Black Swans

Welcome to the ARkStorm

A 45-day superstorm floods California and dishes out economic catastrophe.   
By: | August 3, 2015 • 9 min read
** ADVANCE FOR WEEKEND EDITIONS, AUG. 19-20 **FILE**Evelyn Turner cries alongside the body of her longtime companion, Xavier Bowie, after he died in New Orleans, in this Aug. 30, 2005 file photo. Bowie and Turner had decided to ride out Hurricane Katrina when they could not find a way to leave the city. Bowie, who had lung cancer, died when he ran out of oxygen. (AP Photo/Eric Gay)

The rain starts from light gray skies with modest winds. California farmers desperate for water look up from their work and raise their faces to the sky, thankful for the drops of moisture on their faces.

What the grateful farmers don’t know is that jets of warm, moist air that originated over the North Pacific have formed a massive storm system — what scientists call an atmospheric river — that is getting set to dump catastrophic amounts of precipitation on California.

First the rain comes in spurts. Then it pours and pours and keeps on pouring.

It’s more than enough to water parched almond trees and cotton fields. It’s enough to wipe those groves and fields away.

The story is that Noah built an ark to survive rain that fell for 40 days and 40 nights. This is what happens here and then some. No exaggeration.

Week after week, the rain comes relentlessly. After three weeks of solid rain, accompanied by hurricane-force winds, much of the state’s infrastructure and its flood control systems start to give way.

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California’s first responders and flood control systems are prepared for storm and flood events that might come every couple of hundred years at maximum. They are not prepared for this.

The first major landslide — the first of tens of thousands — occurs at the picturesque community of Fort Bragg on the Mendocino Coast, where dozens of properties are crushed on the ocean side rocks below the town’s cliffs.

Soon, the news media report that the levees that hold back the Sacramento River from businesses and residents in the area’s delta towns are failing. Evacuations are hampered by flooded roads.

A video produced for the U.S. Geological Survey depicts a hypothethical but scientifically plausible storm impacting California.

Flooding swamps San Francisco, Los Angeles and heavily populated San Diego and Orange counties. The state’s capital, Sacramento, suffers a repeat of what it went through in 1861, when its streets were impassable and the governor had to be transported to his inauguration by boat.

The van of a family trying to drive away from the town of Pittsburg in the Sacramento River delta is swept into the surging river. A young couple and their three children are lost.

Dozens of migrant farm workers in California’s Central Valley are drowned before anyone knows they’re gone. They owned no vehicles in which to make their escape. As usual, it’s the poor who suffer the worst.

Flood waters in the Central Valley are at 10 feet and rising and will crest at 20 feet. It won’t be long before the valley is an inland lake 300 miles long and 20 miles wide. Floating on the surface of that massive lake are the bloated, decaying carcasses of thousands of cattle, poultry and swine, swept out of the largest agricultural center in the country and drowned by the storm.

Interstate 5 within the state is under water. Trucks bearing tens of millions in retail goods can’t get where they need to go. It will be weeks before I-5 is passable and it will require millions of dollars in repairs.

The ocean movement from the storm takes many of Southern California’s most treasured structures and smashes them.

The gorgeous terra cotta-roofed seaside racetrack grandstand at Del Mar — founded by Bing Crosby and some of his friends — is heavily damaged by the sea. The piers at Manhattan Beach, Hermosa Beach and Venice Beach are torn to pieces.

The flooding overwhelms coastal wastewater plants. Those residents who live along the concrete-lined Los Angeles River who weren’t forced out by the rain are driven out by sewage, as it erupts out of hundreds of manholes, turning the manmade river into a giant sewer.

The Terminal Island pumping station located between San Pedro and Long Beach is cut off by the floods. Abandoned by its 70-plus employees, raw sewage spews from it and runs untreated into the Pacific Ocean.

Chastened by its failures during the flooding in New Orleans after Katrina, the federal government moves much more quickly than it did in 2005 to support overwhelmed local and state emergency responders.

National Guardsmen and U.S. Army soldiers can help evacuate residents and hoist sandbags. They can’t, however, offer financial disaster recovery assistance.

