AGENDA REPORT
REQUEST FOR CITY COUNCIL ACTION
AND CORONA UTILITY AUTHORITY ACTION
DATE: 4/4/2018
TO: Honorable Mayor and City Council Members
Honorable President and Board Members
FROM: Legal & Risk Management
SUBJECT:
Title
Pursuant to Request for Proposal (RFP) 18-025CG, award Professional Services Agreements to Adminsure, Inc., Lien On Me, Inc., Excel Managed Care & Disability Services, Inc. and Matrix Health Care Services, Inc. (DBA: MyMatrixx) for the Workers’ Compensation Program Third Party Administration and Managed Care Services.
End
RECOMMENDED ACTION:
Recommended action
1. That the City Council take the following actions in response to RFP 10-025CG:
A. Award the attached professional services agreement to AdminSure, Inc. in the amount of $222,000 for Workers’ Compensation Program Third Party Administration Services.
B. Award the attached professional services agreement to Lien On Me, Inc. in the amount of $90,000 for Workers’ Compensation Managed Care Program Services (Bill Review & Lien Defense).
C. Award the attached professional services agreement to Excel Managed Care & Disability Services, Inc. in the amount of $130,000 for Workers’ Compensation Managed Care Program Services (Utilization Review\Case Management\Return to Work & Disability Management).
D. Award the attached professional services agreement to Matrix Health Care Services, Inc. (dba myMatrixx) in the amount of $50,000 for Workers’ Compensation Managed Care Program Services (Pharmacy Benefits Management).
E. Authorize the Purchasing Manager to issue purchase orders to the above firms in the above noted amounts.
F. Authorize the City Manager to approve amendments to each agreement up to the amount provided for in Corona Municipal Code Section 3.08.070(I).
G. Authorize the City Attorney/Legal and Risk Management Director to: (1) exercise the City’s discretion regarding whether to extend the agreements for four (4) additional one-year periods, as discussed herein, and to execute amendments to the agreements to implement the same; (2) to determine whether the City should alter its pricing structure provided by Lien on Me for either Bill Review or Lien Defense from a percentage of savings to a flat rate, as discussed herein, and to execute amendments to the agreements to implement the same; and (3) approve and execute any additional non-substantive amendments to the agreements which are consistent with the direction provided for herein.
2. That the Corona Utility Authority (“CUA”) review, ratify and to the extent necessary authorize the City Council to take the above actions.
Body
ANALYSIS:
WC TPA & Managed Care Program Services
A comprehensive Workers’ Compensation (“WC”) Program typically includes the following components of service, either bundled under one consultant or unbundled amongst two or more consultants:
Third Party Administrator Services
Managed Care Program Services
Components
Bill Review
Utilization Review
Clinical Consultation
Case Management (Telephonic and Field)
Pharmacy Benefits Management
Return to Work and Disability Management Services
Special Investigations and Fraud
The Third Party Administrator (“TPA”) services will always be awarded to one consultant, but the seven components of the Managed Care Program (“MCP”) services may be awarded to one or more consultants, including the consultant who is awarded the TPA services.
Since July 2015, the City’s Legal and Risk Management (“LRM”) Department has been responsible for management of the City’s WC Program, including contract administration of the TPA and MCP agreement(s) and vendor(s). This includes: reporting of injuries, employee contact; providing lost time and salary information; training for managers, supervisors and employees; early return to work program; claimant service evaluation and maintenance of the City workers’ compensation claim files. The LRM Department is also responsible for managing local and regional medical care providers, including those to be included in the City’s “medical provider network” or MPN (to the extent the City maintains one), as well as making sure that City employees are receiving proper medical attention as quickly, efficiently and effectively as possible, so that they can return to work as soon as reasonably possible. At the same time, of course, the LRM Department must determine whether medical and related WC services are provided in the most cost-effective manner possible.
The City has averaged about 100 new claims per year over the last five years, and has over 4,000 claims dated prior to 2012. The City is potentially responsible for medical issues that are linked to those claims, so the WC TPA and MCP providers can be called upon to handle issues related to those claims.
The City is self-insured for workers’ compensation benefits under Certificate Number A-7156-10-132, and has been self-insured since January 1, 1979. The City maintains a self-insured retention level of $1,000,000 and excess insurance coverage up to State statutory limits, with excess coverage carried by the California State Association of Counties (“CSAC”).
