Brains Not Brawn
Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.
The scenario begins with the brief video below:
A Grey Area
For five weeks, Mike lives in a grey area populated by denial and tentative healthcare delivery. Mike reports his injury to his employer and is referred to an occupational medicine specialist. The specialist prescribes Vicodin, a pain killer and Naproxen, an anti-inflammatory.
Mike also discusses light duty alternatives with his employer. Mike tries light duty, taking a stab at acting as a carpenter’s assistant, essentially, cleaning up and doing menial work like sweeping up sawdust and chucking small pieces of wood into the dumpster.
Mike is plagued by pain, and acting against the advice of the occupational medicine specialist, he starts taking two to three Vicodin a day on the job to manage. Buffered by the Vicodin, Mike ignores the verbal agreement he has with his employer and begins to use his shoulder harder.
At one point, frustrated with the inaccurate work of an underling, Mike picks up a circular saw and starts making cuts to beams and other hefty pieces of wood.
After six weeks, Mike’s pain hasn’t gotten any better and under pressure from Mike’s employer, Mike’s occupational medicine specialist refers him to an orthopedic specialist.
At the orthopedic surgeon’s office, Mike is sitting on the examination table with the doctor standing before him.
The doctor, a much smaller man than Mike, places his right hand on Mike’s left wrist.
“Okay, try to lift your arm,” the doctor says.
Mike tries to lift his arm with the doctor pushing down against him but is struggling.
“You’re very weak in the shoulder,” the doctor says. “I’m afraid you have a substantial rotator cuff tear but we’ll order an MRI just to be sure,” the doctor says.
“What if it’s torn, what then?” Mike says.
“You’re looking at surgery with a minimum of six months off of work,” the doctor says.
“Six months? Why?” says Mike.
“Rehabilitation from rotator cuff surgery isn’t easy. You could have some setbacks. I’m giving you a conservative estimate,” the orthopedic surgeon says.
“Why operate at all?” says Mike.
“You can’t walk around with a rotator cuff tear in your line of work for any period of time,” the doctor says.
“It’s way too risky for a man your age.”
“I’m only 54, Doc,” Mike says gamely.
“At your age, honestly, you’re going to have to be very diligent in rehab to bring this thing back all the way,” the doctor says, tapping Mike lightly on his injured left shoulder.
The MRI confirms what the doctor felt to be true. Mike has a full thickness tear of his rotator cuff.
“You see that?” the doctor says to Mike as they look at the MRI image together.
“Looks like it’s torn all the way through,” Mike says.
“Yes it is,” the surgeon says. “We need to set a date to operate. And as I said during our last visit, you’re going to have to be diligent in rehab to bring this shoulder back successfully.
A New Reality
As a former high school wrestler and carpenter, Mike is accustomed to injury and injury recovery. It seemed like he recovered from a torn meniscus in his right knee during his wrestling days in a matter of weeks.
In his twenties, he broke a finger in his right hand in a bar fight in Muscatine, Iowa.
In his thirties, he broke the fifth metatarsal bone in his left foot when he rolled his ankle over a log while dove hunting near Lake Okochobee.
Each time he came back fine. Over the years, Mike developed a quiet confidence that his strong body will never fail him.
But one look at Mike as he sits on his living room couch with his left arm in a sling says that this time might be very different. He’s four weeks post surgery and he’s already gained 20 pounds. Post surgery, his doctor gave him a generous prescription of Oxycontin, 80 pills. Mike still has 50 of those pills, a fact he is keeping from his wife and his doctor.
“Really honey?” his wife says as she stands in the living room doorway watching Mike open another beer as he watches a Florida State football game.
There are three finished beers on the coffee table in front of Mike. “What?” Mike says as he takes a sip of beer.
“You know what,” his wife says. “You’ve been drinking a lot more beer since you’ve been off work.”
“Not really,” Mike says.
His wife walks closer to Mike and peers into a pizza box.
“You ate that entire pizza?”
“Thin crust,” Mike says by way of a joke.
His wife pauses, not enjoying the joke.
“Are you still taking painkillers? Because you know you shouldn’t be drinking and taking that prescription.”