As a result of this 45-day storm, there is more than $400 billion in property damage and an additional $325 billion in business interruption losses.

No more than $30 billion is recoverable through private or public insurance.

When the waters recede, more than 170 California cities and towns are insolvent, unable to cover the costs of the services they required and hamstrung by drastically reduced property and income tax collections.

Deaths number in the thousands.

The state’s agricultural economy, once the biggest in the world and already damaged by years of drought, teeters on collapse.

Goodbye Disneyland. Goodbye Rodeo Drive.

Welcome to the ARkStorm.R8-15p22-24_01ArkStorm3.indd

The Modeling

What we describe is no apocalyptic fantasy. Rain and wind in these amounts came to California in December of 1861 and didn’t leave until the following February.

Geologists studying ocean sedimentation off of the coast of California determined that atmospheric rivers have dropped this much rain on California — or more — on at least six occasions.

The most muscular academic research in this area of catastrophe modeling is that done by the U.S. Geologic Survey’s Multi-Hazard Demonstration Project (MHDP), a multi-discipline effort involving more than 100 scientists, consultants and public sector officials.

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As we described above, the ARkStorm that the project modeled in 2010 would produce more than $700 billion in property and business interruption losses.

“All of these scenarios are scientifically plausible,” said Dale Cox, the project manager for the USGS Science Application for Risk Reduction, the successor organization of the MHDP. Cox co-founded the MHDP and oversaw the ARkStorm scenario.

“They are not worst case scenarios but they are in general low probability, extreme events. We’re trying to create them so that they will be accepted. If it’s too big, people are going to blow it off and nobody is going to do anything about it,” Cox said.

To create the ARkStorm scenario, the team of scientists under Cox’s direction took the science used for studying earthquake trench faults — looking at where offsets in the fault occurred with carbon dating — and applied that to the deltas and marshes of California’s coast line.

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Laurie Johnson, founder, Laurie Johnson Consulting

What they deduced from that geologic evidence is that atmospheric rivers —  massive storms that collect huge amounts of water from the atmosphere over the Pacific and pour it on California — have occurred and could well occur again.

“The metaphor I like to use is that it’s like turning on a fire hose and pointing it at California and moving it up and down California’s coast line,” said Laurie Johnson of San Rafael, Calif.-based Laurie Johnson Consulting. She previously worked at Risk Management Solutions, the modeling firm.

Prasad Gunturi, the lead for North America-related CAT modeling research and evaluation at Willis Re, said a recent scientific report likened an atmospheric river to taking all of the water in the Amazon River and dumping it in California’s Central Valley.

For this project, Johnson focused on long-term recovery implications. Willis Re’s Gunturi pitched in on economic loss analysis.

“The whole purpose of loss modeling is to come up with a risk management strategy. So if we know what we know now, what could we do and what would be the best investment to make now,” Johnson said.

To model the amount of wind, storm surge and flooding that accompanies an ARkStorm, Cox’s team “stitched” together data from two separate storms: a winter storm that affected predominantly Southern California in 1969, and a 1986 storm that impacted predominantly Northern California.

The team also mapped, for the first time ever, what it would look like if the entire state flooded.

“The whole purpose of loss modeling is to come up with a risk management strategy. So if we know what we know now, what could we do and what would be the best investment to make now.” — Laurie Johnson, founder, Laurie Johnson Consulting

“The team had to build that from scratch,” Johnson said. “Team members worked with FEMA and the state department of water resources to develop a statewide hydrology model and figure out how flooding progressed across river systems and through time statewide,” Johnson said.

Legacies

Using trench analysis carbon dating to study California’s storm history is one of the project’s legacies.

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Bringing the term ARkStorm into public consciousness is another. “It’s something you hear quite commonly now with the media and the weather media. Not because we did it, but … it was a new concept,” Johnson said.

The ARkStorm scenario also showed California’s emergency responders that they were going to have to look at flooding in a whole new way.

Here was a statewide event they had never considered before.

“Central California was once a large inland sea with very low elevations in many spots. I knew that from my geoscience background,” Johnson said.