Current WC TPA & Recommendation to Unbundle
For as long as staff can remember, the City has managed its WC TPA & MCP services in a bundled fashion, meaning that essentially all of the MCP component services have been provided by the same consultant who is providing the TPA services. Sedgwick Claims Management Services (“Sedgwick”) has been the City’s WC TPA since 2012, and except for an occasional special investigations assignment provided to another consultant, Sedgwick has been performing all of the TPA and the MCP component services.
Since assuming responsibility for the WC Program in July 2015 (through the merger of the City Attorney and Risk Management Departments), the LRM Department has been trying to determine if the bundled WC TPA and MCP structure is in the City’s best interests. That is, whether the bundled program is providing the most cost-effective structure for the City and whether it is providing the City and its employees with the most responsive, customer service-oriented program possible.
This effort has been significant and on-going, and we have taken some interim steps to improve the service delivery models. For instance, some employees - mostly public safety employees - were experiencing significant delays in obtaining approvals for MRI’s and were at times being asked to begin physical therapy before obtaining the MRI’s. This did not make medical sense to us, and it also seemed to cost the City more money in the end. That is, the amount of consultant and employee time being spent on an analysis and discussion of whether an MRI was needed seemed to us to be costing the City more money than the MRI (which typically cost the City no more than a few hundred dollars). As a result, in 2016 we expanded the list of treatments that could be authorized by our local industrial clinics to include MRIs.
In the end, we have concluded that the City would likely both save money and get better, more effective service by unbundling. For instance, rather than having our TPA determine whether their own Utilization Review (“UR”) staff should be brought into the picture (UR helps determine, for instance, if a procedure is medically necessary) and thus pay their own UR staff to perform the service, we think it might be best to have our TPA make the determination to involve UR absent any potential financial considerations.
While there may be other challenges related to unbundling, including communication and coordination amongst 3 or 4 individual consultants, we will of course monitor and manage those issues. While a bundled program is difficult to change and takes 2-3 months of coordinated effort to switch from one TPA to another, with unbundling we believe that the WC Program will be more nimble and capable of being altered more easily. That is, if for any reason we determine that one of the unbundled MCP services is not working most effectively and cost efficiently, we believe we can return to the Council and make a change in consultants rather easily, even if that would mean adding that service to the Scope of Work provided by the TPA consultant. That is, while it is difficult to move from one bundled TPA to another or to even remove an MCP service from a bundled TPA, moving in the other direction is not difficult. Thus, there is little risk it seems to us in trying this unbundled approach.
The RFP Process
In an effort to best consider unbundling, we structured RFP 18-025CG to allow the City to bundle or unbundle the MCP services in any combination. On January 24, 2018, RFP 18-025CG was formally advertised in Sentinel Weekly, posted on the City of Corona website and sent to 28 firms by Purchasing Specialist, Carlos Garcia.
Thirteen (13) vendors provided proposals for one or more components of the RFP by the due date, and those vendors were:
Adminsure
Arissa Cost Strategies (“Arissa”)
Athens Administrators (“Athens”)
Corvel, Excel Managed Care (“Excel”)
Hazelrigg Claims Management (“Hazelrigg”)
Intelligent Medical Solutions (“IMS”)
JT2 Integrated Resources (“JT2”)
Keenan & Associates (“Keenan”)
Lien On Me
Matrix Health Care Services dba myMatrixx (“myMatrixx”)
Sedgwick
Tri-Star
The written proposals were reviewed and ranked (separately under the TPA category and each of the MCP component categories) by five LRM Department employees (Dean Derleth, John Higginbotham, Maria Conzelman, Loretta Arndt and Amy Rich), using the following criteria: qualifications of firm (25%), qualifications of personnel (25%), related experience (25%), completeness of response (10%) and reasonableness of price (15%).
The top-rated companies in each category were invited to attend an oral interview. All employee groups were invited to participate on the interview panel. The TPA interview panel consisted of the 5 LRM Department employees, as well as DeAnna Soria from the Risk Management Division of the City of Huntington Beach, Jason Perez representing the Police associations and Pete Schumacher representing the Fire Association. The MCP interview panel consisted of the 5 LRM Department employees, as well as DeAnna Soria from the Risk Management Division of the City of Huntington Beach. Carlos Garcia of the Purchasing Division also observed all interviews. The interviewed companies were then ranked after the oral interview.
