SR 06-12-2018 3J
City Council
Report
City Council Meeting: June 12, 2018
Agenda Item: 3.J
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Risk Management
Subject: Second Modification to Agreement #9650 with InterMed Cost Containment
Services for Workers’ Compensation Medical Bill Review Services
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a second modification to agreement #9650 in the amount of $100,000 with
InterMed Cost Containment Services, a California-based company, for workers’
compensation medical bill review services. This will result in a ten-year amended
agreement with a new total amount not to exceed $850,000, with future year funding
contingent on Council budget approval.
Executive Summary
Workers Compensation costs are among the most significant factors driving rising
expenditures across all funds. The City is focused not only on injury prevention, but on
providing responsive and cost-effective care for workers injured on the job to reduce
long-term liabilities. Staff is requesting authorization to extend the term of the City’s
contract for workers’ compensation medical bill review services with InterMed Cost
Containment Services (InterMed) for an additional four years. Given the City’s
investment of staff time and consultant resources to integrate InterMed’s bill review
platform into the City’s workers’ compensation claims management system and the
advantageous pricing InterMed has offered during the extension period , it is prudent to
exercise a longer contract. Therefore, staff recommends that the City enter into a
second modification with InterMed to extend the contract by four years and $100,000 for
a total amount not to exceed $850,000. The costs of the contract will continue to be
funded out of the Workers’ Compensation Self Insurance Fund which is managed by the
Finance Department.
Background
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On October 2, 2012, following a competitive selection process, the City Council
awarded a five-year, $750,000 contract to InterMed for workers’ compensation medical
bill review services (Attachment A). Under the agreement, InterMed is responsible for
reviewing and reconciling the City’s workers’ compensation medical bills in accordance
with the State’s fee schedule for medical services. This process saves the City millions
of dollars each year, as the State’s fee schedule is substantially lower than medical
providers’ usual and customary charges.
The City Council approved a one-year extension to InterMed’s five-year contract (all
other terms and conditions remained the same) at its September 12, 2017 meeting
(Attachment B). This was necessary to facilitate implementation of a new claims
management system for the Workers’ Compensation Program. System installation and
testing coincided with the expiration of InterMed’s bill review agreement, and the
extension gave staff the opportunity to complete the system installation using a familiar
and proven bill review system. This approach worked well; the new claims management
system was successfully implemented in the fall of 2017 without bill review glitches.
Discussion
When InterMed’s one-year contract extension was approved by the City Council in
September 2017, staff indicated it would pursue a competitive selection process for bill
review services once the new workers’ compensation claims management system was
fully operational. Since that time, however, staff has concluded that it does not make
operational or financial sense for the City to consider changing bill review vendors at
this juncture for the following reasons:
InterMed’s bill review platform was successfully integrated into the new claims
management system last fall and continues to operate efficiently. This is critical ,
as the bill review process saves the City millions of dollars each year; and
Based on the City’s recent experience with integrating InterMed’s bill review
platform into the new claims management system, it would take several hundred
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hours to install, test, and train staff on a new bill review system. Further, the City
would incur programming charges from its claims management system software
provider to integrate a new bill review platform into its system.
Given the factors identified above, staff requested InterMed to provide the City with a
cost proposal to extend its contract for four additional years. In terMed subsequently
agreed and proposed raising its “per bill” fee 3% in the first year (a 31-cent increase per
bill), a 2.5% increase in the second year, and 2.4% increase in the third and fourth
years of the contract extension. Staff believes this represents competitive pricing based
on a recent request for proposals the City issued for workers’ compensation claims
management third party administrator services (which included a bill review component)
and discussions with the City’s workers’ compensation consultant. Based on this
pricing, staff estimates InterMed’s compensation for bill review services would increase
by $100,000 over the four-year contract extension.
Staff has determined that it is more cost-effective for the City to continue contracting
with InterMed than to pursue a competitive selection process for bill review services.
Further, staff recommends that the City enter into a second modification with InterMed
that would extend the contract term by four years and increase its compensation by
$100,000 for a total not to exceed $850,000. Please note staff expects to pursue a
competitive selection process at the conclusion of this modification.
Financial Impacts and Budget Actions
The agreement modification to be awarded to InterMed Cost Conta inment Services is
for $100,000 for an amended agreement total not to exceed $850,000. Funds are
available in the FY 2017-18 budget for the Finance Department. The agreement will be
charged to account 59235.522010 / 74800002.534510. Future year funding is
contingent on Council budget approval.
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Prepared By: David Bomberger, Workers' Compensation Administrator
Approved
Forwarded to Council
Attachments:
A. October 2, 2012 Staff Report (Weblink)
B. September 12, 2017 Staff Report (Weblink)
C. InterMed 5-16-18 Oaks Form
REFERENCE:
Modified
Agreement No. 9650
(CCS)