“But I don’t think people appreciated that in 1861-1862, flooding basically closed the capital, Sacramento; the whole Central Valley became a lake for more than three months. It took more than three months to drain the city,” she said.

“Nobody had looked at the statewide flows,” Cox said.

“California has really good flood fighters. We have really good emergency responders. We are looking at a scenario that would challenge them and that is what we’re trying to do,” Cox said.

Since the ARkStorm report was produced, Cox and some of his teammates have taken its hydrology and meteorology science and applied it at local levels. They’ve presented an ARkStorm scenario to officials in Ventura County.

“It was a really eye-opening experience for them,” Cox said.

Cox has also produced a study, published in January, detailing what would happen to the Lake Tahoe community in the event of an ARkStorm.

Look at these two factors alone.

One: That community takes its drinking water out of Lake Tahoe, untreated for the most part.

Two: Tahoe’s sewage treatment facilities are mostly at lake level. Should an ARkStorm strike, pumping that sewage out of the basin would become impossible.

Also, take into account that the workers who operate those sewage plants live on the other side of the mountain ridges, in more modest communities.

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The snow from an ARkStorm would stop them from getting to their jobs.

“We often talk about The Big One  [a big earthquake on the San Andreas Fault]; this is a bigger event,” said Anne Wein, an operations research analyst with the U.S. Geological Survey based in Menlo Park, Calif.

“What struck me was the evacuation being similar in size to a hurricane. We forget that this can happen in California,” Wein said.

BlackBar

Additional 2015 Black Swan coverage:

To Clean Up a Dirty Fight

A dirty bomb detonated in Manhattan could make a ghost town of the most populous city in the U.S.

The Darkness of the Sun

A fast-moving geomagnetic storm blasts the North American power grid, leaving a large swath of the Northeastern U.S. temporarily uninhabitable.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]
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Black Swans

To Clean Up a Dirty Fight

A dirty bomb detonated in Manhattan could make a ghost town of the most populous city in the U.S. 
By: | August 3, 2015 • 8 min read
R8-15p26-28_02Bomb.indd

When explosions shook the Chernobyl nuclear power station in 1986, they released enough radioactive material into the environment to kill 30 workers within a few weeks of the incident due to acute radiation poisoning, and sicken at least 100 others.

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Large areas of Belarus, Ukraine and Russia had to be evacuated due to high levels of contamination, displacing roughly 335,000 people. A 30-kilometer area around the reactor was completely closed off, and a square mile of contaminated pine forest was cut down and buried.

The explosion in this case was an accident, triggered primarily by the poor training of plant workers, but it demonstrated what kind of long-term damage can result from improper use of radioactive materials.

Before the reactor explosion, 14,000 people called Chernobyl home. The surrounding villages were erected mostly to house plant workers. The City of New York, by comparison, boasts 8.4 million residents and nearly 700 skyscrapers.

The Federation of American Scientists (FAS) took a map of the radiological damage from Chernobyl and laid it over a map of New York City to demonstrate just how many properties, businesses and lives would be impacted by an explosion of radioactive material.

But the FAS scenario isn’t based on a nuclear power plant explosion; it’s based on the possibility of a terrorist “dirty bomb” attack. Dirty bombs, or radiological dispersion devices (RDDs), combine a conventional explosive with radioactive material, and concern is growing that they could be the next terrorist threat.

Research laboratories, food irradiation plants, oil drilling facilities and medical centers are just some examples of facilities that house radioactive elements like cobalt, cesium, plutonium and Americium. The small quantities that these facilities work with are protected as a commercially valuable asset, according to the FAS, but “once radioactive materials are no longer needed and costs of appropriate disposal are high, security measures become lax, and the likelihood of theft or abandonment increases.”R8-15p26-28_02Bomb.indd

The Attack

The FAS focused its scenario on a dirty bomb built with cobalt-60, a radioactive material used in cancer treatment, industrial radiography, sterilization and food preservation. Facilities keep cobalt-60 in the form of small metal rods that are perfectly safe when encased inside therapy units or other machinery, but emit dangerous levels of radiation if the casings and rods are broken and particles of the cobalt-60 are dispersed.