The written and oral results were reviewed to determine the companies to be recommended for selection in the RFP process, as follows:
Third Party Administrator (TPA) Services
8 vendors (Adminsure, Athens, Corvel, Hazelrigg, JT2, Keenan, Sedgwick and Tri-Star) provided proposals for the WC TPA services. The 4 top rated companies were in order as follows:
AdminSure (77.20%)
JT2 (71.18%)
Tristar (68.70%)
Hazelrigg (68.22%)
For the oral interviews, AdminSure had the highest ranked score of the four (1.71 out of 4; with 1 being the highest ranked), and was selected overall based on the scoring of the oral interview and written proposal. Adminsure had the highest overall score, they have been in business for more than 35 years, they were found to have the most relevant and qualified experience, including with many cities (about 60), many of whom (about 50) had public safety employees (who are entitled to several unique benefits under WC law and the TPA must be very knowledgeable in those areas), and they were open and willing to work in an unbundled program. It was clear to us that some of the respondents, mostly large TPA firms similar to Sedgwick, were not keen on an unbundled program. Adminsure was also the second lowest in price behind Hazelrigg.
MCP - Bill Review
11 vendors (Adminsure, Arissa, Athens, Corvel, Hazelrigg, IMS, JT2, Keenan, Lien On Me, Sedgwick and Tri-Star) provided proposals for the Bill Review component of the MCP services. The 6 top rated companies were in order as follows:
Lien On Me (76.82%)
JT2 (69.86%)
IMS (67.95%)
Arissa (67.82%)
Adminsure (67.47%)
Tristar (64.75%)
The top 3 who had not also submitted a proposal for TPA Services (Lien On Me, IMS & Arissa) were invited to a separate interview panel just for those firms who bid only on the MCP services. For the oral interviews, Lien On Me had the highest ranked score of the 3 (1.2 out of 3; with 1 being the highest ranked), and was selected overall based on the scoring of the oral interview and written proposal. Lien On Me had the highest overall score, their business has focused for more than 20 years only on Bill Review and related services (e.g. Lien Defense, as discussed below), they were found to have the most relevant and qualified experience, including with many cities, and they were clearly open and willing to work in an unbundled program.
Lien On Me was also the 1st lowest in price estimation.
It is also important to point out that staff believes that Bill Review is one of the two most important MCP services to have “unbundled” from the TPA, the second being Utilization Review. They are the two highest cost centers outside of the TPA and we believe they are potentially the most sensitive to independence.
Bill Review Fee Structures; Delegated Authority
Lien On Me provided 2 different fee structures - a Flat Fee structure and a Percentage of Savings structure. The difference between the two structures involves the rate for reviewing each routine bill (a bill submitted by a provider other than a hospital or a preferred party with whom billing agreements have already been made) and the rate for reviewing hospital bills. Both structures called for the same savings-based fee for preferred party arrangements. The Flat Fee structure called for a flat $7 per routine bill and a flat $300 for all hospital bills. The Percentage of Savings structure called for a flat $6 per routine bill and a fee equal to 5% of savings realized by Lien On Me on all hospital bills.
The City estimates that each year about 2,200 routine bills are reviewed and about 100 hospital bills are reviewed. However, the vast majority of hospital bills appear to be out-patient hospital services, which are of course significantly lower in amount. Accordingly, since the average hospital bill savings would have to be about $6,000 to equal the flat rate of $300 (5% x $6,000 = $300), and since the vast majority of our hospital bills appear to be outpatient services, staff believes that saving an average of $6,000 per bill may be difficult. We also like the idea of incentivizing Lien On Me to find more bill savings through a percentage fee split. Thus, staff believes that the Percentage of Savings structure is likely in the City’s best interests, in that we believe $2,200 saved on the routine bills and the incentive derived from the hospital bill percentage fee split is the best way to proceed initially.
However, under this new unbundled program, staff will better be able to track how our fees would fare under either scenario. Thus, within a year or so we should know if we would be better off under the Flat Fee structure. Therefore, in the recommended action we have asked that delegated authority be given to the City Attorney/Legal and Risk Management Director to make that determination and execute an amendment to switch from the Percentage of Savings structure to the Flat Fee structure if it is determined to be in the City’s best interest to do so.
Lien Defense (Optional Service); Fee Structures; Delegated Authority
Lien On Me has also proposed an optional Lien Defense service, a service which was not requested in the RFP. This service is essentially to help the City reduce liens filed by medical service or other providers against claims at the Workers’ Compensation Appeals Board (“WCAB”). While it does not occur often for the City, it is a service which has traditionally been handled by law firms which represent the City at the WCAB. However, Lien On Me provides an optional method which could prove to be cheaper for the City, and thus staff is willing to try this service on a trial basis.