“Nah, I dumped ‘em in the garbage. I don’t need ‘em anymore.” Mike says.
“Hummmph,” his wife says, not pleased with the whole picture and seeming to doubt Mike’s word.
“What about your physical therapy exercises that you’re supposed to be doing at home?”
“I’m doin’ ‘em,” Mike says.
“When?” his wife asks him.
Mike glares at his wife and she reacts.
“I know what you’re thinking,” she says, crossing her arms.
“You think I’m being a nag. Well I’ve got news for you Mike Manning. Just because I care enough to ask after your health doesn’t make me a nag!”
As soon as she leaves the room, Mike fishes in his pocket and brings out a vial of pills.
With practiced dexterity, Mike uses his slinged left hand to hold the pill bottle while he wrests the top off with his right. Mike pops a pill in his mouth and washes it down with a slug of beer.
Mike had initially taken the painkillers according to the instructions on the bottle. But two months into his recovery, he’s now ingesting twice that amount on a daily basis.
Back at his doctor’s office, six weeks post-op, Mike’s shirt is off while the doctor checks his range of motion and his strength.
“Okay, stand up and raise your arm as high as you can,” the doctor says.
Mike gamely raises his arm, but he can’t raise his hand above chest height.
“Keep working hard in therapy,” the doctor says. “How’s your pain?”
Mike gives a pain rating of eight over ten. Excess pain behavior.
“Eh, it still hurts, especially when I’m trying to sleep,” he says.
“Okay, we started you on Oxycontin but I’m going to see if you can get by on Vicodin,” the doctor says.
“Sounds good,” Mike says, avoiding eye contact with the doctor. Mike still has a renewal on his Oxycontin and he’s happily envisioning doubling up with Oxycontin and Vicodin even before the doctor has put pen to paper to write him a new prescription.
Mike flexes his knee.
“My right knee has started to hurt too,” Mike says. “Don’t know what’s up with that.”
The doctor looks at Mike as Mike flexes the knee.
“It looks like you’ve picked up a considerable amount of weight since you’ve been off Mike. That could be affecting your knee.”
“Yeah, probably so,” Mike said, patting his gut affectionately.
“How’s rehab going?” the doctor says. “You doing the home exercises they’re giving you?”
“Eh…sure,” Mike says.
From the doctor’s expression, he’s not too convinced.
Six months post-injury, Margorie Kessel, a claims supervisor for Mike’s employer’s workers’ compensation carrier, has a look at Mike’s file and does not like what she sees.
“His opioid use is like a runaway train,” Margorie says to herself.
“I’m going to put a nurse on this case.”
Off the Rails
Nine months post-injury, Mike is at physical therapy, lying on his back while a therapist works on his shoulder.
The physical therapist is holding Mike’s left arm and trying to gain more range of motion by steadily pushing Mike’s shoulder past where it wants to go.
The therapist is straining, and from the expression on his face, even nine months past injury, Mike is experiencing serious pain in the shoulder.
“Wow,” the therapist says.
“You’re as tight now as you were three months ago.”
“I know,” Mike says without much conviction.
The therapist sheds her sweatshirt.
“You’re giving me a workout,” she says. She picks up Mike’s arm again and resumes work.
Just then, another patient shouts out to Mary.
“Hey Mary, can you come over here? I’m not sure what to do on this exercise ball,” the other patient says.
“Sure, just a sec, Mary says.
“Here Mike,” so some work with this hand weight and I’ll be right back.”
The therapist leaves Mike and he continues on with the hand weight.
The therapist comes back.
“Sorry about that. Where were we?” But instead of picking up Mike’s left arm she picks up his right arm.
“It’s the left arm,” Mike says impatiently.
“Oh, right, sorry about that,” the therapist says.
“Okay, let’s see here,” she says, picking up Mike’s left arm.
She strains again, trying to get some motion out of the stiff joint.
She pauses, tuckered out.
“Are you sure you’re doing those home exercises I’ve been giving you?” she says. How many times is he doing it? How many times are you doing it? He can’t remember.
“You’re just not making the progress I’d hoped you would at this point.”
“I’m doin’ ‘em,” Mike says, again, somewhat unconvincingly.
