
or the objective findings.
21
We do not recommend subrosa assignments on files with very little potential exposure. Usually
subrosa investigations are reserved for those cases where we expect a high cost benefit ratio of
return for our clients. We will discuss all subrosa assignments with the Cities and obtain their
authority prior to referral. Any request by the Cities for subrosa will be honored. HRNIS has a
provider list for subrosa investigators, but will certainly honor any vendor selection by the Cities
for case referrals. As with all investigations, subrosa assignments are to be completed and
submitted within 30 days.
Litigation
Initial Legal Analysis
HRMS does not employ staff hearing representatives. Legal assignments or recommendations
are made after review of such factors as the complexity of the case, the presence of opposing
counsel or degree of litigation expected, the need for a particular defense strategy, and the
existence of appealable issues. We will prepare an analysis of all legal cases, outlining exposures
and evaluating possible defense options. We will handle all non - complex legal claims in -house
whenever possible. Before referring any file to outside counsel, HRMS will prepare a
recommendation for such action, and forward it to the Cities for approval.
Legal Firms
If we are awarded the contract, we recommend meeting with the Cities prior to the
commencement of services to discuss which attorneys the Cities are amenable to using. As we
have no monetary affiliations with any provider, we have no financial incentive to recommend
any firm over another. In fact, we believe that specific attorneys, rather than firms, have
generally been found to provide the most effective representation. HRMS will work closely with
counsel in evaluating and making recommendations for case management.
If so desired, we will work closely with the Cities in evaluating legal counsel and make
recommendations regarding suitable panel attorneys. We can also use existing attorneys if
preferred.
Referral Criteria
Legal assignments or recommendations are made after review of such factors as, the complexity
of the case, the presence of opposing counsel or degree of litigation expected, the need for a
particular defense strategy, and the existence of appealable issues.
22
At HRMS, we recognize the below issues or characteristics of files that may be indicators to make
a legal assignment:
Case is set for hearing or trial
Case is represented and delayed: Need deposition
Represented case with potential of appreciable apportionment:
Need deposition.
Complex contribution issues with need to seek order joining co- defendants.
132(a) and S &W allegations
A need to depose a treating physician or panel QME.
Discovery order compelling
Other complex factors where there is a positive cost benefit ratio benefit.
Legal Handling Protocols
When a legal referral is appropriate, the scope of services and defense issues are identified.
HRMS maintains litigation control by providing specific authorization to attorneys to conduct
clearly defined and agreed upon tasks. This authority is set forth in writing. HRMS will monitor
all legal activity throughout the life of the claim. Changes in our defense posture, or approach,
will not be accepted unless by our agreement. The Cities' consensus is also required. We will
ensure that all obligations imposed by the courts relating to cases under our charge will be met,
including those involving subpoenas, depositions, and timely filing of necessary legal documents.
Legal Monitoring
Litigation monitoring is achieved through provision of regular status reports, which are to be
served to HRMS and the Cities. An initial progress report is due from the attorney within thirty
days of receipt of the case. Follow -up reports are required a minimum of every 90 days, or
whenever significant events occur. These periodic reports must be pertinent updates of case status
and prognosis, with a realistic time -line and strategy, not just a recitation of prior reports.
23
Subrogation
During the initial audit of the Cities' existing files, HRMS will analyze each claim for this
potential. In addition, as new claims arrive, possible third party liability will be taken into account
during our initial file review. The original set -up of a claim in our Risk '.Management Information
System (RM1S) requires documentation that a decision has been made with respect to potential
recovery.
Once identified, all subrogation case assigrunents are referred to the claims manager for specialized
handling. However, before initiating subrogation recovery, we will obtain specific direction from
the Cities. if the Cities agree that we should pursue their third party interests, we will do so
aggressively. The claims manager will then review the progress of our recovery effort no less often
than every 90 days.
In those instances where third party liability is evident, HRMS' claims manager will put the
responsible parties on notice and continually monitor the file for recovery no later than every 90
days. Subrogation reports will be provided to the Cities on a semi - annual basis, or more frequently
if desired. The HRMS RMIS report provides for separate analysis and tracking of all third party
cases.
Whenever possible, our claims manager will attempt to settle the subrogation matter without the
use of attorneys. This further increases the potential reimbursement to the Cities. In addition to
limiting the amount of time an attorney is needed, HRMS will provide a determined in —house
subrogation effort. We will only assign counsel as a last resort to recover Financial loss incurred
by the Cities as a result of employee injuries and property damage.
e. Americans with Disabilities Act
The claims manager, supervisors and claims examiners all have working knowledge of' ADA,
FMLA, Employment Law and Section 504 of the Rehabilitation Act. The dedicated claims unit
proposed attended a recent seminar on these issues in 2001. In addition, HRMMS has conducted
two seminars in 1998 and 1999 for our clients and claims staff.