The explosion of an RDD with cobalt-60 would send a cloud of radiation over a radius of at least several miles from the blast site.

“Based on the type, size and location of the device, we predict that in an urban environment, one building will need to be demolished, eight others will need repair, and about 75 more will need cleanup or decontamination,” said Hart Brown, vice president, organizational resilience, at HUB International.

Hart Brown, vice president, organizational resilience, HUB International

Hart Brown, vice president, organizational resilience, HUB International

“The physical nature of the damage will be localized, and small in comparison to the contamination aspect.”

A highly radioactive and powerful bomb could reasonably result in “180 to 200 fatalities, 250 to 300 injured, 20,000 possibly contaminated, and as many as 100,000 to 200,000 that think they could be contaminated,” Brown said.

Mark Lynch, head of terrorism model development on the impact forecasting team at Aon Benfield, estimated that radiation could spread over a 32-block radius from the blast site, which would cover roughly 49 square miles.

A 2003 report titled “Radiological Weapons: How Great is the Danger?” foresaw an even larger impact. This analysis, written for the U.S Department of Energy by George Malcom Moore, a former senior analyst in the Office of Nuclear Security at the International Atomic Energy Agency (IAEA), concluded that even a very small amount of cobalt-60, if dispersed evenly, has the capacity to contaminate 137 square miles.

That would cause millions of dollars’ worth of damage, so imagine what contamination of 621 square miles could do. That’s just what the FAS predicted in its scenario. The simulation surmised that if a tube of cobalt-60, about one inch in diameter and one foot long, were detonated and the particles dispersed from a bomb in lower Manhattan, it would contaminate an area of 621 square miles, or about 300 city blocks.

By EPA standards, lingering radiation from a source of this strength could increase the risk of dying from cancer to one-in-100 for anyone living in the borough of Manhattan.

Within 30 miles of the blast site, the risk remains high at one-in-1,000. Within 75 miles, the risk reduces to one-in-10,000.

In a presentation of these risks made to the Senate Foreign Relations Committee in 2002, the FAS reported that EPA recommendations dictate decontamination or destruction within that 75-mile zone.

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“Everybody agrees that not a lot of people will be killed, but not everybody agrees on the amount of property damage,” said Moore, the scientist in residence at the James Martin Center for Nonproliferation Studies. “The big hazard from a dispersion device or a dirty bomb is not killing people, but contamination of property, which is an expensive proposition. You can create an extensive amount of economic loss by doing that.”

The Cleanup

Decontamination is no easy task. Removing the radioactive material would involve sandblasting the top layer off of everything, and repeating the process until radiation levels meet the EPA’s emergency standard, which is twice the normal background level.

(According to the EPA, low levels of radiation exist naturally in the environment at all times. Sources include cosmic radiation from space, radioactive minerals in the ground and radioactive gases like radon and thoron.)

“We’re talking taking the top layer off of sidewalks, off the outer side of buildings, off of all the furnishings inside those buildings,” HUB International’s Brown said. “It could be months to years to get everything cleaned up.”

“Most people who deal with radiation are surprised we haven’t yet had an incident of this type.” — George Malcom Moore, former senior analyst, Office of Nuclear Security at the International Atomic Energy Agency

The FAS suggested that decontamination alone may not be enough. In cases where the risk of cancer could not be reduced to one-in-10,000, total demolition may be necessary.

If all of the buildings within a 1.2 mile area in New York City had to be demolished and rebuilt, the cost could top $50 billion, according the organization’s report, “Dirty Bombs: Response to a Threat.”

Overall, “if such an event were to take place in a city like New York, it would result in losses of potentially trillions of dollars,” the report said.

Even greater than the costs of repair and cleanup, though, is the loss from business interruption.

It’s possible that an exclusionary zone would have to be established until radiation levels fell low enough. Businesses in that zone would be unable to function.

Even companies in the surrounding area would lose a major portion of their customer base; when buildings are able to reopen, it’s likely that former residents and employees will not return, fearing the long-term health effects of any lingering radiation.

