Public Sector

Upgrading America’s Infrastructure

Climate change is speeding the deterioration of an already aged system. The fix will cost trillions.
By: | June 1, 2015 • 8 min read
** FILE ** Construction crews work to repair a 36 inch water main break that crumbled pavement and sent thousands of gallons of rushing water onto a major city street turning it into what looked like a small lake, in this file photo of Tuesday, Jan. 22, 2008, on the north side of Chicago. It was not clear what caused the 80-year-old cast-iron main to break, but engineers say we are in a crucial era for the nation's infrastructure, especially in older cities where some pipes and tunnels were built more than a century ago, and are now nearing the end of their life expectancies. (AP Photo/M. Spencer Green, File)

D+. That’s the grade assigned to the overall quality of America’s infrastructure by the American Society of Civil Engineers (ASCE). Just one notch above failure.

ASCE’s economic report on surface transportation, released in July 2011, reported that deteriorating infrastructure will cost the American economy more than 876,000 jobs and suppress the growth of GDP by $897 billion by the year 2020.

Advertisement




Bad infrastructure has a cascading effect on the economy. Lack of capacity and poor road conditions lead to backups and bottlenecks.

That means products sitting in trucks aren’t reaching their destinations in a timely and efficient manner. Commuters are wasting time and fuel sitting in traffic. The cost in wasted fuel and lost productivity is staggering.

“The Federal Highway Administration calculates that highway bottlenecks cause more than 243 million hours of trucking delays each year, costing $7.8 billion.

When shipping takes longer, businesses have to reorient their supply chains and rely on more distribution centers, adding more costs,” said Mark Brockinton, managing director, transportation and logistics practice at Aon.

“In 2011, traffic congestion caused American commuters to purchase an extra $2.9 billion in fuel, costing more than $120 billion in added fuel costs and wasted time.”

The effects of climate change and increasingly severe weather only further constrain traffic flow and worsen road conditions.

“If you look at the severe winter we had in the Northeast, that created a lot of wear and tear on our roads and bridges,” said Andy Herrmann, past president of the ASCE.

“They had to put a lot of de-icing material down to combat that, but that salt mixes with water and accelerates the corrosion of steel and gets into the concrete and starts corroding the reinforcing bars. And when steel corrodes, it expands seven to eight times its volume. So when you look at a bridge deck or a roadway surface and you see a pothole, that’s those reinforcing bars expanding and pushing against the concrete.”

Steve Bojan, vice president of fleet risk services for HUB International, added, “When you talk about climate change and harsh weather, you look at the Northeast and it wreaks havoc. [This past winter] was horrible. All bets were off on everything. Roads, whole cities, interstates were shut down. So you end up backing everything up for days, and at some point, some goods and services are just not produced. It’s in the billions of dollars a day in activity that can’t be done.”

“People are starting to understand that when they rebuild their infrastructure, they have to do it to a new standard.” — Erik Johanson, manager of strategic planning and analysis, SEPTA

Federal and state governments are taking steps to improve infrastructure, especially after Superstorm Sandy demonstrated that the effects of climate change can literally bring major cities to a standstill and incur huge costs.

In 2011, the Federal Transit Administration selected seven transit agencies across the country as part of a pilot program to conduct risk and vulnerability assessments of their systems and create plans for climate change adaptation.

After Sandy, it doled out capital funding to help turn some of those plans into reality.

In Philadelphia, the Southeastern Pennsylvania Transportation Authority (SEPTA) received $87 million to fund seven projects it developed during the pilot program phase.

The authority’s regional rail system in particular has been taking a beating.

06012015_03_risk_report_Johanson

Erik Johanson, manager of strategic planning and analysis, SEPTA

“We did a pre-screening process to determine the most vulnerable points in our system, and the Manayunk/Norristown line, which parallels the Schuylkill River pretty close to the level of the river, has flooded 13 times since 2003, out of a total of 21 recorded flood events in history,” said Erik Johanson, manager of strategic planning and analysis.

“So more than 50 percent of recorded flood events that have occurred on that line have happened since 2003.”

While plans focus on flood mitigation and shoreline stabilization, improving the system’s resiliency will also involve building a backup control center and power systems, and insulating bare copper wires that can easily trip and cause signal failure.

In general, extreme temperature changes and powerful storms make any transit system vulnerable to failure.

“For heat, the big things are track buckling and sagging wires, which have major impacts,” Johanson said.

Advertisement




“Once it reaches 90 degrees, we have to slow the trains down, so it has service impacts.”

Snow, ice and strong winds can also lead to downed power lines, damage to signal systems and other equipment, and labor workforce issues associated with snow removal.

“People are starting to understand that when they rebuild their infrastructure, they have to do it to a new standard,” he said.