Again, Lien On Me has provided 2 different fee structures - a Flat Fee structure ($1,375 for up to 3 appearances at the WCAB; $400 per appearance thereafter) and a Percentage of Savings structure (25% of savings realized, up to a maximum of $5,000, with no cap on the number of appearances). Staff believes again that the Percentage of Savings structure is likely in the City’s best interests, in that we don’t get a lot of liens and those we get are likely to be smaller in amount. We also like the idea of incentivizing Lien On Me through a percentage fee split.
However, again, under this new unbundled program, staff will better be able to track how our fees would fare under either scenario. Thus, in the recommended action we have asked that delegated authority be given to the City Attorney/Legal and Risk Management Director to make that determination and execute an amendment to switch from the Percentage of Savings structure to the Flat Fee structure if it is determined to be in the City’s best interest to do so.
MCP - Utilization Review
10 vendors (Adminsure, Arissa, Athens, Corvel, Excel, Hazelrigg, JT2, Keenan, Sedgwick and Tri-Star) provided proposals for the Utilization Review component of the MCP services. The 6 top rated companies were in order as follows:
Adminsure (76.30%)
Excel (71.17%)
Arissa (66.95%)
JT2 (66.34%)
Tristar (64.15%)
Hazelrigg (63.25%)
The top 2 who had not also submitted a proposal for TPA Services (Excel and Arissa) were invited to a separate interview panel just for those firms who bid only on the MCP services. For the oral interviews, Excel had the highest ranked score of the 2 (1.2 out of 2; with 1 being the highest ranked), and was selected overall based on the scoring of the oral interview and written proposal. Excel had the second highest overall score, their business has focused for more than 25 years only on disability and medical case management services, they were found to have the most relevant and qualified experience, including with many cities, and they were clearly open and willing to work in an unbundled program.
Excel was also the 1st lowest in price estimation.
It is also important to point out again - as mentioned above - that staff believes that Utilization Review is one of the two most important MCP services to have “unbundled” from the TPA, the second being Bill Review.
MCP - Case Management
9 vendors (Arissa, Athens, Corvel, Excel, Hazelrigg, JT2, Keenan, Sedgwick and Tri-Star) provided proposals for the Case Management component of the MCP services. The 4 top rated companies were in order as follows:
Excel (73.37%)
Arissa (69.20%)
JT2 (65.90%)
Hazelrigg (64.00%)
The top 2 who had not also submitted a proposal for TPA Services (Excel and Arissa) were invited to a separate interview panel just for those firms who bid only on the MCP services. For the oral interviews, Excel had the highest ranked score of the 2 (1.2 out of 2; with 1 being the highest ranked), and was selected overall based on the scoring of the oral interview and written proposal. Excel had the first highest overall score, their business has focused for more than 25 years only on disability and medical case management services, they were found to have the most relevant and qualified experience, including with many cities, and they were clearly open and willing to work in an unbundled program.
Excel was also tied (with Arissa) for 1st lowest in price estimation.
MCP - Pharmacy Benefits Management
8 vendors (Athens, Corvel, Hazelrigg, JT2, Keenan, myMatrixx, Sedgwick and Tri-Star) provided proposals for the Pharmacy Benefits Management component of the MCP services. The 2 top rated companies were in order as follows:
myMatrixx (67.20%)
JT2 (65.15%)
Although myMatrixx had not submitted a proposal for TPA Services, they were present for the JT2 TPA interview panel, as JT2 used them as a sub-consultant (it appears that myMatrixx is a sub-consultant for several firms for Pharmacy Benefits Management services, including a few of those who proposed to the City). myMatrixx was selected overall based on the scoring of the oral interview and written proposal. myMatrixx had the first highest overall score, their business has focused since 2001 almost exclusively on pharmacy benefits management in the WC market (it is 98% of their business and in 2017 they were acquired by Express Scripts, the nation’s largest pharmacy benefits manager), they were found to have the most relevant and qualified experience, including with many cities, and they were clearly open and willing to work in an unbundled program. In addition, JT2 indicated that they would not unbundle their MCP services.
Pharmacy Benefits Management was one are that staff could not accurately estimate for cost savings, but staff believes that their fee structure appears to be the most competitive and cost effective.
MCP - Return to Work and Disability Management Services
5 vendors (Corvel, Excel, JT2, Keenan and Sedgwick) provided proposals for the Return to Work and Disability Management component of the MCP services. The 2 top rated companies were in order as follows:
Excel (70.52%)
JT2 (68.22%)
The top 1 who had not also submitted a proposal for TPA Services (Excel) was invited to a separate interview panel just for those firms who bid only on the MCP services. Following the oral interviews, Excel was selected overall based on the scoring of the oral interview and written proposal. Excel had the first highest overall score, their business has focused for more than 25 years only on disability and medical case management services, they were found to have the most relevant and qualified experience, including with many cities, and they were clearly open and willing to work in an unbundled program. None of the proposers are estimated to generate significant savings in this area, since the City spent only about $7,000 on this service in FY 2016-17.