Just then, another patient calls out for help from the overworked therapist.
“Hey Mary, am I doing this leg extension correctly?”
“Um, let me see,” Mary says, as Mike rolls his eyes impatiently.
“Hold on a sec, sorry,” Mary says as she puts Mike’s arm down again.
Mike lies on the table for another couple of minutes as the therapist gets caught up in the other patient’s questions.
Mike looks over to the therapist, working on the other patient.
“That’s it,” he says. “I’m out of here.”
Despite his weight and his gimpy knee, Mike slides off of the table and leaves, limping as he goes.
“Mike! Mike! Where are you going?” Mary says.
“Out! I’m going out of here! I’ve had it!” Mike says.
Three months later, Margorie Kessel is taking another look at Mike’s file.
“So now we’ve got a frozen shoulder. Probably looking at a six-figure settlement for permanent disability. And he’s still at the drugstore,” she says.
“What the heck happened to this claim?”
This scenario was originally presented at the 2014 National Workers’ Compensation and Disability Conference in Las Vegas.
As part of the discussion, panelists discussed key aspects presented in the scenario.
Panelists included Dr. Robert Goldberg, chief medical officer, Healthesystems; and Dr. Kurt Hegmann, Associate Professor, The Rocky Mountain Center for Occupational & Environmental Health. The session was moderated by Tracey Davanport, director, National Managed Care, Argonaut Insurance.
Insights from their discussion are highlighted below:
Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.
Nothing beats working with the best. That’s what Jerry Oliver, a senior vice president with Manhattan-based Lupex, told himself as he left the morning meeting.
In that meeting, executives with Lupex, an energy trading firm, voted to buy two million barrels of crude and store it offshore. A precipitous decline in oil prices was the motivation.
All the firm had to do was keep the oil safe and sound until the prices rose again, which they inevitably would. Major domestic drillers were already laying off staff and cutting production. These latest low oil prices were just another bend in the cycle.
Oliver’s marching orders from that morning’s meeting were clear. Working with other members of the Lupex team, it was Oliver’s responsibility to find the right vessel and a safe place to moor it.
The strategy was to keep the oil safe by avoiding CAT-exposed locations and hold it long enough for the firm to cover its storage costs and still make a handsome profit when the price rose.
“Let’s get this done,” Oliver said to himself before walking into his office to get on a phone call with a colleague in Texas.
After consulting with his colleague, Oliver decided to use the Miller Line, a company based in the energy hub of Houston. The Miller Line was an owner of Very Large Crude Carriers — or VLCCs.
One of the company’s ships, the Mariana, had the capacity that Lupex needed and was available. Adding to the attractiveness of the Mariana was that she was already in Southern California, not far from the tank farm in El Segundo where the oil was stored.
The Lupex team decided to moor the Mariana off of Long Beach, once she’d taken on the Lupex crude.
“We don’t want to store it in the Gulf, or anywhere near Florida,” Oliver told his team, pointing to the hurricane hazards in those locations.
“Long Beach has also got the security infrastructure we like,” Oliver said.
Lupex procured the oil at $50 per barrel the following morning, making its value at purchase $100 million. To wrap up the deal, Oliver and his associates took care of some final details, among them, getting insurance in place.
Loading at the tank farm went off without a hitch and the Mariana was moored off of Long Beach. Within days, it looked like oil prices had bottomed.
Weeks later, after a particularly sharp, sustained rise in the price of oil, Lupex executives gave the “sell” order.
With oil at $80 per barrel at the time of the sale, it looked like the company’s strategy was playing out as well as could be hoped. The Mariana made her way to Houston, to offload the oil for the buyer.
At 2 p.m. on the afternoon the oil was offloaded in Houston, Jerry Oliver got a call from Antony Ellis, his associate in Houston.
“We’ve got a problem, a very serious problem,” Ellis said.
“What is it?” Oliver asked.
“The oil’s contaminated,” Ellis replied.
“What?” Oliver said.
“It’s true,” Ellis said. “Apparently, the ship was carrying gasoline before it picked up the crude load and wasn’t cleaned properly.”
