Last week, Barbara Martinez wrote a very in-depth article which appeared on the front page of the Wall Street Journal (September 18, 2006; Page A1). A subscription to WSJOnline is necessary to view the article, but I encourage you to read it if at all possible. In the article MS. Martinez writes about independence in the health care industry with regards to product placement and claims audit. More on that in a moment, in the meantime, allow me to digress.
Enron. The word means different things to different people. For people working in the audit and professional services industry, it has a very personal meaning. The Enron scandal affected hundred of thousands of lives: perhaps millions. Tens of thousands of Enron and Arthur Andersen employees lost their jobs directly as a result of the scandal, and the ripples continue to be felt today.
Tuesday, September 26, 2006
Tuesday, September 19, 2006
TCO: Measuring Risk
In a prior post I wrote about the Total Cost of Ownership (“TCO”) in the context of risk. Today I would like to write about techniques to measure the cost of risk, particularly in the case of administering benefit plans.
The shortfall of TCO modeling for administrative functions is that typically, quantifying the costs of poor administration is difficult to accomplish. Just as with investment returns “past performance is not an indicator of future returns,” if poor administration in the past resulted in additional costs, we don’t know that it will in the future.
The shortfall of TCO modeling for administrative functions is that typically, quantifying the costs of poor administration is difficult to accomplish. Just as with investment returns “past performance is not an indicator of future returns,” if poor administration in the past resulted in additional costs, we don’t know that it will in the future.
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