EXAMINATION COMPANIES, OR SHOULD I GO FOR A HIGHER FEE OFFERED BY A
BILLING SERVICE?
Recently, I exchanged emails with a known online billing service that was soliciting examiners on the MSN
Examiner Forum for billing. The onliner was offering higher fees, particularly for exams where he has
direct approval with the carrier. I posed two simple questions to him:
1. What are your general liability and E&O limits; and
2. Do you indemnify the examiners and the customers?
His response was very eloquent and reflects the popular consensus among examiner billing services. He
stated, "Our operation is similar to a medical billing service. We're billing insurance medical exams on
behalf of examiners. In fact, the examiners are independent contractors... If a paramedical examiner
commits malpractice, there is no possible way that we could be culpable. We're operating at arms-length
only in the capacity of a billing agency. The bottom line is that we do not exercise any control whatsoever
over the examiners, and this in and of itself immunizes us from any potential liability, even vicarious
liability. Our company attorney concurs. In essence, I have no concerns regarding malpractice liability. This
is really a non-issue."
Having been in senior management with one of the national examination services for 26 years, and a
corporate officer for the past 12 years, I have had occasion to discuss this issue with most of the
insurance carriers. Not a single carrier agrees with this biller's opinion. To the contrary: they believe his
attempt at plausible deniability is naive at best, and irresponsible at worst, regardless of whether or not it
is a valid or logical perspective.
At the end of the day, even the national examination companies act as billing services for all their
independent contractors and affiliates. To be fair, they provide value added services such as liability
coverage, indemnification, requirements management, communication with the customers, and
aggregation of statistical data.
And they are fully liable for any wrongdoing on any cases they bill.
A few years ago, there was an independent examiner who was charged with multiple counts of sexual
assault while performing exams. This individual had worked for and was terminated by all four of the
national examination companies at various times in his career. Because he had never been criminally
charged before, he was able to fly under the radar of the criminal background check that the national
providers conduct. At the time of his arrest, he was getting case assignments directly from agents and
was billing work through an independent examiner who was billing the work through several national
providers. At no time did he receive any case assignments from the national companies.
One might think that there was clearly an arms-length relationship between this examiner and the national
companies ultimately billing his work; but the carriers did not see it that way when it came time for
indemnification. There were hundreds of thousands of dollars paid in legal fees, and reserves set up for
future claims.
If an independent examiner bills through one of the nationals, they and their subcontractors are generally
covered under the national's liability coverage - that's some of what the billing fee pays for. If, however, the
examiner bills the carrier directly, she is indeed on the hook for any case billed, whether the carrier
specifies this or not. If something goes wrong, she will have to have legal defense, and will likely be
required to indemnify the carrier. If an online service bills her work directly to a carrier and thinks that the
"arms-length" logic will prevail, the cost to defend this position to prove they are not responsible will be
enough to put them out of business and lose whatever assets are not protected or sheltered. And if the
independent examiner is billing through an uninsured biller, she better make sure she has her own
professional liability coverage to protect her personal assets.
Carriers are becoming increasingly demanding with liability limits and indemnification. That is just a
product of the litigious society in which we live. It is not unusual for carriers to expect aggregate general
liability of $2 million, professional liability of $3 million, and a $10 million umbrella.
An independent examiner needs to consider the ramifications of liability when billing direct or through an
uninsured biller who offers higher fees. Liability insurance is a huge cost of doing business in this
industry; defending yourself is even more costly. Operating under the secure umbrella of a national
provider could provide enough peace of mind to let the examiner sleep better at night.
DG December 31, 2005
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CAN YOU EXPLAIN A BIT MORE ON HOW YOU WILL RECRUIT EXAMINERS AND HOW
MAY AN EXAMINER QUALIFY AND WHAT BENEFITS WOULD AN EXAMINER HAVE
BEING ASSOCIATED WITH YOUR COMPANY.
I am in the process of developing the RAS Examiner Network as part of a total solution for the insurance
industry. We are faced with many challenges in the current examination environment. The customers
need to contain costs to be competitive, so the fees continue to erode, resulting in reduced quality and
service. The poor quality and service then become the reason the customers refuse to pay more, so we
are caught in a catch 22.
I hope to bring innovative solutions to the market that will work collaboratively with the examination
providers and will enable the customers to be more efficient so that more spending can be reallocated
towards the examination. The RAS Examiner Network will be more than just a billing service - Lord knows,
the industry doesn't need another billing service. RAS will develop a world-class registry of the best
examiners in the business – a premier, elite group. We will be very selective, very demanding, and we will
have no tolerance for anything less than 100% quality and service. In return, these examiners will be paid
wages higher than any other service can afford. RAS can do that, because providing examiner referral
services is just one aspect of the total RAS customer solution and revenue stream.
