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[T]he most effective tool for vendor management is a two-fold approach that requires performance guarantees up front and ongoing oversight through periodic claim audits to evaluate and confirm reported accuracy results.

One very important reason for reviewing administrators is often overlooked: cost savings. For a health plan to be successful, claims administrators must remain committed to delivering value long after the administrative service agreement has been signed. Claims administrators are far more likely to stay vigilant on the accuracy and efficiency of claim payments when subject to performance guarantees and periodic reviews by an independent firm hired by the employer.

Including monetary penalties or incentives for maintaining standards for accuracy, turnaround time and financial performance reinforces to administrators the importance employers place on effective health plan administration. Performance guarantees are fundamental vendor management tools that encourage a better working relationship with administrators by providing a forum for discussing employer needs and priorities, plan objectives and service expectations. In addition, a periodic claims audit can identify overpayments that can be recovered, again resulting in cost savings.

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