State Compenstation Fund Performance Audit 12 Month Followup

Az Auditor General

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• Publié par: Vawyor
• Nombre de lectures: 43
• Langue: English

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STATE OF ARIZONA
DEBRA K. DAVENPORT, CPA OFFICE OF THE WILLIAM THOMSON
AUDITOR GENERAL DEPUTY AUDITOR GENERAL
AUDITOR GENERAL
April 20, 2010
The Honorable Judy Burges, Chair
Joint Legislative Audit Committee
The Honorable Thayer Verschoor, Vice Chair
Dear Representative Burges and Senator Verschoor:
Our Office has recently completed a 12-month followup of the State Compensation Fund
regarding the implementation status of the 16 audit recommendations (including sub-parts of
the recommendations) presented in the performance audit report released in April 2009 (State
Compensation Fund No. 09-05). As the attached grid indicates:
 12 have been implemented;
 3 are in the process of being implemented; and
 1 is not yet applicable.

Our Office will conduct an 18-month followup with the State Compensation Fund on the status
of those recommendations that have not yet been fully implemented.
Sincerely,
Melanie M. Chesney, Director
Performance Audit Division
MMC:sjs
Attachment
cc: Donald A. Smith, President and Chief Executive Officer
State Compensation Fund

Judith Patrick, Board Chair und

th2910 NORTH 44 STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • [phone] • FAX [phone]

State Compensation Fund
Auditor General Report No. 09-05
12-Month Follow-Up Report
Recommendation Status/Additional Explanation

Finding 1: Fund should continue and enhance efforts to improve its claims expense-to-
premium ratio
1.1 The Fund should consider applying stricter Implemented at 12 Months
standards of coverage so it provides insurance to
only those companies with loss histories within
reasonable industry standards and where
reasonable safety improvement efforts are effective..
1.2 The Fund should continue to work with the Implemented at 12 Months
Legislature to develop legislation to change state In 2009, the Fund worked with the Legislature to
statutes to establish that any medical charges not submit legislation that would have expanded the ICA
covered under the ICA fee schedule and not from a fee schedule to cover ambulatory surgical centers
medical provider within a carrier’s medical network and enact other statutory changes to Arizona’s
shall be based on the usual and customary workers’ compensation statutes. The fee schedule
reimbursement rates that prevail in the same changes failed because of opposition from
community for that medical service. stakeholders, such as hospitals, that would have
been affected by the statutory change. An
alternative bill that would have imposed a "usual and
customary" payment standard for nonfee scheduled
medical providers also received the same opposition
and did not move forward. Fund officials state that
they remain committed to pursuing medical cost-
containment legislation. Fund officials reported that
they attempted to revive a bill in 2010, but its
attempt met the same level of opposition as in 2009.

1.3 The Fund should continue to encourage Implemented at 12 Months
policyholders to direct injured workers to the Fund’s
network providers, when appropriate, for their first
medical treatment.
1.4 The Fund should continue working to make Implemented at 12 Months
improvements to its provider network through efforts
to recruit additional providers and identifying areas
of the State in need of additional providers.
Finding 2: Fund should continue to improve claims management by better aligning itself
with recommended practices
2.1 The Fund should re-examine its consultant’s Implemented at 12 Months
recommended criteria for when to assign claims to
lost-wages claims handlers and adopt additional
criteria, if it determines that doing so would help
avoid payment delays arising from reassigning
claims. Recommendation Status/Additional Explanation

2.2 The Fund should examine its policies, training, and Implementation in Process
oversight functions to determine why claims The Fund has developed performance standards for
handlers fail to adequately complete three-way three-way contact and expects 90 percent
contact. Based on the results of its findings, the compliance among its claims handlers, and also
Fund should modify its oversight and training produces regular management reports. The Fund
practices accordingly and ensure that the three-way reported that it plans to continue modifying quality
contact and claims investigations are completed in a assurance processes in 2010 to better evaluate
timely manner. other aspects of an individual claims handler’s
performance, including investigations.
2.3 To help ensure effective case management, the
Fund should:

a. Require documented action plans for all claims Implemented at 12 Months
with significant costs, and

b. Review documented action plans as part of its Implemented at 12 Months
best practices reviews The Fund’s standard operating procedure is to
review action plans associated with (1) a claims
adjuster’s initial estimate of claims expenses
associated with a claimant, and (2) revised action
plans associated with any “significant change” in the
estimated claims expenses associated with a
claimant. The reviews are part of standard
operations, and not part of occasional or special
best practice reviews.

2.4 The Fund should implement the external Implemented at 12 Months
consultant’s recommendation that it contact injured
workers by phone, in addition to the required letter,
to check on his/her work status and job search when
applicable.
2.5 To help ensure QA reviews are used to improve
statutory compliance, the Fund should:

a. Examine its review policies, and develop Implemented at 12 months
and implement an effective review process
that provides fund management with trends
in claims management and that can be used
to improve claims handlers’ performance;

b. Provide documentary evidence of this Implemented at 12 months
supervisory review; and

c. If appropriate, develop an action plan for Implementation in Process
improvement based on the results. The Fund reported that it plans to enroll all lost
wages claims handlers in mandatory training in the
third quarter of 2010 to review requirements for
calculating lost wages benefits. Further, the Fund
reported that one of the new statutory compliance
reports allowed them to document a need for
supplemental training.

Page 2 of 3 Recommendation Status/Additional Explanation

2.6 To better ensure timely payment of lost-wages
claims, the Fund should:

a. Develop and implement policies regarding Implemented at 12 Months
actively working to obtain medical
documentation;

b. Establish an internal standard for payment Implemented at 12 Months
timeliness when eligibility for lost-wages
compensation cannot be determined within
21 days of an ICA notification date; and

c. Modify its QA review to evaluate whether Implementation in Process
claims handlers are following the policies The Fund reported that it plans to develop a
and meeting the internal standard. managerial report to identify timelines of disability
paid from receipt of documented medical verification
and that its claims audit team will review
semiannually 10 percent of those claims exceeding
the Fund’s 14-day standard. In addition, the Fund
reported that as part of the plan for its 2010 QA
audits, its claims auditors will also conduct quarterly
reviews of compliance with timeliness of first-time
compensability payments.

2.7 To ensure the Fund’s reorganization efforts are on Not Yet Applicable
target and effectively bringing the Fund in line with The Fund reported that its Internal Audit Division will
recommended practices in claims management, the include an audit of the Claims Division as part of its
Fund should perform an internal audit or commission 2011 Audit Plan.
another external claims review to measure progress
against statutory compliance and recommended
practices in claims management.



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