As for qualifications, being credentialed and at least one year as an examiner with three customer
references will be minimum requirements. Volume is less important than availability, as we are looking
for quality and service. The carriers will rely on this registry to provide coverage alternatives when the
approved service providers do not meet their service level expectations. Having been on the corporate
side of the largest examination service, I know how often this occurs industry-wide. I can also tell you that
an increasing number of carriers are willing to pay a premium for guaranteed elite service, particularly for
their most discriminating clients and distributors.
RAS will also provide consolidated billing for customers that allow their producers and distributors to order
services from independent examiners. These independents are generally required to work through one of
the national providers at a reduced percentage. The difference with RAS, is that we are not in the
examination business; we are in the relationship management business, working on behalf of the
customer. Although this may sound like a fine distinction, it is a whole different perspective, focused on
service, not volume.
To be clear, RAS is not a billing service for independent examiners. We are providing examiner referral
services and consolidated billing on behalf of the insurance carrier, representing their interests and those
of their agents/brokers. There are many examiners looking for the best billing opportunities but are not
committed to this profession. Since my first post on the MSN Examiner Forum, I received 74 emails from
examiners, many of whom were just interested in knowing how much RAS will be paying, and no interest
in the rest of the value proposition. Those are the examiners that are better off staying where they are.
Let me assure you that RAS will be the most respected service in the industry, and we will set the new
benchmark for how examination services will be delivered going forward. I will continue to update the
benefits to the examiners on the site. Anyone interested can submit a request through the website or
email me directly.
DG January 1, 2006
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ARE THE PAY INCREASES SUBSTANTIAL? WILL EXAMINERS SEE THOSE INCREASES
RIGHT FROM THE START OR WILL THEY HAVE TO PROVIDE IMPROVED SERVICE
BEFORE THOSE INCREASES ARE PUT UNDER CONSIDERATION?
I recognize that "show me the money" is the decisive factor in any business proposition. Pertaining to your
question of whether the pay increases are substantial, we need to first put things in perspective. There
are examiners who earn as little as 30%, or as much as 85% - perhaps more in some circumstances.
There is also the question of what is the percent based on? A sophisticated examiner can keep all the
national companies' prices in a database and decide on a case-by-case basis where to submit each
exam, based on which company has the best price for that particular service for that particular carrier. And
as much as that scenario may maximize the examiner's earnings, it demonstrates a fundamental lack of
connection to any particular company. Perhaps that is what is inherently broken in the industry - there is
no value proposition that embraces the examiner beyond the lure of higher wages. I have listed on the site
some of the benefits that will be offered to examiners in the RAS Network. I am very interested in learning
from independent examiners what benefits beyond the highest pay would be valued? Perhaps benefits
are not important, and examiners would rather just have the money. Please send me your comments and
suggestions.
I have done some modeling to determine what percent can realistically be paid against the cost of
providing the billing and other benefits, and have found that at certain thresholds, 90-95% of billing can be
paid out based on not having to engage in any manual handling and follow-up. That is why I strongly
emphasize quality and service - the less resources needed to go into damage control and follow-up, the
more that can be allocated to the examiner who will perform at 100% everytime. RAS will be positioned as
a premium service, and will not do business with all carriers at any cost.
Pertaining to your second question about ramping up the fees, RAS does not intend to be a training camp
for examiners. I am only interested in working with the top guns who are maintenance free, and worthy of
the high fees from day one. If I have learned anything in 26 years, it is that you are only as good as your
last exam. There is very little customer forgiveness for only performing at 98%. It is that 2% error ratio that
will wipe out the profits for any company offering a 95% fee.
I hope I have answered your questions and welcome any more. I have devoted more than half my life to
this industry and intend to use my resources, my experience, my contacts, and my will, to fix what is
broken, perhaps one exam at a time.
DG January 2, 2006
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I CAN SEE HOW YOUR ACCOUNT MANAGEMENT CONCEPT WOULD BENEFIT THE
CUSTOMER, BUT HOW DOES IT WORK "COLLABORATIVELY" WITH THE VENDORS?
An examiner doesn't get up in the morning and say, "Today I'm going to do all my exams correctly, except
for the ones I get from Chicago based carriers."
