REPORT TO COUNCIL
SUBJECT
Title
Award of a Five-year Contract to LWP Claims Solutions, Inc. for Third Party Workers’ Compensation Claim Administration Services (F25-042)
Report
REPORT IN BRIEF
Approval is requested to award a five-year contract in an amount not to exceed $2,431,620 to LWP Claims Solutions, Inc. of Mill Valley to provide workers’ compensation claims administration services. Approval is also requested to authorize the City Manager to increase the not-to-exceed amounts and extend the contract for up to two additional one-year periods, with both actions subject to available budgeted funding, need, acceptable pricing ad services.
EXISTING POLICY
Pursuant to Chapter 2.08 of the Sunnyvale Municipal Code, contracts for this type of service are awarded pursuant to a Request for Proposals (RFP) best value process, unless otherwise exempt from the competitive bidding process. Additionally, City Council approval is required for the procurement of goods and/or services exceeding $250,000 in any one transaction.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
BACKGROUND AND DISCUSSION
The City utilizes a state-licensed third-party administrator (TPA) to manage workers’ compensation claims of injured workers through a contract managed by the Department of Human Resources. Workers’ compensation claim administration services consist of the daily management of claims by a designated account manager and two claim adjusters who:
• Communicate with injured workers, medical providers, and City staff;
• Issue disability payments to injured workers, review medical bills for medical necessity, and issue medical payments for medical treatment;
• Coordinate care for injured workers;
• Conduct regular claim review meetings;
• Report claims as required to the city’s reinsurer, PRISM;
• Provide litigation management; and
• Provide online access to claim data.
The City has contracted with Keenan and Associates (Keenan) for TPA services since 2018.
A Request for Proposals was issued on August 27, 2024. The RFP was posted on the City’s DemandStar public procurement network and seven proposals were received.
The written proposals were evaluated by a committee which included members of the Departments of Human Resources, Public Safety, and the City Attorney’s Office. Each component of workers’ compensation claim administration services was evaluated separately to determine which proposers offered the best solutions for the City. Four firms were selected to be interviewed.
Based on the evaluation of the written proposals and the subsequent interviews, the committee selected LWP Claims Administrators (LWP) based on its extensive experience working with California public entities and its results-oriented culture. The company's aggressive and proactive claim-handling approach, commitment to return-to-work strategies, and expertise in litigation management were key factors in the decision. Additionally, LWP's controlled provider network and focus on reducing workers’ compensation costs through innovative programs and strategies make them a strong partner in managing claims effectively and efficiently. Reference checks were performed by the Department of Human Resources, which confirmed LWP’s effectiveness in providing high-quality service.
After negotiation, the final contract with LWP consists of the following cost components:
|
Claim Administration Services (Five Years) |
$2,423,620 |
|
One-Time Fees |
$8,000 |
|
Total |
$2,431,620 |
These costs represent a 10% increase over the prior negotiated contract with Keenan, which is consistent with inflationary increases and an enhanced scope of services.
To ensure an uninterrupted transition from the current vendor to LWP, it is industry practice to begin the process of account establishment 60-90 days before onboarding a new TPA to facilitate the day-to-day activities of managing claims. Following Council approval of the contract, LWP will begin accessing the file data, uploading electronic files for each case, and establishing the City’s access portal and user access dashboard in advance of the claims administration start date.
LWP will partner with Human Resources to meet with City leadership and current injured workers to ensure a smooth transition. Beginning July 1, 2025, LWP will assume responsibility for all new claims and will adjust them accordingly, based on key performance standards that include placing all claims on the diary and calling injured employees to provide necessary support and updates within 15 business days of claim data intake. This process is designed to streamline claims management and ensure timely response and care for injured workers.
FISCAL IMPACT
Costs for claims administration are budgeted in Fund 7065 - Workers’ Compensation Sub-Fund of the Employee Benefits Fund. Funding is provided through transfers from all other funds where personnel are budgeted; however, approximately 95% comes from the General Fund, which funds safety employees who comprise the largest share of claims due to the dangerous and physical nature of the work. The revised claims administration costs and transfer amounts will be updated as part of the FY 2025/26 Recommended Budget.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the City Hall reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
RECOMMENDATION
Recommendation
Take the following actions:
- Award a five-year contract in substantially the same form as Attachment 1 to the report in the amount not-to-exceed $2,431,620 to LWP Claims Solutions, Inc. of Mill Valley;
- Delegate the authority to the City Manager during the term of the contract to increase the not-to-exceed amount of the contract subject to budget availability to fund investigations and claim case increases beyond the maximums set forth in the agreement;
- Authorize the City Manager to execute the contract when all necessary conditions have been met; and
- Delegate the authority to the City Manager to extend and fund the contract for two additional one-year periods at the rates set forth in the agreement, subject to budget availability and if services and pricing remain acceptable to the City.
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $500 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
An “X” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
_x_ Contract or franchise
EXEMPT FROM THE LEVINE ACT
_ _ Competitively bid contract*
___ Labor or personal employment contract
___ Contract under $50,000 or non-fiscal
___ Contract between public agencies
___ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Staff
Prepared by: David Battaglia, Purchasing Officer
Reviewed by: Matthew Paulin, Director of Finance
Reviewed by: Tina Murphy, Director of Human Resource
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. Draft Service Agreement