“The gasoline additives that remained in the tanker contaminated the crude, lowering its grade and market value,” Ellis further explained.
‘Somebody’s got to tell the executive committee. I’ll do it,” Oliver said.
Then he hung up the phone.
On their follow-up call, Ellis and Oliver began to put the pieces of a disturbing picture together.
“So we can re-blend it?’ Oliver said.
“In essence, yes,” Ellis said.
“It’s a lower product grade, and far less valuable, and then there’s our mixing costs and other related expenses,” he said.
“If we’re very, very lucky and we get this done in no more than two days’ time. We might be able to get $42 per barrel for this lower grade product. I don’t see how we can hold it any longer,” Ellis said.
“Nobody up here has any patience for anything more than that,” Oliver said.
Oliver wasn’t sharing with Ellis the exact tone and temperature of the conversation that he’d had with senior management when he brought them the bad news to begin with. He’d spare his colleague that extra pain.
Working as quickly as they had ever worked, with neither of them sleeping more than four hours over a 48-hour period, Oliver and Ellis arranged for the re-blending of the ill-fated oil from the Mariana.
When all was said and done, Lupex got $41 per barrel for the re-blended product. A down day in the markets worked against them, but as traders, they knew that timing was everything. They were already down millions. They could not afford to wait a day longer. Two days after the sale of the re-blended product, Oliver was speaking with a senior executive, conducting a post-mortem on what became an instant legend at Lupex, “The Long Beach Loss.”
“What do our insurance carriers have to say about this?” the executive asked.
“Ummm, I haven’t talked to them yet,” Oliver said. He was back in his office and on the phone with Lupex’s broker within a minute, his ears still hot from the tongue-lashing his superior had given him.
The broker, Danny Parker, a young gun with a multinational firm, listened to the details of the loss as relayed by Oliver.
“Well, I’ve got a question for starters,” Parker said.
“What?” Oliver said.
“Why didn’t you contact me earlier?” Parker asked.
A List of Ills
Falling oil prices in 2014 were something that got everybody’s attention. Everyone of driving age could see it as gasoline prices at the pump plummeted.
Lupex executives couldn’t be blamed if they were practically obsessed with the rate at which oil prices were going down. After all, this was what they did; it was their bread and butter.
They had the capital and the connections to do very well on what looked like a historic trading opportunity. A two-year average oil price of more than $110 per barrel was becoming a dream-like memory as oil prices fell to below $80 per barrel, then $70 per barrel and on and on down.
Lupex executives were bright and well-schooled. They knew the history of the energy sector. They’d worked extremely hard, done very well over the years and felt they had earned this moment.
As with anyone, it was what they didn’t know that dealt them such a painful blow.
It fell to Danny Parker, the energy insurance broker, and his colleague, Lee Ann Farmer, a cargo specialist, to give Lupex the most painful messages of all.
“Jerry and Antony … let me ask you something. When you arranged to lease the Mariana from the Miller Line, did you ask them about what the Mariana previously held, and whether the vessel posed a contamination risk?”
“That’s on me,” Antony Ellis said. “The short answer is no. You have to understand — we weren’t the only traders on the planet that had their eye on this opportunity. VLCC rates were showing a lot of volatility of their own in late 2014,” he said.
“A lot of people were after this opportunity,” Oliver said.
“We understand …” Danny Parker managed to get out before Antony Ellis interrupted him.
“We’re talking about storage rates of tens of thousands of dollars per day, and in one week alone in November, we saw a 20 percent increase in those leasing rates. There was a lot to consider here,” Ellis said.
“I’m sure there was,” Lee Ann Farmer said.
“I know you had a lot to consider,” she continued. “But you should have thought about a cargo policy. After all, once that product leaves land and goes into a ship, you’re in a completely different ballgame from a coverage perspective.”
“Okay, but how exactly?” Jerry Oliver began.
“Just hold on a second,” Danny Parker said.
“That contamination issue you had? I bet you I could have covered that for you,” Lee Ann said.
Oliver felt nausea roil his stomach.
“You’re kidding me,” he said. “All of it?”
“I’m pretty sure the carrier would have you retain some of it,” Lee Ann said. “But in our world, these days, there’s a lot of capacity out there.”