When a customer identifies a problem, such as a pattern of not providing accurate measurements, or a
lack of responsiveness from a particular vendor office, the issue is universal to all customers. In today's
environment, the vendor is likely fielding calls from multiple customers all complaining about the same
problems. As a single point of contact representing multiple customers, RAS works with the vendor to
identify the problem, prepare a corrective action plan, and monitor the results. Instead of the vendor
consuming more time on conference calls with a dozen different customers, or responding to multiple
correspondence dealing with the same problems, the vendor can now devote more time to correcting the
problem and only having to report to a single source.
RAS will address service and quality issues as they occur, and will conduct formal quarterly reviews with
each of the customer's approved vendors. During the reviews, RAS will address service level expectations
and key performance indicators that apply to all customers working with the vendor. This process
eliminates the redundancy inherent in error resolution meetings discussing the same issues that apply to
multiple customers. Again, the vendor resources can now be devoted to fixing the problems instead of
dwelling on the nature of the problems time after time with each customer. The money saved from cutting
down the multiple points of contact can be reallocated from damage control to quality control or put back
into higher examiner wages.
DG January 3, 2006
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WE HAVE A VENDOR RELATIONS DEPARTMENT SET UP TO WORK WITH OUR
VENDORS. HOW DOES RAS HELP US ELIMINATE REDUNDANCY AND REDUCE OUR
COSTS?
Many insurers have set up vendor relations departments to liaison with their suppliers. This trend is a
clear indication of the growing need to manage vendors away from the core business side. New
Business Managers, Underwriting Managers and Operations Managers have full time jobs managing their
departments without having to contend with ongoing vendor issues, especially when the carrier is working
with multiple vendors.
The larger the carrier, the greater the need for some form of vendor management. Service level
monitoring, issue resolution, and billing audits are just some of the ongoing responsibilities that
consume an increasing amount of the customers’ time in managing their vendors. If a carrier is working
with multiple vendors, even a vendor relations department must spend countless hours reviewing the
same service level issues and key performance indicators with each of their vendors.
RAS is retained by the customer as the single point of contact to manage its vendors, eliminating the need
for redundant meetings and conference calls that deal with the same service issues, IT initiatives, billing
reconciliation, and audits for all their vendors. With a monthly retainer based on case volume, there are no
fixed costs associated with account management. Because RAS represents multiple carriers as their
Vendor Account Manager, we have built-in efficiencies in working with the vendors. We can, therefore,
manage the accounts much more economically, efficiently, and effectively than any single carrier alone.
The vendor also benefits through a “one-stop” error resolution and management process representing
multiple customers.
As a single point of contact, RAS is an extension of a vendor relations department, enabling internal
Relationship Managers to be more productive. Carriers that do not have these departments retain RAS as
their outsourced vendor relations department. RAS can also assist the customer in developing realistic
vendor service level agreements and deliverables, drawing from expertise in industry standards, best
practices and individual customer requirements.
DG January 4, 2006
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DOESN’T YOUR EXAMINER NETWORK COMPETE WITH THE VENDORS, AND HOW
THEN CAN YOU BE AN IMPARTIAL VENDOR ACCOUNT MANAGER?
RAS is not in the examination business and does not compete in the examination arena. The RAS
Examiner Network is a registry that identifies independent examiners who have demonstrated excellent
quality and service. Carriers and agents will be able to utilize these examiners when the need arises.
Customers can choose to pay these examiners directly or can defer to RAS to centralize the billing on their
behalf. RAS will not compete as an approved vendor, but will offer centralized billing as one of the
benefits of the RAS Account Manager Service.
In today’s environment, approved vendors tend to be held to higher standards and service levels than
“unapproved” or independent examiners, creating an unfair advantage for the independents. RAS will
monitor all independent examiners and vendors equally, assuring that every exam is completed within the
customer’s service level expectation.
DG January 5, 2006
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PLEASE COMMENT ON A RUMOR THAT SEVERAL LARGE CARRIERS HAVE SIGNED
ON WITH RAS AND NOW YOU ARE GOING TO NEGOTIATE THE PRICES DOWN EVEN
FURTHER.
A number of carriers will be retaining the services of RAS and deriving the benefits of single-point-of-
contact account management. Pricing review will be an important part of account management along with
creating solutions that will help our customers develop more profitable and mutually beneficial
relationships with their providers.
A legitimate pricing analysis needs to take into account the type of services ordered by the customer rather
than purely analyzing the level of discount. Examiners need to be compensated fairly for getting to the
proposed insured's house - that is the basic housecall cost. Any costs associated with services
performed on the case once she is there are incrementally less than the costs of getting there. That is
where RAS will help customers identify opportunities for cost savings, or where recommendations will be
made for a price increase. Price management is not about beating the vendors down, but working
collaboratively to recognize the value of the relationship with the customer in the context of the services
performed. A customer that is heavily discounted but orders mostly exams with blood and ECGs is a much
more desirable account than the customer that orders urine pick-ups at published rates. The examiner
earns and the vendor bills incrementally more with the former than with the latter.
