The TPA Success Algorithm

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To be or not to be, on a Third-Party Administrator (TPA) program? This is a common question throughout the industry. Followed by, how can I be successful and profitable on a TPA? I am asked these questions a lot, mainly due to my past success as an owner of a restoration company and my team’s consistent recognition as a Top Performer. Over the years, I have talked to many other Top Performers about those questions, and I have come to the consensus that there is an algorithm for success. Today, we are going to narrow it down to the top three variables in that algorithm that allowed me to take a failing restoration company from being a bottom dweller to a Top Performer in just under 15 months.

1. Get a Deeper Understanding of a TPA’s Role and Purpose. 

Carriers outsource their claims management process to TPAs for a variety of reasons, but one of the primary reasons is to connect their members with a vetted restoration contractor, so repairs get done professionally and quickly. TPAs take on this responsibility by delivering a robust contracting force. This becomes a win-win-win relationship for the carrier, TPA, and program contractor. The carrier gets access to the TPA’s fully licensed contractor network that has been vetted via background checks, has the necessary insurance coverage, and is familiar with restoration work. The TPA receives compensation for managing the carrier claims process. The program contractor adds a new sales funnel which brings in new leads (claims) with higher capture rates and lower customer acquisition costs.

A second function of a TPA is quality assurance oversight. TPAs perform this function by acting as a Program/Project Management Office (PMO) for the carrier. If you are not familiar with a PMO’s mission, it is to introduce and maintain a consistent approach to managing projects. They accomplish this by overseeing the administration of projects, and upholding a support of standards, methodology, and technology. To put this in simpler terms for the claims process, they uphold carrier guidelines, monitor, report, and track project success (metrics), and provide resources (program contractors) for the claims. Some of the more advanced TPAs implement a scorecard with defined metrics to identify, improve, and monitor contractors’ performance. Some TPAs use these scorecard metrics to reward performance while others monitor the scorecard for trends.

So, in summary, a TPA supports two business functions of a program contractor: the sales & marketing function by providing leads through a sales funnel; and an operations function by setting standards, documenting and reporting on active projects, as well as monitoring progress to ensure contractors are meeting established metrics and guidelines.

2. Know Your Product and Value Proposition. 

Most program contractors believe they are delivering reconstruction services as their product. I wholeheartedly disagree! A contractor’s real value proposition and service is much more specialized and sought after. It is project management. Project management is a relatively new term and concept that originated with the defense, aerospace, and construction industries approximately 70 years ago. Therefore, your company’s true product and value proposition is to provide the expertise and skillset to align and coordinate all elements, including resources, stakeholders, and deliverables to restore a property more efficiently and effectively. This is the epitome of project management integration.

3. Provide Qualified Expertise.

When I was recruited and selected for Special Forces, I had very little insight of a Green Beret and their daily tasks; however, I felt like it was a great opportunity and wanted to be part of an elite organization. Little did I know it then, but I was being recruited based on potential to fit within their framework. As I completed the training, I realized no one was selected based on their previous knowledge or skillset.

I feel like recruiting restoration professionals is very much the same. It is very rare to find individuals who can walk right onto a job and get started without being trained, especially restoration estimators and restoration project managers. They may have an idea of what those positions require, but, they may have never worked in the restoration industry, much less with a TPA. Even those with experience do not provide a guarantee they understand the landscape completely. The industry is well known for hiring individuals and providing very little training but expecting them to perform at TPA standards that quite frankly may not be understood by those hiring them.

Why does this matter? If a program contractor doesn’t understand a TPA carrier’s expectations by employing a project management framework that measures their success based on their key employee’s ability to estimate, manage, and complete jobs, they are doomed for failure or conflict. To remove the probability of failure, an organization must recruit like the Army does for Green Berets. They must select the right talent based on a set of core values, intangible attributes, and personal characteristics. Once found, the goal should be to train them to be subject matter experts and align with the organization’s value proposition… project management service.

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Rod Cruce

Rod is the founder and Chief Growth Officer for Trifecta Growth Institute, an organization focused on helping business owners, their leadership and their project teams to grow their business, people, and culture. He is an entrepreneur, business owner, leader, published author, and coach who specializes in business coaching, executive leadership, and creating high-performing teams. Since retiring from the military as a Special Forces Green Beret, he has become a serial entrepreneur. He has started, bought, and sold numerous businesses within the construction, restoration, leadership and training, and industrial maintenance industries. He is passionate about equipping restoration leaders and their team with a critical and specialized project management skillset to become a top performing organization. You can reach Rod by emailing him at rcruce@trifecta-growth.com. Download his eBook, Project Management – The Secret Sauce to Profitability by clicking here or visiting the website at https://trifectagrowthinstitute.com/.

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