Brown referred to this as “radio-phobia,” where people treat radiation exposure as a type of virus they can catch and transmit.

“The fear,” said Aon Benfield’s Lynch, “is usually significantly higher than the actual damage.”

While very high doses can cause acute radiation poisoning and even death, most people will not be physically affected, though fear among the general public persists.

Brown estimates that BI losses could fall anywhere in the range of tens to hundreds of billions.

The Likelihood

The likelihood of a radiological attack using a small amount of radiation occurring within the next decade “is probably greater than 50 percent,” Moore said. “Most people who deal with radiation are surprised we haven’t yet had an incident of this type.”

Many medical facilities have rods of cobalt-60 on site, and they are not always well-guarded.

Video: Authorities in Mexico recovered a stolen truck that has been transporting radioactive material, in this report from ITN News.

That leads to many of what the U.S. Nuclear Regulatory Commission (NRC) calls “orphaned sources,” or small volumes of radioactive material that are uncontrolled, lost, or in the possession of someone not licensed to own it.

The NRC reports that U.S. companies have lost track of nearly 1,500 radioactive sources within the country since 1996, and more than half were never recovered.

Incidents outside of the country have demonstrated how easily the wrong people can get their hands on a radiological device.

In 2013, in the Mexican town of Cardenas, for example, a couple of thieves stole a truck carrying iridium-192, which is used for cancer treatment, to a waste storage facility.

That source was eventually found, but not before six people were hospitalized for radiation exposure.

In the city of Goiania, Brazil, in 1985, a private radiotherapy institute relocated, but left behind some cesium-137.

Part of the institute was later demolished, which destroyed the protective casing around the cesium and led to contamination of the surrounding environment.

Ultimately, about 112,000 people were medically monitored, 249 were contaminated either internally or externally, and four died. It took three years to totally restore contaminated areas to livable conditions.

Response and Recovery

Coverage for any losses stemming from a dirty bomb attack could be difficult to find. In order for TRIA to kick in, the incident would have to be clearly defined as an act of terrorism, but “crime scene contamination makes it more difficult to collect and examine evidence,” Lynch said.

Without a declaration of terrorism by the Secretary of the Treasury and the Secretary of Homeland Security, the losses could be insurmountable for affected businesses to handle on their own.

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“When you get into nuclear terrorism, there’s really no ability to predict that loss. It gets complex based on the coverage, and there are a lot of exclusions,” Brown said.

“The federal government would have to provide some economic stimulus, some funds, to prop up the city throughout this timeframe, which again could be years.”

It’s not known whether extremist groups such as ISIS are actively building RDDs, but mishaps like those in Mexico and Brazil and the growing list of orphaned sources make a dirty bomb a very real threat.

In 2012, 160 incidents of lost radioactive materials were reported to the IAEA, 17 of which involved some type of criminal activity.

The NRC and Department of Energy have since made more aggressive efforts to document and locate orphaned sources; here’s hoping they pay off.

BlackBar

Additional 2015 Black Swan coverage:

Welcome to the ARkStorm

A 45-day superstorm floods California and dishes out economic catastrophe.

The Darkness of the Sun

A fast-moving geomagnetic storm blasts the North American power grid, leaving a large swath of the Northeastern U.S. temporarily uninhabitable.

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]
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Sponsored: Healthcare Solutions

The Tools of the Trade

Opioid use is ticking down slightly, but high-priced specialty drugs, compound medications and physician dispensing are giving WC risk managers and payers all they can handle.
By: | July 1, 2015 • 7 min read
HCS_BrandedContent

Integrating medical management with pharmacy benefit management is the Holy Grail in workers’ compensation. But getting it right involves diligence, good team communication and robust controls over the costs of monitoring technology.

Risk managers in workers’ compensation can feel good about the fact that opioid use is declining slightly. But experts who gathered for a pharmacy risk management roundtable in Philadelphia in June pointed to a number of reasons why workers’ compensation professionals have more than enough work cut out for them going forward.

For one, although opioid use is declining, its abuse and overuse in legacy workers’ compensation claims is still very much a problem. An epidemic rages nationally, with prescription drug overdose deaths outpacing those from the abuse of heroin and cocaine combined.