Because RAS is providing a service that has never been offered before in this industry, it is only natural to
suspect that RAS' only value proposition is in lowering fees. It is because the industry has competed on
price and not value or for any regard to the actual services delivered, that we are working in a
commoditized environment. RAS will provide the necessary reality check to strengthen the relationship
between customer and provider.
DG January 9, 2006
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IN THE 1990’S, PORTAMEDIC OFFERED ELECTRONIC EXAMS BUT ALL THE BUGS
WERE NOT WORKED OUT AND IT WAS DIFFICULT TO GET GOOD SUPPORT. I HOPE
RAS FIXES THE TECH ISSUES BEFORE IMPLEMENTING AN ELECTRONIC EXAM
PROCESS.
Some may remember 1993 as the year the FBI stormed the Davidian compound in Waco, or the First
World Trade Center Bombing, or the historical, if not meaningless peace treaty signed between Israel and
the PLO. I will remember 1993 as the year I was involved in the development and launch of the ill-fated
Portamedic Electronic Paramedical (PEP). Imagine if you can, a world without an Internet, and trying to
deploy 400 primitive pen-based laptops with less functionality than a gameboy. Imagine, too, that the 15
carriers who thought this was an amazing idea, couldn't accept data transmissions, and simply printed out
paper versions of the electronic forms to store in their file cabinets. When a customer form needed to be
updated or added, the laptop had to be shipped back to Portamedic's IT Center to re-program the unit. And
did I mention that in 1993 dial-up modem speeds for transmitting data was 14.4 kbps, taking about 20
minutes to transmit a single exam?
The PEP was a wine that was served well before its time; but the world is a much different place today,
especially from a technological perspective. Web-based functionality and current programming and
development techniques make a PEP-type initiative much more practical and effective today.
DG January 10, 2006
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WHY HASN’T THE INDUSTRY GONE TO A UNIVERSAL EXAM FORM?
The question of a universal exam form has been discussed, debated, and considered for many years.
About 15 years ago, the American National Standards Institute (ANSI) was working on standardizing a
number of insurance processes, including the exam form. The initiative got very little support from the
insurance industry, because at the time, the common opinion among the carriers was, "we are all for a
universal form as long as it is based on ours."
The efforts were abandoned until 2000, when ACORD took on the task of bringing standardization to the
life insurance arena. ACORD had developed universal application forms for the property and casualty
industry many years ago, making it easier for brokers to sell auto insurance for multiple carriers using one
standard application form. In 2000, ACORD set up a task force that included the Big4 exam companies
and many of the top carriers to explore the feasibility of universal application and exam forms. In 2002, the
prototypes were developed, and by the end of 2004, the forms were approved by the Commissioners of
Insurance in all 50 states. There is now a universal exam form available for use, and carriers just need to
slap on their logos and file with the states. Some carriers have already done so; but for many, it is easier
said than done. Carriers have built underwriting and processing systems based on their proprietary
forms/formats, and their underwriting decisioning depends on certain questions asked a certain way. The
good news is that ACORD has also developed standardized data formats based on XML language that
will make it easier to move to a universal environment. XML projects are among the fastest growing
initiatives at many carriers who recognize that standardization allows them to be more competitive,
especially in the brokerage arena. ACORD's entry into the life side of insurance was actually prompted by
the National Association of Independent Life Brokerage Agencies (NAILBA), a very influential brokerage
trade group that had also been working on standardization of forms and other common workflows.
Based on conversations I've had with many of the top carriers, I am much more optimistic today about the
prospect of the industry moving toward standardized forms. This is an industry that has few early
adopters, but many fast followers. RAS will be working on standardization initiatives of workflow
processes and forms as a more effective way for carriers and their trading partners to do business.
DG January 11, 2006
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WHY IS DISCOUNTING SO WIDELY ACCEPTED BY THE PARAMED COMPANIES AND
WHY IS IT ASSUMED THAT DISCOUNTING IS REASONABLE?
In any discussion about discounting, we need to get to the basis of what is being discounted and how did
we arrive at the “published” price in the first place. I am always amused when I see ads for $800
mattresses that are on sale for $399. Who determined that the mattress was worth $800 in the first
place? Certainly the retailer is not giving away the mattress as a community service. So we assume the
mattress is worth somewhere between $800 and $399. Then we get a Columbus Day circular that offers
the same mattress for $299 for one day only, and we have to further wonder, who in their right mind would
pay $800 for that mattress?
