Service Provider Panel Management

An article I've written on panel management is appearing in the next edition of a LexisNexis publication, Contract Management in Practice. In the article, I discuss how a fictional insurance company, ABC Insurance, manages their panels of doctors, lawyers, assessors and medical service providers. The following is an extract from the article:

Best practice panel structures and management

ABC, as a skilled panel manager, realises that the starting point for effective panel management is ensuring that each panel member receives enough work to keep them interested in remaining on the panel. The maximum size for any panel equals the total number of jobs available divided by the minimum number of jobs required to keep members interested. For example, if ABC annually sends 1000 work requests out to solicitors and each law firm requires 100 jobs per year to view ABC as an important client then the maximum size of the panel is 10 firms.

Once the panel is established and ABC starts allocating work to the panel members, they can then begin letting the naturally competitive structure of panels work for them. To do this, they will compare each panel member’s performance against the other panel members and occasionally bring in an outside supplier to assess the competitiveness of the panel members against the larger market. Ideally, they will collect and analyse this data using a commercial panel management system.

Once performance data is collected, ABC provides incentives for panel members to improve their performance. Incentives can be positive, such as increasing the volume of work allocated to the high performance providers; or negative, such as removing the poor performing providers from the panel.

Making the rubber meet the road

Once the panels are established, claims officers allocate work to the panel members, and an appropriate incentive system is put in place and communicated to the panel members. ABC must then ensure that their claims officers utilise the incentive scheme. This is not a trivial matter. ABC Insurance may have 1000 claims staff located across the State and Territory capital cities. Without a method of constraining the allocation of work to the panel members, ABC would be unable to offer to the panel members any effective incentives for good performance.

To address this situation, insurers can use commercial allocation software or they can take the decision out of the hands of the individual claims officer by using a centralised allocation department to allocate work.

Either way, the successful management of providers relies on each provider believing that ABC will reward them for good performance and punish them for poor performance. Without this belief, the entire panel management system falls to pieces…

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