3. Offeror works jointly with the Cities as partners in the administration of the program. The
Cities are expected to report all claims timely and to fund the claims when payment is needed.
4. HRMS is a claims adjusting firm, and all aspects of claims administration is provided.
24
5. Additional Services
Training and Safety Programs
el
Communication /File Review
As with all of our clients, HRMS will provide the Cities with quarterly or monthly file reviews of
all of their open claims. Our file reviews contain narratives of the selected claims along with a
reserve analysis (See Appendix VI).
The Cities can also request monthly visitations to meet with department heads to review selected
files, meet with safety committee personnel, conduct on -site visitations with injured workers and
educational seminar sponsorships. These services are provided to the Cities without further
charges.
HRMS conducts periodic seminars for our clients in which we review new developments in workers'
compensation laws and regulations. For example, one of our recent seminars dealt with methods for
reducing the additional loss exposure inherent in the Moorpark decision. Another was a
comprehensive program concerning AB 435. These "workshop style" conferences allow us to share
our experiences with those of our clients, and provide clear, step -by -step advice about claims
management, reporting procedures and providing information to the client needed to effectively
participate in claim handling strategies.
At HRMS, we recognize that the passing of A.B. 435, left most employers in the dark, when it
comes to the medical status of their employees. It is our position that the passing of this bill was
not to withhold relevant medical information, but in fact, to keep the employee's private medical
history, private. When we receive a medical report from a physician, which renders temporary or
permanent work restrictions, we review the history provided to the doctor from the employee. If
we determine that there is non- relevant medical information in this report, we exclude this
information. We then provide the relevant information to the Cities, to make a determination on
whether or not modified duty or permanent modified duty is available, pending the case. In the
event that the case is litigated, an employee will receive medical information, once the medical
has been served on the WCAB which now makes it public record. The Cities can also implement
.that all injured workers' sign a medical release at the time of completing the claim form.
HRMS has an experienced claims manager on staff whose primary function is to manage the
claims staff and to assure adherence to the Labor Code Rules of Practice & Procedure as well as
monitor all guidelines set forth by the Self - Insurance Plans. Our claims manager will provide
copies of any changes, statutes, rules or regulations directly to the Cities. Currently, we have
requested the new OSHA log to distribute to our clients. This service is provided at no additional
cost to the Cities.
25
HRMS has developed a comprehensive Claims Manual for its clients. This reference material will
be updated to include the specific guidelines required by the Cities for administration of workers'
compensation claims in accordance with its overall philosophical framework. We also provide a
comprehensive employee booklet explaining the Workers' Compensation system, with appropriate
caveats about misuse of the system, for distribution by the Cities to its current and future
employees.
HRYIS has had considerable experience assisting clients in identifying the need for, and
implementing, safety and loss control practices in the workplace. This includes introduction of
respected safety consultants to the Cities for the purpose of controlling accident frequency. These
professionals are able to develop and carry out specific recommendations and procedures to
address loss exposures that may have been identified. We also work closely with the designated
safety personnel for insurers, as we firmly believe that prevention of work related injuries is the
best cost containment device available. We provide these services to the Cities, as pan of our
program. There are no additional costs to the Cities.
Other Services
Medical Bill Review
Our medical cost containment program is among the most effective in the industry. Through our
contacts, we have established contracts and relationships with various bill review organizations
and providers to ensure that our clients are maximizing their medical savings potential.
Medical Auditing Services (MAS): This is an in -house bill review program, which is solely
owned and managed by HRMS. Last year, MAS saved our clients over 40% of the gross amount
billed. MAS charges a competitive rate of 20% of savings as fees.
Photocopy Costs
Included without further costs.
Safety Inspection & Loss Control Services
Loss analyses are provided at claims administration level without further costs.
Fraud Investigation Services
Included without further costs.
Index Bureau Membership /Usage
Part of our commitment to investigate all claims includes our pledge to index all of the Cities'
claims. As a long-standing subscriber to the Index Bureau, HRMS reports all new claims to the
Index System. Consistent with our current policy, HRMS will send all of the Cities' claims to the
Index Bureau and will copy all such reports to the Cities' Safety and Risk Managers. The
membership fee is paid by HRMS. However, there is a $4.00 fee for each claim indexed in the
system.