In addition, increased use of compound medications and unregulated physician dispensing are resulting in price gouging and poor medical outcomes.

Although individual states are attempting to address the problem of physician dispensing of prescriptions in workers’ comp, there is no national prohibition against it: That despite substantial evidence that the practice can result in ruinous workers’ compensation medical bills and poor patient outcomes.

“The issue is that there isn’t enough formal evidence to indicate improved outcomes from the use of compounds or physician dispensed drugs, and there are also legitimate concerns with patient safety,” said roundtable participant Jim Andrews, executive vice president, pharmacy, for Duluth, Ga.-based pharmacy benefit manager Healthcare Solutions.

Jim Andrews, Executive Vice President, Pharmacy, Healthcare Solutions

Jim Andrews, Executive Vice President, Pharmacy, Healthcare Solutions

Andrews’ concerns were echoed by another roundtable participant, Dr. Jennifer Dragoun, Philadelphia-based vice president and chief medical officer with AmeriHealth Casualty.

“When we’re seeing worsening outcomes and increasing costs, that’s the worst possible combination of events,” Dr. Dragoun said.

Whereas two years ago, topical creams and other compounds with two to three medications in them were causing concern, now we’re seeing compounds with seven or more medicines in them.

How those medicines are interacting with one another, and in the case of a compound cream, how quickly they’re being absorbed by the patient, are unknowns that are creating undue health risks.

“These medicines haven’t been tested for that route of administration,” Dragoun said.

In other words, the compounds have not been reviewed or approved by the FDA.

Carol Valentic, vice president of cost containment and medical management with third-party administrator Broadspire, said her company’s approach to that issue is to send a letter to providers, through the company’s pharmacy benefit administrator, alerting them to the fact that compounds are not FDA-approved and could be dangerous.

Other roundtable participants said they employ utilization review of every prescribed compound medication. They’re finding that the inflation of the average wholesale price for prescriptions that pharmacy benefit managers are battling in the case of single medications is happening with compounds as well, to the surprise of probably no one.

“The cost of compounds is doubling every year,” Healthcare Solutions’ Andrews said.

Deborah Gleason, Clinical Resources Manager, ESIS

Deborah Gleason, Clinical Resources Manager, ESIS

Kim Clark, vice president of utilization management with Patriot Care Management Inc., a division of Patriot National, Inc., said Patriot has their own software, DecisionUR, and opioids as well as  compound prescriptions can be directed from the PBM to Utilization Review.

In the area of new worries in workers’ compensation, and there are plenty of them, Dragoun also pointed to the introduction of extremely high cost, albeit extremely effective specialty medications, such as those being used to treat Hepatitis C. Treatments in this area can run into the hundreds of thousands of dollars.

Domestic drug manufacturers, pressed to pursue profits as their product lines mature and their margins level off, are jockeying for dominance in this area.

“This seems to be a route that a lot of drug makers are going after. Very narrow markets but with extremely high cost medications,” said Deborah Gleason, clinical resources manager, medical programs, with ESIS, the Philadelphia-based third-party administrator that is part of ACE Group.

Tools of the Trade

Given how substantially the use of prescriptions can balloon the cost of a workers’ compensation claim and undermine outcomes, a number of tools are in the market that can help risk managers rein in costs.

One is urine drug monitoring, which can catch cases of drug diversion, or instances where an injured worker is ingesting unprescribed substances. But the use of that test can create its own problems, namely overutilization.

Gleason, with ESIS, Inc., and others use urine drug monitoring. But when the test is overused, say by being conducted every month instead of quarterly as is recommended, the members of the Philadelphia roundtable said its costs can outrun its usefulness.

Test results are frequently inconsistent, signaling that the injured workers aren’t taking the prescribed medication or are taking something they shouldn’t be. Drug testing shouldn’t be used in isolation but rather as a component of integrated medical management.

“What’s emerging today, and in some companies more prevalently, is the integration of managed care with pharmacy benefit management,” roundtable participant Valentic said.

HCS_BrandedContent“When we’re seeing worsening outcomes and increasing costs, that’s the worst possible combination of events.”