MCP - Clinical Consultation
With Sedgwick, the City was paying $10,000 per year for them to maintain a 24/7 Work Injury Nurse Line. Essentially, this was a phone number that employees could use to find out where to obtain medical service. Unfortunately, the LRM staff determined that only about 2 employees on average per month would call the line, and most employees tended to be dissatisfied with the service they would receive. Most of the time, LRM staff and even fellow employees could provide employees with better, more effective information. Thus, last year the decision was made to discontinue this service with Sedgwick and save $10,000. We included this component in the RFP, wondering if better ideas might be proposed for this type of service. Unfortunately, this does not appear to be the case and the Clinical Consultation component is not being proposed to be awarded to any vendor.
MCP - Special Investigations and Fraud
No standalone responses to the RFP were submitted for this MCP component service. However, this service is not needed often, and Staff has access to these services elsewhere. Therefore, the Special Investigations and Fraud component is not being proposed to be awarded to any vendor pursuant to his RFP.
Agreement Term; Optional Extensions with COLA; Delegated Authority
The term of each of the Professional Services Agreement is two (2) years from July 1, 2018 to June 30, 2020, and the City has the unilateral ability to extend each agreement for four (4) additional one (1) year periods under the same terms and conditions. If the City exercises this discretion, then each agreement provides for any flat rate fees to be adjusted by the lesser of: (1) two percent (2%); or (2) the change in the Consumer Price Index for the recent 12 month period. There is no discretion on how the flat fees are to be adjusted. Each extension and adjustment would be documented pursuant to a duly authorized written amendment to the agreement.
Whether these extensions are implemented is likely going to be routine and based solely on a determination that services are being performed well and that the anticipated savings are being achieved, determinations of course which are expected to be performed by staff and for which we accept responsibility. Thus, in the recommended actions we have asked that delegated authority be given to the City Attorney/Legal and Risk Management Director to make these determinations and execute an amendment to implement the extensions. If any issues arise with respect to service or costs, of course staff will return to the City Council for further discussion and direction prior to implementing any extension.
In addition, it should be noted that in each agreement the City retains the absolute right to terminate the agreement, or any portion of it, for any or no reason upon giving seven (7) days’ notice to the consultant. This is also a determination which is to be made by the City Council, so we would return to the City Council for further discussion and direction prior to making any such determination.
COMMITTEE ACTION:
Not applicable.
STRATEGIC PLAN:
Not applicable.
FISCAL IMPACT:
Although the total cost for the proposed professional services agreements is $492,000, staff estimates that savings from current expenditures can be at least $200,000 (could in fact be as much as $140,000 for TPA, $75,000 for Bill Review, $50,000 for Utilization Review and $75,000 for Case Management). Estimates are difficult to make, but staff feels comfortable with a conservative estimate of $200,000 in savings. The savings from the recommended changes will be included in the department’s operating budget submittal for Fiscal Year 2018-19.
ENVIRONMENTAL ANALYSIS:
This action is exempt pursuant to Section 15061(b)(3) of the Guidelines for the California Environmental Quality Act (CEQA), which states that a project is exempt from CEQA if the activity is covered by the general rule that CEQA applies only to projects that have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. This action awards contracts to various entities associated with implementing the City’s workers’ compensation program and managed care services and there is no possibility that this action will have a significant effect on the environment. Therefore, no environmental analysis is required.
PREPARED BY: AMY RICH, RISK MANAGER
REVIEWED BY: DEAN DERLETH, CITY ATTORNEY/LEGAL & RISK MANAGEMENT DIRECTOR
REVIEWED BY: CITA LONGSWORTH, PURCHASING MANAGER
REVIEWED BY: KERRY D. EDEN, ASSISTANT CITY MANAGER/ADMINISTRATIVE SERVICES DIRECTOR
SUBMITTED BY: DARRELL TALBERT, CITY MANAGER/EXECUTIVE DIRECTOR
Attachments: AdminSure, Inc. Professional Services Agreement
Lien-On-Me, Inc. Professional Services Agreement
Excel Managed Care & Disability Services Inc. Professional Services Agreement
Matrix Health Care Services, Inc. (dba MyMatrixx) Professional Services Agreement