Building in Resiliency

That new standard may include building with new materials and technologies.
According to the ASCE’s Herrmann, “The University of Michigan came out with a concrete that can take some tension. Concrete is a compressive material, but if it can take tension, it can prevent it from forming the little cracks that allow salty water to get into it and start the corrosion cycle.”

Monitoring devices can also be built into bridges to track ground movement.

“When it comes to settlements of soil or ground movements, those things can change just due to small gradual movements, but can also be drastic. It has impact on the stability of a structure,” said Guido Benz, head of engineering and construction at Swiss Re Corporate Solutions.

“Structural elements today have more up-to-date monitoring tools that can be built in during construction, which was not the case in the ‘50s. — Guido Benz, head of engineering and construction, Swiss Re Corporate Solutions

“Structural elements today have more up-to-date monitoring tools that can be built in during construction, which was not the case in the ‘50s.”

When bad weather strikes, lower salt and salt-free mixtures can also be used on roadways to melt ice. There are also new high-performance forms of concrete and steel, which are less permeable, more resistant to corrosion, and higher strength.

“But those things come with a cost,” Herrmann said. “State departments of transportation have hard decisions to make — what to do with limited dollars. Do they do maintenance, repairs or replacements with new structures? Maintenance can get put off, and it just gets more expensive the longer you put it off.”

By Bojan’s estimates, “It’s probably at least 20 years to uncork this. These projects are all very long term and take a lot of planning.”

Critical infrastructure may also be delayed due to lack of will.

“Infrastructure is not sexy, for lack of a better word,” Bojan said.

“People are much more likely to want a park on the lakefront. They’ll spend $150 million for that, but to spend $100 million for a viaduct, for example, they react negatively.”

Finding Funding

Lack of funds is another primary reason that necessary upkeep and upgrades to transportation infrastructure have not been made.

Guido Benz, head of engineering and construction, Swiss Re Corporate Solutions

Guido Benz, head of engineering and construction, Swiss Re Corporate Solutions

“Investments needed are in the billions of dollars. They’re massive numbers. The big question is: Where will the funds come from?” Benz said. The ASCE estimates it will take a $3.6 trillion investment by 2020 to bring the many components of America’s infrastructure up to an acceptable standard, and that total could increase if higher-strength, weather-resilient tools and materials are considered.

The federal government may invest in rebuilding efforts after a disaster, but these long-term projects need a steady stream of capital for maintenance.

Public-private partnerships (PPPs) are one way to attract investors to costly infrastructure projects.

“Models that bring in private investors but also involve project parties in long-term operational contracts generate revenue to maintain the structure. Achieving proper maintenance and keeping infrastructure upgraded is the critical element,” Benz said.

“In times of financial difficulty, maintenance gets cut short, so the quality will decay over time. So the benefit of the PPP approach is that the upkeep as well as the operations of the infrastructure is outsourced, and that presents a business opportunity for the private parties. From the investor’s point-of-view, it’s attractive because they can make a profit off of tolls, for example, and sell the property back when their contract is over.”

Other experts say a fuel tax increase is necessary to move projects forward at a steady pace. As vehicles have grown more fuel-efficient, the fuel tax percentage has remained static, meaning that more miles are being driven while fewer funds are collected. The revenue can’t keep up with the demand for repairs, upgrades and maintenance.

Advertisement




“The fuel tax needs to be raised an additional 40 cents to a total of 65 cents. The federal diesel tax hasn’t changed since 1993,” said Aon’s Brockinton.

“The American Trucking Association actually is pushing for higher taxes now,” HUB’s Bojan said.

“Freight is good, profits are up, and they’re saying, ‘We need to improve our lanes and infrastructure so we can improve our throughput, otherwise we’re just getting clobbered by constraints.’ ”

Planning for the Storm

The Environmental Protection Agency predicts that unless greenhouse gas emissions decrease substantially, temperatures will continue to climb, the world’s oceans will become more acidic and the frequency of severe storms and precipitation levels will increase.

Failure to address the risks to infrastructure will not only worsen congestion, but threaten to totally shut down transit if roads, bridges and rails become too dangerous to use. Safety also becomes a major issue.

Mark Brockinton, managing director, transportation and logistics practice, Aon

Mark Brockinton, managing director, transportation and logistics practice, Aon

“Certain insurance companies have products insuring against a loss a company might have within the transportation infrastructure, such as a port delay, local embargo, or a natural disaster,” Brockinton said.

“The products would include business interruption, contingent business interruption, trade disruption, political risk, logistics insurance.

Certain companies will insure risks without an actual loss of product under certain circumstances, which would include a delay or non-delivery of product due to a strike or natural catastrophe.

“A well-performing transportation network keeps jobs in America. It allows businesses to expand, and it allows businesses to manage their inventories and transport goods more cheaply and efficiently.”