— Dr. Jennifer Dragoun, Vice President and Chief Medical Officer, AmeriHealth Casualty

In other words, it’s not enough to flag a script or pick up a urine drug monitoring test result. There needs to be a plan or a system in place that says what action should be taken with the patient once that information has been received.

Identifying a potential problem early and taking action on it is key, said ESIS’ Gleason. She added that the patient’s psychological state, including how they react to and perceive pain, is something that more risk practitioners should consider.

Obstacles to assessing someone’s psychological or psychosocial state, according to roundtable members, include a lack of awareness or acceptance of its possible advantages on the part of patients and physicians. After all, we’re talking about an assessment, a list of questions, that should take no more than 15 minutes to carry out.

If a treating physician or case manager doesn‘t conduct a psychological test but is still concerned about the potential for pain medication abuse, there is one key question they can ask an injured worker, according to AmeriHealth Casualty’s Dragoun.

“There is one question that predicts far more than any other attribute of a patient whether they are likely to abuse narcotics, and that is if they have a personal or family history of substance abuse,” Dragoun said.

Kim Clark, Vice President of Utilization Management, Patriot Care Management

Kim Clark, Vice President of Utilization Management, Patriot Care Management

“You know they may ask that about the patient, but I don’t know how many ask it about the family,” Patriot Care Management’s Kim Clark said.

Pharmacogenetic testing, that is testing an individual for how they might react to certain drugs or combinations of drugs, and not — let’s be clear about this — whether they are predisposed to addiction, is also entering the market.

But as is the case with urine drug monitoring, the use of pharmacogenetic testing is no cure-all and the cost of it needs to be carefully managed.

Some vendors are pitching that it be applied to every case in a payer’s portfolio. The roundtable participants in Philadelphia agreed that it should be used with far more discretion than that.

Regulating the Regulators

It’s a given in the insurance business and in workers’ compensation that regulators in all 50 states call the shots. There are few national laws that regulate the hazards faced by workers’ compensation risk managers and injured workers.

Having said that, is it really such a pipe dream to think that the federal government could step in and provide leadership in an area that is so prone to confusion, risk and self-serving behavior on the part of some vendors and medical practitioners?

If the Philadelphia roundtable as a group could point to one place where federal regulators could do some good it would be in the area of physician dispensing. Many states have enacted legislation to curb the practice, as there is no data to prove better outcomes, and regulation by the federal government would be of benefit, the Philadelphia roundtable concluded.

Another area would be to require FDA oversight for compounds.

“The minute you need to have FDA approval of a compound, that’s going to stop it,” Broadspire’s Valentic said.

It’s a notion worth considering. After all, lives are at stake here.

Given the lack of oversight from the federal government, the roundtable participants pointed to measures in a number of states that are worth emulating. The Texas closed formulary, which limits the range of medications that can be prescribed, is one example.

The requirement in the State of New York that a prescribing physician check a state registry — what’s known as a prescription drug monitoring program — to check whether a patient is already taking or has a prescription for a controlled substance, is another good example of a state government stepping in to ensure the safety of its residents.

“The minute you need to have FDA approval of a compound, that’s going to stop it.”

— Carol Valentic, Vice President of Cost Containment, Medical Management, Broadspire

Pennsylvania also earned praise from the roundtable for recently passing a measure limiting the amount of medication that a physician can dispense to an initial supply.

With different regulations in every state and with the average wholesale cost of prescriptions constantly on the rise, pharmacy benefit management is an art requiring constant vigilance.

“It’s not an original thought, but if you stop and think about all the things that are happening in society with the addictions and the costs, the cost of doing nothing is greater than the cost of doing something.

I think that’s why everybody is doing something,” Healthcare Solutions’ Andrews said.

For more information about Healthcare Solutions, please visit www.healthcaresolutions.com.

Opinions of the roundtable participants are the opinions of each individual contributor and are not necessarily reflective of their respective companies.

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




Healthcare Solutions serves as a health services company delivering integrated solutions to the property and casualty markets, specializing in workers’ compensation and auto liability/PIP.
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