Workers Comp Legacy Systems – Or Is It The Whole System?

I received a recent email from Rachel @ Rising Medical.  Rachel is a great person that understands claims department mechanics better than most ancillary providers.  See her adjuster Friday video here.  She said that when I pointed out workers comp legacy systems in their annual report the term jumped off the screen.(check out the link to the annual report here),

As always, her message was very complimentary to my article.   If you have not downloaded and read Rising Medical’s report, you are missing out on great information.

Legacy System – Definition

With my IT background, legacy systems was a nice term for severely out of date.

Let us look at the original definition by IBM, the original legacy system upgraders – from tabulating machines to mainframes.

From the IBM community pages -(Philip Mann -Macro 4)

If you do reuse legacy applications, then you need to make sure they’re going to be fit for the job, and that’s often an application-performance issue. A component of your application that experienced low usage rates in the past under internal use can suddenly see a 10-fold, 100-fold, or 1,000-fold increase by being reused as part of an external customer-facing system. This sort of thing does happen.

Workers Comp Legacy Systems and Pareto’s Rule

Thanks, Philip, I could not have said it better myself.  Workers Comp legacy systems are the same.  It is not the hardware or the server, it is the actual workers comp claims or other systems software that usually is the problem.

When we perform claim reviews for clients, one of the huge concerns is – will the system give us what we need to do a loss run review.  Processing claims and documenting are parts of all claims systems.

Pareto’s 80/20 rule applies here.  From what I have seen in many online systems (80%) process claims very well.  Approximately 20% have problems – hardware or server.   Then, when we try to run certain reports that no one really uses that often (see the definition above), those may not work that well. (20% do, 80% usually not).

For context, Pareto’s rule came from 20% of an Italian town’s citizens having paid 80% of the total taxes.

Are Legacy Systems Systemic?

Not all Workers Comp systems should be profiled as a legacy, but are they working within an overall legacy system?

When I advise investor groups looking to invest in the WC space, I always say that WC is the same as health insurance systems – just subtract 10 years.

Are Workers Comp legacy systems part of a larger problem?  The software for the systems, whether homegrown or rented, reflects the way that claims are handled at this point in time.

What changes can be implemented to change the whole system?  Not much has changed in the last 20 years in the way that Workers Comp claims have been handled.  Are Workers Comp legacy systems just a mirror image of the industry as a whole?

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.

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