Bill of health

The medico-legal reporting industry has always had its struggles. But with the recent failures of several high-profile agencies, combined with the credit crunch and apparent tension between the industry’s trade body and its most prominent member, fears are emerging over the sector’s health.

The agencies co-ordinate medical reports for personal injury cases. Their use is not mandatory – an insurer or lawyer can order a report on their own – but they do ensure any report is done quickly and to a specified standard. Agencies also often have software that is compatible with insurers and solicitors.

E-Reporting Group (Medical Reports Services) went into administration at the end of last year, and IMS Group and Trauma Claims Consultancy went into administration in 2007. E-Reporting Group and IMS are former members of the Association of Medical Reporting Organisations (Amro), although IMS had left Amro several months before it went into administration.

Now one of the remaining key players in the sector, Premier Medical Group (PMG), is reconsidering whether it will stay with Amro. It says it is working to “encourage” the group to be more active in promoting the medical reporting profession.

Jason Powell, chief executive at PMG, once worked for Bupa. “My view of Amro was that it stood for quality and good financial governance.” But he says the fact that two of its former members got into financial trouble means Amro needs to do more.

“We’re definitely considering whether we want to be involved and are pushing Amro and its members to look at ways in which it can have a much better regulatory position within the marketplace.”

But Ian Medforth, Amro chairman and managing director of UK Independent Medical, says Amro is doing is part. “Amro is always on hand to support its members and the wider personal injury [PI] marketplace, to ensure that the highest levels of independence and professionalism are used by those providing medical evidence in PI claims,” he says.

He denies there are tensions between Amro and PMG. But he adds: “As an organisation, because we have strong concerns about [our] number of members, we have been discussing how best to deal with our profile.”

Simon Margolis, chief executive of Premex – the industry’s other main player – does not believe the casualties are a manifestation of trouble in the medico-legal industry.

“In fact, it is arguable that these failures conversely represent a watershed and point of maturation . . . some ‘natural selection’ has commenced and may still have some way to go as only those organisations that have been run efficiently and prudently will be in a position to survive in the long term.

“In much the same way Premex believes that as the largest medical reporting organisation by any measure, including turnover and number of cases handled, having scale is and will be essential in guaranteeing long-term stability.”

Three years ago Amro had 12 members; now it has six. E-Reporting Group and IMS were among the six that left, along with a smaller agency. The rest were swallowed by consolidation. Members now include market leaders PMG and Premex, as well as UK Independent Medical, Doctors Chambers, Mobile Doctors and Speed Medical Examination Services.

Medforth insists the organisation remains strong. “In terms of market share, we believe we are as large as we ever were, if not bigger. The Amro members represent about 85% of all the medico-legal reports produced, whereas if you go back a number of years, it was slightly lower.”

But there are commercial hardships to contend with. First, it’s important to understand some background and history.

Medical reporting agencies act as booking services: they secure a doctor’s availability to produce a medico-legal report to a certain standard. An insurer or solicitor instructs the agency which, in turn, instructs the doctor. The injured party is considered to be the agency’s client, while doctors are the agency’s suppliers.

Technically, solicitors are responsible for medical reporting fees. But once they’ve received the invoice from the agency, they can recover that fee from the third-party insurer as part of their costs for pursuing the claim.

Third-party insurers have traditionally been responsible for paying medico-reporting fees. But in 2006 insurers won the Woollard vs Fowler case, with the outcome that the claimant solicitor should be responsible for the fee. This was successfully appealed, making the third-party insurer again responsible.

Following Woollard vs Fowler, insurers and medical reporting companies created their own payments solution in the form of the Medical Reporting Organisations Agreement (MROA), signed in May 2007 and renewed earlier this month. It’s good for 12 months, but Amro says it will tweak it to accommodate the Ministry of Justice’s impending personal injury reforms.

The agreement sets standards for both parties, including fixed fees and faster payments. Insurers get a discount if they pay early, which is good for agencies’ cash flow.

The MROA sets lower fees than the agencies had previously been charging. In some cases, the agreement applied to retrospective debt and this put a strain on some agencies. For example, if an invoice had been raised at £350 and the MRO agreement set a new rate for the same service at £220, agencies had trouble justifying the old rates. So PMG, for example, decided to write off all its historic debt to the new rates so it knew exactly where it stood.

Powell says the agencies had issues because of the long tail of debtors they had in their balance sheets. “Prior to agreement, the agencies didn’t get paid for about a year, and fees were priced at exceptional rates. So there was a chance they might have to write off some of that debt.”

The effects are still being felt, Powell says. “There was a big squeeze going on in the industry after May 2007, and now you’ve got the credit crunch. So at times when operating margins are being squeezed quite significantly, the availability of debt in the general economy is falling like a stone. It’s a significant recipe for business failure.”

But Medforth insists that Amro members have weathered the financial difficulties that were the fallout from the Woollard case.

Either way, doctors are being encouraged by PMG to take more responsibility for making sure they get paid. This means more scrutiny of an agency’s financial strength.

Traditionally, doctors have been paid well for writing reports. Three years ago an agency would have paid a doctor about £250 an hour (a locum doctor receives £250 for half a day’s work). Before the agreement, agencies were charging solicitors or insurers between £200 and £350 for a basic GP report. But under the agreement, an agency gets paid £195 for a basic GP report from which it has to pay the doctor. With agencies looking for a 5% to 15% return on sales of the £195, the rate that doctors receive has been adjusted accordingly and can be less than £170.

GPs, orthopaedic surgeons and psychologists are the main producers of about 725,000 medical reports each year for agencies.

Sharif Helmy, a GP with a specialism in cardiology and 14 years’ experience, works in two practices in north-west London. He started writing medico-legal reports about three years ago and now produced about 20 a week.

He admits that he works more quickly when using an agency. “The benefit for insurers is it’s extremely quick. The reports are all standardised because of the software. And if there’s a problem, the solicitors can always get a reply fairly quickly. They don’t have to chase us.”

While the agreement means that agencies have had to cap rates, they need the doctors’ services to stay in business so have to make it worth it for the doctors to continue.

“One of the big tragedies of IMS, Trauma Claims and ERG, is the amount of money the doctors ultimately ended up funding the industry themselves,” Powell says. “They had to write off all their debts . . . A lot of that could have been avoided.”

Powell suggests better use of technology would save more agencies from going bust. Doing business electronically is quicker and doctors are more likely to be paid on time. Currently, every agency has its own software system and some are better than others.

But Amro’s role, and the trust its own members place in it, will also be crucial in keeping companies afloat. PMG, which has a turnover of about £45m, is on target to hit 165,000 reports in 2009. PMG is not the only player in the market. But if it leaves Amro, its departure could have a knock-on effect for the entire sector. IT