“I never knew,” Antony Ellis said.
“Sorry. But now you know,” Danny Parker said.
Lupex would live to seek other opportunities in coming months and years, but its insurance coverage lapse in the Long Beach loss cost the company an opportunity that might have been once in a lifetime.
Risk & Insurance® partnered with XL Group to produce this scenario. Below are XL Group’s recommendations on how to prevent the losses presented in the scenario. These “Lessons Learned” are not the editorial opinion of Risk & Insurance®.
1. Consider an Ocean Cargo Policy: For a relatively low cost compared to the value of goods, an ocean cargo policy can be structured to cover perils of the seas (i.e. sinking, fire, collision, explosion, heavy weather), General Average, Theft, Fire, Acts of War, Shortage, Leakage and contamination. In the “Tainted Goods” risk scenario, if Lupex had purchased an appropriately structured ocean cargo policy, the company would have been covered for the loss due to contamination.
2. Choose Appropriate Limits: When evaluating an ocean cargo policy, risk managers need to ensure that the amount of insurance will be sufficient to cover the goods at the maximum foreseeable financial interest. This is especially important in dealing with commodities, like oil, where there’s a chance of financial fluctuations.
3. Valuation of Goods: For an effective ocean cargo policy, it should be structured to allow the buyer to be indemnified for the highest value of goods for several different situations, including:
- The invoice value + 10% (for ancillary/related costs)
- The selling price (if sold)
- The market value on date of loss
With these different evaluations structured into the policy, this will allow for recovery of the amount paid at a minimum, or the full mark up if sold or unsold at a maximum.
4. Ensure Professional Handling of Goods: Bulk liquids and solid goods pass through a number of loading mechanisms, holding tanks/locations, pipelines, conveyor belts, loading machinery and pumps when moving from shore to vessel and vice versa upon unloading. This opens up the potential for many types of losses, including: shortages, contamination and loss in weight. In order to reduce this risk, companies should take the steps to ensure professional handling of their goods by working with tenured logistics providers.
5. Reduce Your Contamination Risks: It’s common for companies to conduct and pay for testing and approval of tanks as well as a certificate by a qualified surveyor. However, it’s important that additional samples are taken at loading and unloading to determine if, where, or when the contamination occurred. This is also recommended for barges, lighters, tank cars and port side tanks. Most of all, a company operating in this space should make sure the handling guidelines are adhered to. By following the handling guidelines, the insurance coverage will remain valid.
6. Consult with your Marine Broker & Underwriter: Marine brokers and underwriters can offer specific knowledge and experience that can be leveraged in certain classes of businesses. They can discuss best practices and provide recommendations to reduce your risk. In addition, they can provide value added services in terms of Risk Engineering, Claims, and various technical white papers, which can serve as readily available resources.
Mitigating Fraud, Waste, and Abuse of Opioid Medications
There’s a fine line between instances of fraud, waste, and abuse. One of the key differences is intent and knowledge. Fraud is knowingly and willfully defrauding a health care benefit program for personal gain or profit. Each of the parties to a claim has opportunity and motive to commit fraud. For example, an injured worker might fill a prescription for pain medication only to sell it to a third party for profit. A prescriber might knowingly write prescriptions for certain pain medications in order to receive a “kickback” by the manufacturer.
Waste is overuse of services and misuse of resources resulting in unnecessary costs, whereas abuse is practices that are inconsistent with professional standards of care, leading to avoidable costs. In both situations, the wrongdoer may not realize the effects of their actions. Examples of waste include under-utilization of generics, either because of an injured worker’s request for brand name medication, or the prescriber writing for such. Examples of abusive behavior are an injured worker requesting refills too soon, and a prescriber billing for services that were not medically necessary.
Actions that Interfere with Opioid Management
Early intervention of potential fraud, waste, and abuse situations is the best way to mitigate its effects. By considering the total pharmacotherapy program of an injured worker, prescribing behaviors of physicians, and pharmacy dispensing patterns, opportunities to intervene, control, and correct behaviors that are counterproductive to treatment and increase costs become possible. Certain behaviors in each community are indicative of potential fraud, waste, and abuse situations. Through their identification, early intervention can begin.