Benz of Swiss Re said companies should view infrastructure failure as an “operational risk,” and mitigate it by building redundancies into their supply and delivery chains. As harsh weather presents an ever-growing challenge, it becomes more and more important for risk managers to “always have a Plan B ready to go.”

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]
Share this article:

Risk Insider: Martin Frappolli

What If Uber and ZipCar Had a Baby?

By: | May 28, 2015 • 3 min read
Martin J. Frappolli, CPCU, FIDM, AIC, is Senior Director of Knowledge Resources at The Institutes, and editor of the organization's new “Managing Cyber Risk” textbook. He can be reached at [email protected]

Imagine a world in which all of the cars on the road are navigating without a human driver. We may also anticipate another liberating aspect – the “ownerless” car. Well, some entity will own the car, but it may not be you or me.

Several motoring trends are moving towards convergence; Uber and ZipCar are already changing the way we move about. The potential for a driverless car changes those models. What could happen when autonomous cars are demonstrably safer than human-piloted vehicles?

Uber and Lyft essentially replace hailing a cab with ordering and paying for your ride through your smartphone. No cash changes hands, your driver is motivated to be polite and keep a clean vehicle because you will rate him after the experience.

When will this all happen? Many experts say “sooner than you think,” but Warren Buffett is still investing in car dealerships.

At the same time, city residents who don’t own cars but occasionally need one can turn to ZipCar instead of taxis or car rentals. After a small monthly membership fee, ZipCar users pay an hourly rate. It’s an on-demand model for car use.

This model isn’t new to us. Just 10 years ago, we bought our music on CDs (or MP3) and bought movies on DVD. Now, people everywhere are rapidly switching to a streaming model for music and movies – think Pandora, Spotify, Roku, Chromecast and Netflix.

With streaming, we save the costs of purchasing a library of movies or music, and we save the hassle of maintaining this library. We find it convenient to have every song and movie title at our fingertips.

Imagine, then, how the utility of Uber and ZipCar is compounded by the potential for autonomous vehicles. When we want a ride, the car comes to us, takes us safely to our destination, and then departs.

We don’t buy the car, insurance, gas, or parking space. We are freed from the time and expense of vehicle ownership.

The implications of this “streaming transportation” model are far-reaching. Some experts predict that, because most cars are idle most of the time, we would need only one out of eleven cars currently on the road.

While there is great opportunity for robotics experts and upstart transportation entries like Google and Tesla, how do Ford and Toyota react?

Reduce the car count by 90 percent, reduce the number of accidents even further – what happens to car insurers? Auto insurance exists to help us recover from the costs of human error. Once you take human error out of the mix, auto liability will be an issue for the manufacturer, not the (absent) driver.

Other implications – parking garages will be largely unnecessary; local mechanics won’t be needed; doctors and hospitals will have fewer patients; reduced congestion might spark inner cities, but easier commutes might spark development outside the cities.

Drunk driving, texting and driving, and driver fatigue will all be problems of the past. Leisure travel might mean you get in your RV at 10pm and wake up 8 hours later at your resort destination. No person is denied transportation due to age or ability to drive.

When will this all happen? Many experts say “sooner than you think” but Warren Buffett is still investing in car dealerships.

It will likely happen sooner in cities than rural areas, but the certain thing is that this disruptive technology will create great opportunities while destroying a lot of traditional business models.

Share this article:

Sponsored Content by IPS

Managing Chronic Pain Requires a Holistic Strategy

To manage chronic pain and get the best possible outcomes for the payer and the injured worker, employ a holistic, start-to-finish process.
By: | August 3, 2015 • 5 min read
IPS_BrandedContent

Chronic, intractable pain within workers’ compensation is a serious problem.

The National Center for Biotechnology Information, part of the National Institutes of Health, reports that when chronic pain occurs in the context of workers’ comp, greater clinical complexity is almost sure to follow.

At the same time, Workers’ Compensation Research Institute (WCRI) studies show that 75 percent of injured workers get opioids, but don’t get opioid management services. The result is an epidemic of debilitating addiction within the workers’ compensation landscape.

As CEO and founder of Integrated Prescription Solutions Inc. (IPS), Greg Todd understands how pain is a serious challenge for workers’ compensation-related medical care. Todd sees a related, and alarming, trend as well – the incidence rate for injured workers seeking permanent or partial disability because of chronic pain continues to rise.

Challenges aside, managing chronic pain so both the payer and the injured worker can get the best possible outcomes is doable, Todd said, but it requires a holistic, start-to-finish process.

Todd explained that there are several critical components to managing chronic pain, involving both prospective and retrospective solutions.

 

Prospective View: Fast, Early Action

IPS_BrandedContent“Having the wrong treatment protocol on day one can contribute significantly to bad outcomes with injured workers,” Todd said. “Referred to as outliers, many of these ’red flag’ cases never return to work.”