26
G. Reports and Forms
Computer- Related & Reports
a. Reporting Capability
Our RMIS system identifies injuries by various criteria and can be sorted in over 100 ways on
existing Cities' converted files and new losses. Some of the basic criterion by which the claims
can be sorted include the following:
• Type
• Examiner
• Status (open and closed)
• Location
• Body Part
• Cause
• Policy Year
• Claim Number
b. Loss Runs
• Injured Worker Name
• Delay /Denied
• Fiscal Year
• Incident Date
• Report Date
• Nature of Injury
• Department
• Subrogation
Loss Runs (Please see sample in Appendix II) will be provided on a monthly basis. At a
minimum, the Loss Runs include the following information:
• Type of claim
*
Future & paid medical
• Cause of loss
*
Future & paid T.D.
• Status (open and closed)
*
Future & paid P.D.
• Litigation status
*
Future & paid voc. rehab
• Specific Cities' site and division
*
Allocated loss adjustment
• Vocational rehabilitation status (if applicable)
*
Total incurred
• Date
*
Subrogation recovery
• Time of Day
*
Excess insurance payment
• Body part, identifying injured side
*
Investigation services
• Object/substance involved
*
Legal services
27
I
These reports are available in various time formats and history periods, including "as of and
actual time. Upon the initiation of the program, we will meet with the Cities to determine what
reports are necessary on a monthly basis. At a minimum, the Cities' Risk Managers can expect to
receive, no later than the 15`x' of each month, standard reports which include:
• Open and closed claims summary report — all years, date of injury, employee department,
employeejob class, claim number, employee name, cause of injury, nature of injury, body part.
• Open claims summary report — all years.
• Check register by check number.
• Trust account activity register.
• Summary of losses by year.
• Log of Occupational Injuries and Illnesses — Annual OSHA log.
• Annual list of all claims having a total incurred over $25,000.
• Summary of penalties (if any).
• The public sectors self - insurer's annual report as required by the Department of Industrial
Relations Office of Self - Insurance Plans, and submit it to the Cities no later than 30 days prior
to the due date.
• Maintain a list of all claims referred to case management, including the date of referral, the
name of the case manager, the recommendations of the case manager, including savings, and
the date the case management issue is closed.
• Loss triangle.
C. Other Reports
In addition to these computer - generated reports, the Cities can also receive the following monthly
reports from the office manager:
• Manager's Monthly Report: Summarizing results for the Cities in closing ratios, claimant
contact, set up time etc.
• Subrogation Report: Outlines all recoveries and credits for the month.
• Hearing calendar report.
29
HRMS will develop and provide to the Cities, as requested, specialized reports and statistical
summaries to assist in the evaluation and management of the Cities' compensation program. Such
reports and summaries, except those, which are unusually complex, shall be delivered to the Cities
usually within 14 calendar days of request. Should such reports require an additional charge,
authorization will be obtained from the Cities prior to producing those reports.
Our system also accommodates the entry of supplemental pay information. This data is
identifiable and can be included or excluded in reports depending on the needs of the Cities.
Specific payroll information could be gathered through the Employer's Report of Occupational
Injury. Our system is also capable of providing the information necessary for Cal OSHA
reporting requirements.
In addition, RMIS allows us to prepare custom tailored reporting to suit our clients' needs. The
new syllabus will include Report Writer software that will facilitate custom reports. On a
monthly basis, HRMS will provide the Cities with a loss run report. This analysis will contain a
summary of OSHA recordable days by employee, (we will train designated City personnel if
necessary) and an alphabetical listing of all open and closed claims. We will provide any
specialized reports or statistical data necessary to support the Cities' risk management program.
Software Design
HRMS currently utilizes the new state -of -the -art Windows based Valley Oaks System Portal
software to capture claims information for its clients. This system allows reports to be generated
in a variety of formats using a custom "Report Writer" module. This innovative software brings
many new features to workers' compensation data capture; is "Y2K" compliant and runs on
Microsoft NT. Connectivity is effected through a Citrix system, and we use a secure Web Site
for enhanced EDI.
Currently, our computer system is available 24 hours a day, Monday through Friday.
Our computer system has the capabilities for remote access between the Cities and defense
attorney firms. There is a licensing fee for each remote access account of $1,000.00 per year.
On -Line RMIS Access
HRMS has available on -line "read only" access to the database. This allows the client to look at
the entire file, including the adjuster's daily notes. The Portal system is configured to include E-
Mail capabilities for leaving messages for the adjuster, and remote report writing and printing at
the client's facility, in this package. The client may access these features after providing
hardware and software at its facility capable of Internet access with sufficient RAM to handle
downloading of Windows based data. The Portal system will require an amival license fee for
this optional remote use.