- Prescriber/Pharmacy Shopping – By going to different prescribers or pharmacies, an injured worker can acquire multiple prescriptions for opioids. They may be able to obtain “legitimate” prescriptions, as well as find those physicians who aren’t so diligent in their prescribing practices.
- Utilizing Pill Mills – Pain clinics or pill mills are typically cash-only facilities that bypass physical exams, medical records, and x-rays and prescribe pain medications to anyone—no questions asked.
- Beating the Urine Test – Injured workers can beat the urine drug test by using any of the multiple commercial products available in an attempt to mask results, or declaring religious/moral grounds as a refusal for taking the test. They may also take certain products known to deliver a false positive in order to show compliance. For example, using the over-the-counter Vicks® inhaler will show positive for amphetamines in an in-office test.
- Renting Pills – When prescribers demand an injured worker submit to pill counts (random or not), he or she must bring in their prescription bottles. Rent-a-pill operations allow an injured worker to pay a fee to rent the pills needed for this upcoming office visit.
- Forging or Altering Prescriptions –Today’s technology makes it easy to create and edit prescription pads. The phone number of the prescriber can be easily replaced with that of a friend for verification purposes. Injured workers can also take sheets from a prescription pad while at the physician’s office.
- Over-Prescribing of Controlled Substances – By prescribing high amounts and dosages of opioids, a physician quickly becomes a go-to physician for injured workers seeking opioids.
- Physician dispensing and compounded medication – By dispensing opioids from their office, a physician may benefit from the revenue generated by these medications, and may be prone to prescribe more of these medications for that reason. Additionally, a physician who prescribes compounded medications before a commercially available product is tried may have a financial relationship with a compounding pharmacy.
- Historical Non-Compliance – Physicians who have exhibited potentially high-risk behavior in the past (e.g., sanctions, outlier prescribing patterns compared to their peers, reluctance or refusal to engage in peer-to-peer outreach) are likely to continue aberrant behavior.
- Unnecessary Brand Utilization – Writing prescriptions for brand medication when a generic is available may be an indicator of potential fraud, waste, or abuse.
- Unnecessary Diagnostic Procedures or Surgeries – A physician may require or recommend tests or procedures that are not typical or necessary for the treatment of the injury, which can be wasteful.
- Billing for Services Not Provided – Since the injured worker is not financially responsible for his or her treatment, a physician may mistakenly, or knowingly, bill a payer for services not provided.
- Compounded Medications – Compounded medications are often very costly, more so than other treatments. A pharmacy that dispenses compounded medications may have a financial arrangement with a prescriber.
- Historical Non-Compliance – Like physicians, pharmacies with a history of non-compliance raise a red flag. In states with Prescription Drug Monitoring Programs (PDMPs), pharmacies who fail to consult this database prior to dispensing may be turning a blind eye to injured workers filling multiple prescriptions from multiple physicians.
- Excessive Dispensing of Controlled Substances – Dispensing of a high number of controlled substances could be a sign of aberrant behavior, either on behalf of the pharmacy itself or that injured workers have found this pharmacy to be lenient in its processes.
Clinical Tools for Opioid Management
Once identified, acting on the potential situations of fraud, waste, and abuse should leverage all key stakeholders. Intervention approaches include notifying claims professionals, sending letters to prescribing physicians, performing urine drug testing, reviewing full medical records with peer-to-peer outreach, and referring to payer special investigative unit (SIU) resources. A program that integrates clinical strategies to identify aberrant behavior, alert stakeholders of potential issues, act through intervention, and monitor progress with the injured worker, prescriber, and pharmacy communities can prevent and resolve fraud, waste, and abuse situations.
Proactive Opioid Management Mitigates Fraud, Waste, and Abuse
Opioids can be used safely when properly monitored and controlled. By taking proactive measures to reduce fraud, waste, and abuse of opioids, payers improve injured worker safety and obtain more control over medication expenses. A Pharmacy Benefit Manager (PBM) can offer payers an effective opioid utilization strategy to identify, alert, intervene upon, and monitor potential aberrant behavior, providing a path to brighter outcomes for all.