Examination services pricing is established much like the pricing in other industries. Vendor A comes out
with new year pricing, and vendors B, C, and D follow with their rate schedules. And like many industries,
competitor pricing for similar services are similarly priced. Over the years, when I determined the pricing
for Portamedic, there were many factors that went into the exercise, some internal, some external.
Determining the “value” of an exam, however, is more a subjective opinion. When the customer’s opinion
is not aligned with the vendor’s, it often leads to discounts and concessions. Volume projections are
considered when offering a discount; but in addition to calculating the possible maximum gain in being a
preferred vendor, one must also factor in the probable maximum loss if the vendor loses the approval
because the pricing was not aggressive enough.
The one thing that is never negotiable is quality. When we shop for appliances, unless we are knowingly
buying a scratched, dented or reconditioned model, we expect the gizmo to be new in the box and in
working order regardless of the price. The same holds true for exams. Regardless of what the customer
pays, we are expected to deliver a perfect exam everytime. And in today’s environment, when the customer
wants it “faster, better, cheaper”, the best we can offer is, “pick any two out of three.” In the new world order
of examinations, we will be able to deliver all three, and it won’t be at the examiner’s expense.
DG January 12, 2006
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THE EXAMINERS’ PAY/TIME RATIO IS HIGHER FOR A URINE PICKUP THAN OTHER
SERVICES WHICH SHOULD COST MORE BECAUSE THEY ALSO REQUIRE A HIGHER
SKILL SET; YET THAT DOESN’T SEEM TO BE REFLECTED IN THE FEE SCHEDULE.
ALSO, THE VALUE IN THE MOBILE EXAMINER COMPARED TO FIXED SITE MD EXAMS
DOESN’T SEEM TO BE RECOGNIZED.
An ECG and comprehensive history indeed require a higher skill set than just being a urine courier. Some
carriers have even elected to allow their agents to do urine pickups and oral fluid collections. As a
historical point of interest, before the age of HIV, urine was the only fluid collected. The labs back then -
GIB (owned by Prudential and later acquired by LabOne) and HORL (later renamed LabOne) weren't even
set up to analyze blood. Once the carriers started getting all the testing results available from blood, they
were now able to do some creative underwriting, particularly in the preferred risk arena, to offer more value
driven policies. These products would have been difficult to price with just urine testing. Ironically, it is
also the packet business - where there is no face-to-face selling and the examiner needs to review the
application forms with the proposed insured - that has made the examiners even more indispensable. If
the industry abandoned blood for urine, DHL could conceivably be a new competitor.
In the mid 90's, Equifax' paramedical division, PMI, made a bold move by revamping the pricing model for
examination services. They came out with a pricing schedule that charged much more than the market
price for single services, and much less than the market price for double and triple services. The strategy
was to be able to pay examiners a fair wage for getting to the house and to impress upon the industry that
the incremental costs associated with double and triple services were where the carriers would see real
savings. Unfortunately, the carriers were one step ahead, and told their agents that they could only use
PMI for double and triple services, but not for single services. PMI abandoned the pricing strategy the
following year.
The paramedical industry, as you allude to, was built on the premise that MD exams are costly,
inconvenient, and performed by the house nurse anyway. So why pay an MD to do something that a
mobile examiner can do cheaper, faster, and just as well? With the Quest acquisition of LabOne, it will be
interesting to see how long it takes for Quest to push in-house exams at one of their 1700+ sites, but at a
lesser cost than a mobile exam. Any exams handled through their infrastructure will result in incremental
profits, albeit at the expense of their own mobile examiners.
The industry has lost perspective on the value of the examiner. Indeed, many examiners have never been
oriented to understand the real value they bring and the critical need for accurate and timely exams. Lives
are literally in their hands; and the ability to offer reasonably priced insurance would not be possible
without accurate underwriting information. One lost policy because of poor service or an incomplete exam
can cost an insurer thousands of dollars in lost premiums. One policy placed on the books that should
have been declined can cost even more.
There is no doubt that the issue of examiner wages needs to be addressed, and I would be very surprised
if this was not a high priority with all the paramedical companies. The challenge will be in finding the
money to pay the examiners without the carriers paying more and without the PCs going out of business.
That is the challenge that RAS has accepted and the foundation of our business model. The change will
not take place overnight; but I am confident that 2006 will be the turning point for the industry.
DG January 16, 2006
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