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Diary and Notes
This software provides for an automatic diary system requiring review of files on a 30, 60, and 90-
day basis. Warnings are progranuned into the system to alert adjusters to the need for diary review.
Automatic diaries are in place QRR referrals at 70 days of lost time. Supervision overview diaries
automatically posted on every file.
Diary updates and reviews.are a significant part of our internal audit process. The system also
provides for examiner notes. These entries are confidential to the actual claim file, but the Cities'
files would be available for `real time" read -only review through accessing the Internet and
thereby the secure Web Site.
Electronic Data Interface
We currently have the capability to export and import data via Internet in a wide range of
formats, including ASCII and Microsoft Excel. The Portal system includes interconnectivity
through a secure Web Site. This capability also allows us to securely export and import each
client's data to that client (but no client's data is accessible by any other client) without
corruption concerns. We also have the ability to download our client's Unit Stat data with this
system.
On -Line / Remote Claims Reporting
HRMS has designed and operates a program allowing our clients to report all new injuries "on
line" with our computer system. When they are done entering the data on the computerized 5020
form, they simply save the document. By doing this, an actual pending claim is created within our
system. The employer can then print the 5020 for their records and note the claim number. HRMS
then receives a message of receipt of this pending claim instantaneously. Upon notification we
immediately begin to process the claim. Upon receipt of a fully completed Form 5020
electronically, we are able to download it to our RMIS system, facsimile execute it on behalf of the
employer, forward the required copy to the State and return the employer's copy to the client by
fax.
Documents, Records and Files
All documents, records, files and computer information relating to an injured worker's file
(except for software) will remain the exclusive property of the Cities. We maintain these records
on behalf of the client for the period required by the California Labor Code. Such maintenance
will continue for the duration of our service as Claims Administrator.
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DWC Notices and Correspondence
Our system integrates all of the state mandatory DWC letters. These pre - formatted letters are easily
accessed by the examiner or assistant thrOUgh the RMIS system itself, which retrieves all system
data related material in the required fields. HRMS currently has over 300 correspondence
documents (letters) in the database. In addition, HRMS has full capability to integrate new letters.
Through an approval process new letters are continually being input on an as needed basis. This
saves our technical and clerical personnel considerable time which we use for more productive
tasks such as case analysis and claimant contact.
HRMS provides, at no cost to the Cities, all State mandated forms. This includes our pre - printed
5020, DWC -1 and the information pamphlets for your employees. We will also supply the Cities with
Supervisor Reports of Injury, doctor referral forms, return to work slips and wage statements.
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H. Compensation/Payment Schedule
Service Agreement and Fees
The fee structure over a three -year initial contract term is as follows:
A. YEAR ONE. For Administration of claims from September 1,
2002 through August 31, 2003, and thereafter for the life of the contract period,
the sum of Three Hundred Ten Thousand Dollars ($310, 000), payable
quarterly in advance.
B. YEAR TWO. For Administration of claims from September 1,
2003 through August 31, 2004, and thereafter for the life of the contract period,
the sum of Three Hundred Nineteen Thousand and Three Hundred Dollars
($319, 300), payable quarterly in advance.
C. YEAR THREE. For Administration of claims from September 1,
2004 through August 31, 2005, and thereafter for the life of the contract period,
the sum of the contract fees are subject to further negotiation up to a maximum
increase cap of 3% from the base amount of $319, 300.
D. "TAIL CLAIMS ". Administration of existing claims is included for the
life of the contract in the above prices, so long as such claims were open as of the
day preceding the first day of the first contract year.
E. START —UP COSTS.
F. ANNUAL LICENSE FEE.
There are no start-up costs.
Included at no additional cost.
G. MEDICAL BILL REVIEW. Medical bills will be reviewed, at a service fee of
twenty percent (20 %) of net savings generated by review and reduction, through
Medical Auditing Services.
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I. Validity of Proposal
This proposal shall remain valid for one hundred twenty (120) days.
J. Certificate of Insurance
Insurance Requirements
HRMS maintains in force insurance coverage, in the policy amounts, as follows:
General Liability
$1,000,000
Automobile Liability
$1,000,000
Workers' Compensation
Statutory Limits
Fidelity Bond
$1,000,000
Claims Adjusting E & O
$1,000,000
The Cities of Costa Mesa and Newport Beach will be named as "additional insureds" under
the general liability policy and as "loss payees" under the fidelity coverage. A thirty -day notice
of termination clause will be provided to the Cities.
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