Best practice care begins with the use of evidence-based UR recommendations such as ODG. Using a proven pharmacological safety and monitoring opioid management program is a top priority, but needs to be combined with an evidence-based medical treatment and rehabilitative process-focused plan. That means coordinating every aspect of care, including programs such as quality network diagnostics, in-network physical therapy, appropriate durable medical equipment (DME) and in more severe cases work hardening, which uses work (real or simulated) as a treatment modality.

Todd emphasized working closely with the primary treating physician, getting the doctor on board as soon as possible with plans for proven programs such as opioid Safety and Monitoring, EB PT facilities, patient progress monitoring and return-to-work or modified work duty recommendations.

“It comes down to doing the right thing for the right reasons for the right injury at the right time. To manage chronic pain successfully – mitigating disability and maximizing return-to-work – you have to offer a comprehensive approach.”
— Greg Todd, CEO and founder, Integrated Prescription Solutions Inc. (IPS)

 

Alternative Pain Management Strategies

IPS_BrandedContentUnfortunately, pain management today is practically an automatic move to a narcotic approach, versus a non-invasive, non-narcotic option. To manage that scenario, IPS’ pain management is in line with ODG as the most effective, polymodal approach to treatment. That includes N-drug formularies, adherence to therapy regiment guidelines and inclusive of appropriate alternative physical modalities (electrotherapy, hot/cold therapy, massage, exercise and acupuncture) that may help the claimant mitigate the pain while maximizing their ongoing overall recovery plan.

IPS encourages physicians to consider the least narcotic and non-invasive approach to treatment first and then work up the ladder in strength – versus the other way around.

“You can’t expect that you can give someone Percocet or Oxycontin for two months and then tell them to try Tramadol with NSAIDS or a TENS unit to see which one worked better; it makes no sense,” Todd explained.

He added that in many cases, using a “bottom up” treatment strategy alone can help injured workers return to work in accordance with best practice guidelines. They won’t need to be weaned off a long-acting opioid, which many times they’re prohibited to use while on the job anyway.

 

Chronic Pain: An Elusive Condition

IPS_BrandedContentSoft tissue injuries – whether a tear, sprain or strain – end up with some level of chronic pain. Often, it turns out that it’s due to a vascular component to the pain – not the original cause of the pain resulting from the injury. For example, it can be due to collagen (scar tissue) build up and improper blood flow in the area, particularly in post-surgical cases.

“Pain exists even though the surgery was successful,” Todd said.

The challenge here is simply managing the pain while helping the claimant get back to work. Sometimes the systemic effect of oral opioid-based drugs prohibits the person from going to work by its highly addictive nature. In a 2014 report, “A Nation in Pain,” St. Louis-based Express Scripts found that nearly half of those who took opioid medications for more than a month in their first year of treatment then refilled their prescriptions for three years or longer. Many studies confirm that chronic opioid use has led to declining functionality with reduced ability to recover.

This can be challenging if certain pain killers are being used to manage the pain but are prohibitive in performing work duties. This is where topical compound prescriptions – controversial due to high cost and a lack of control – may be used. IPS works with a reputable, highly cost-effective network of compound prescription providers, with costs about 30-50 percent less than the traditional compound prescription

In particular compounded Non-Systemic Transdermal (NST) pain creams are proving to be an effective treatment for chronic pain syndromes. There is much that is poorly understood about this treatment modality with the science and outcomes now emerging.

 

Retrospective Strategies: Staying on Top of the Claim

IPS_BrandedContentIPS’ retrospective approach includes components such as periodic letters of medical necessity sent to the physician, peer-to-peer and pharmacological reviews when necessary, toxicology monitoring and reporting, and even addiction rehab programs specifically tailored toward injured workers.

Todd said that the most effective WC pharmacy benefit manager (PBM) provides much more than just drug benefits, but rather combines pharmacy benefits with a comprehensive ancillary suite of services in a single portal assisting all medical care from onset of injury to RTW. IPS puts the tools at the adjustor fingertips and automates initial recommendations as soon as the claim in entered into its system through dashboard alerts. Claimant scheduling and progress reporting is made available to clients 24/7/365.

“It comes down to doing the right thing for the right reasons for the right injury at the right time,” Todd said, “To manage chronic pain successfully – mitigating disability and maximizing return-to-work – you have to offer a comprehensive approach,” he said.

SponsoredContent

BrandStudioLogo

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with IPS. The editorial staff of Risk & Insurance had no role in its preparation.




Integrated Prescription Solutions (IPS) is a Pharmacy Benefit Management (PBM) and Ancillary Services partner to W/C and Auto (PIP) Insurance carriers, Self Insured Employers, and Third Party Administrators who specialize in Workers Compensation benefits management.
Share this article: