Although insurance carriers have had internal Special Investigation Unit (SIU) departments, US state requirements did not focus on third-party administrators (TPAs) until five years ago. Most TPAs have been playing catch-up, as 12 states now have mandated SIU requirements. But Sedgwick CMS, the nation’s largest TPA, tapped MJM Investigations, Inc., the largest, full-service private investigative company in the United States three years ago to provide an outsourced SIU. This innovative outsourcing partnership was the first of its kind in the industry.
According to Michael J. Malone, chairman/chief executive officer of MJM Investigations, MJM’s market share is increasing due in large part to companies not having the expertise, budget, and staff necessary to adequately investigate insurance claims internally. Although Sedgwick has outsourced its entire SIU unit, other MJM clients are outsourcing discrete functions within SIU services, such as surveillance, claims, fraud packaging, and reporting.
Sedgwick had been doing the investigation work internally, but it was a decentralized program; and each of its 80 offices nationwide did things a little differently, recalls Lori Morgan, manager of Sedgwick’s SIU. Facing the need to centralize and hire a lot of new people, Sedgwick chose, instead, to outsource. MJM not only had the expertise, she says, but it had nationwide coverage and could expand into other countries as Sedgwick grew.
A study by the Coalition Against Insurance Fraud, whose members are leading insurance companies, found that fraud bureaus received nearly 99,000 referrals or complaints about suspected fraudulent activity the previous year; and one of three referrals were opened as an actual case. The study further reveals that, on average, each conviction cost $58,000. The ramifications to payors and their clients from fraudulent claims are enormous.
As Sedgwick’s SIU, MJM detects and manages claims with suspected fraud and minimizes claims exposures through enhanced information verification and intelligence capabilities. Through its centralized management program software, Sedgwick’s 1,700 examiners submit referrals electronically to MJM for investigative services. They can then monitor progress; view reports, photos, and videos; send reports and invoices; and forward information to a colleague or attorney, all online through MJM CaseTrak.
According to Morgan, the majority of Sedgwick’s clients are large Fortune 500 companies. They are either self-insured or have a large enough deductible that they issue a Request for Proposal (RFP) and choose the provider that administers their claims. “A lot of the RFPs I’ve seen in the last year and a half are requesting Special Investigative Units,” states Morgan, “and along with our outstanding claims handling abilities, we’ve won quite a few accounts because of our relationship with MJM. It’s very cost-effective for our clients, and cost is a big factor for many of our clients.”
MJM’s flexibility in assisting us to handle our clients’ needs has been outstanding,” reports Morgan. “Whenever we see a new area that we need to start addressing in our claims, we’ve been able to jointly design an appropriate investigative service.”
The SIU also provides anti-fraud education and training specifically designed for each state’s laws, and Sedgwick has seen an increase in more appropriate referrals as a result of MJM’s training.