September 6, 2007

WEITZMAN AUDIT: IMPROVEMENTS NEEDED IN
WORKERS’ COMPENSATION PROGRAM

The hiring of a contractor by Nassau County to administer its workers’ compensation program has resulted in significant management improvements, but the contractor needs to improve its accounting controls and information technology systems, according to an audit by Nassau County Comptroller Howard Weitzman.

"Before the county hired TRIAD Group in July 2004 to manage workers’ compensation, the program was poorly managed," Comptroller Weitzman said. "A 2004 State Comptroller’s audit noted significant deficiencies in the county’s administration of the program, including a lack of computerized records; late payment of awards, resulting in penalties; a general failure to investigate claims; and a failure to monitor cases after compensation had been awarded."

"The hiring of a third-party administrator corrected many of these problems," Weitzman said. "Yet even with these improvements, this audit shows that problems remain, including instances of duplicate charges and overbilling.  Our report concludes that TRIAD needs to improve its internal accounting and system controls.  The problems found by our auditors may be growing pains, but nonetheless need to be addressed."

Workers’ compensation reimburses employees for lost wages up to a statutory maximum and pays for medical expenses associated with job-related injuries and occupational diseases.   Nassau County’s workers’ compensation expense in 2006 totaled $21.6 million, not including fees to TRIAD totaling $803,000.  The county self-insures to provide workers’ compensation coverage to its employees.

Among the deficiencies found by auditors were overcharges totaling thousands of dollars. During the course of the audit, TRIAD acknowledged the overcharges and reimbursed the county.

Among the major findings:

• Inaccurate Billing – Auditors reviewed 12 vouchers submitted by TRIAD for payment of its management fees during the audit period of July 2004 through December 2005, finding that TRIAD charged the county more than once for 130 claimants, as well as billing for two "test" claimants.  The erroneous charges resulted in Nassau paying an additional $49,740 in management fees, out of total management fees for the period of $459,575, equal to an overcharge of approximately 11 percent.
  
  
• Duplicate Funding Request – In one incident, TRIAD was found to have requested a duplicate payment of over $12,000 to a claimant.  The payment was not processed because Comptroller’s Office personnel identified the duplicate charge and declined to approve payment.
  
  
• Inadequate Reporting – TRIAD’s system software does not permit downloading of all necessary claim, payment and fee data in a format that allows the county to effectively monitor contract performance.
  
  
• Security of TRIAD’s Database – County employees with access to the database had the ability to change or delete pertinent claimant information. TRIAD corrected the problem after Comptroller’s auditors brought it to the attention of TRIAD and the county.
  

Among its responsibilities, TRIAD reviews thousands of medical bills submitted annually on behalf of claimants.  As an incentive to reduce the cost of medical expenses, the county’s contract with TRIAD originally provided for a fee of 15 percent of savings achieved to be paid to TRIAD.  Auditors discovered two instances in which there were no actual savings to the county and no fee should have been paid to TRIAD, but were unable to determine whether they were isolated occurrences, due to the deficiencies in TRIAD’s information technology ("IT") personnel and systems.

"The issue of inadequate data reporting, which has still not been resolved, makes it difficult or impossible for the county to assess whether the payments TRIAD makes to claimants and the fees it bills to the county are accurate," Comptroller Weitzman said.  "As a result of these continuing limitations on our ability to monitor TRIAD’s performance and accuracy, the Comptroller’s Office will begin performing periodic on-site reviews of medical claims, indemnity payments and management fees processed by TRIAD."

Some of the issues identified in the report were found to be contract-related, for example the provision of a 15 percent fee for claimed savings on medical bills.  After the report was circulated in draft, the county and TRIAD renegotiated the contract to correct some of these problems. 

"I am pleased to note that, following the audit, the administration amended its contract with TRIAD to substitute a flat fee of $8 per claim for medical bill reviews, rather than charging a fee equal to 15 percent of savings," Comptroller Weitzman said.  In addition, oversight of the contract has been moved from the County Attorney’s Office to joint oversight with a risk management unit within the county’s office of management and budget.

"I commend the administration for taking actions to resolve the problems we identified in this report and for making a sincere effort to find effective solutions," Comptroller Weitzman said. 

The full text of the report may be read or downloaded by clicking the report title in the link below.

September 6, 2007 - TRIAD Audit Report