Risk Insider: Jack Hampton

The Cutting Edge of Health Care Reform

By: | July 26, 2016 • 3 min read
Jack Hampton is a Professor of Business at St. Peter’s University in New Jersey and a former Executive Director of the Risk and Insurance Management Society (RIMS). He was named a Risk Innovator in 2008 by Risk and Insurance®. He can be reached at [email protected]

The Land of Lincoln health care exchange just announced it is closing as a result of big financial losses. Naturally, the first thing that comes to mind is podiatry.

The closing after three money-losing years is bad news for Illinois joggers. They need periodic visits to the podiatrist to treat abused toenails and painful calluses.

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So why should those who don’t live in Illinois, or even jog, care? Let me explain.

Health care tries to balance the cost and benefits of service with care and understanding for the emotional needs of the patient. By and large, it does a great job.

The problem is a mismatch between the backgrounds of the people who provide service and the services needed. Routine treatments do not rise to the level of disorders. Annual physicals are not complicated.

We need a better system for routine and preventative health care. We are getting it, but too slowly.

An over-reliance on testing and high-priced technology is one reason exchanges are going out of business. Here is another:

Dennis D’onofrio, Doctor of Podiatric Medicine, has an office in Torrington, CT. He did post graduate work at Yale and residency at a VA hospital.

He has two board certifications and three hospital affiliations. His achievements verify his prowess with corns, calluses and ingrown toenails.

Does Dr. Dennis, with all his expensive learning, have to perform at this level of medical intervention? Pedicurists, often lacking a high school degree, can treat feet in storefront salons.

Imagine Dr. D’onofrio, board certified and all, sanding down a big toe. Could a lesser-trained health care professional perform many of his daily tasks?

The mismatch between medical treatment needed and qualifications of the provider drives up the cost of health care and creates shortages of medical services.

We need a better system for routine and preventative health care. We are getting it, but too slowly.

If we do not accelerate the process, the cost of health care may bury both medical providers and federal efforts to subsidize services for the needy and disadvantaged.

Question for the Illinois Department of Insurance. Can we find capable people and train and certify them to perform routine and preventative medical service?

Would this lower the cost of health care and could it have kept the Land of Lincoln cooperative viable doing what it does at a cost people and the government can afford?

We know the answer. Medical providers are doing it already. Nurses perform procedures once in the realm of doctors.

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We are training medical assistants in areas as varied as family medicine, geriatrics, internal medicine, pediatrics, oncology, and cardiology. We need to accelerate the authorization for them to do more before financial pressure collapses the current system.

Concluding thoughts. I wonder if Dr. D’onofrio has student loans from his medical school days. Perhaps a leased Mercedes with monthly payments. A vacation home in the Caribbean.

We would not want this dialogue to hurt him. The man is a magician when it comes to treating minor foot pain.

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Risk Insider: Jason Beans

Medicare Paves the Way

By: | April 12, 2016 • 2 min read
Jason Beans is the Founder and Chief Executive Officer of Rising Medical Solutions, a medical cost management firm. He has over 20 years of industry experience. He can be reached at [email protected]

While it’s uncommon to think of Medicare blazing a trail anywhere, it is certainly at the forefront of value-driven health care. As of January 1, 2016 the Centers for Medicare & Medicaid Services (CMS) deployed 10 alternative payment models that increasingly tie healthcare payments to value.

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With the ACA as a catalyst for change, Medicare is making assertive advances to replace the fee-for-service model we all know and love. Recent/upcoming activities include:

  • New Bundled Payment Plan for Joint Replacements – On April 1st, CMS launched its bundled payment initiative that’s designed to eliminate the significant geographic variance in reimbursements for inpatient total joint procedures.
  • First Set of Core Measures Used as Basis for Quality Payments – In February, CMS released seven sets of clinical quality measures to be used for value-based care.
  • Merit-Based Incentive Payment System (MIPS) – In January, CMS met its 2016 goal of shifting 30 percent of fee-for-service payments to value-based reimbursements; in 2018, they’re committing to 50 percent.
  • Physician Quality Reporting System (PQRS) Initiative – In 2017 physicians will receive negative payment adjustments for not satisfactorily reporting quality metrics to CMS.

One outcome of Medicare’s advancements that particularly caught my eye was reported by the Agency for Healthcare Research and Quality (AHRQ) in November 2015.

Their research indicates that hospital-acquired conditions (HAC’s) decreased 17 percent between 2010 and 2014, from 145 to 121 per 1,000 discharges, while readmission rates dropped 8 percent.

This resulted in an estimated 87,000 lives saved, and a cost reduction of $19.8 billion. These dramatic results occurred during a period of concerted effort by hospitals to reduce adverse events spurred by Medicare’s move toward value-based payment models.

Currently, the best fit for workers’ comp is Medicare’s Bundled Payment models, which set a single rate for services during an episode of care. This concept is certainly not unfamiliar to workers’ comp.

While these numbers certainly illustrate the business aspect of health care, more than that, they illuminate the striking financial and quality impact that value-based models can have on healthcare delivery.

Most compelling is that the 2010-2014 programs that drove these drastic improvements were largely Medicare’s pilot forays into value-based care.

Now that Medicare is fully implementing these programs, imagine the impact broader application could have in areas like workers’ comp.

At their foundation, value-driven models reward high quality and cost effective patient care. While Medicare has many models, there are four basic forms, three of which—Affordable Care Organizations (ACOs), Merit-Based Incentive Payment Systems (MIPS), and Capitated Rates—pose major obstacles for most workers’ comp payers today. All require significant patient volume to mitigate the providers’ risk and administrative burden, historical data and benchmarking efforts, and direction of care capabilities.

Currently, the best fit for workers’ comp is Medicare’s Bundled Payment models, which set a single rate for services during an episode of care. This concept is certainly not unfamiliar to workers’ comp.

The simplest (and oldest) model is DRGs, where hospitals are paid a flat rate for a diagnosis/procedure, regardless of treatment. We’ve also long seen case rates for physical therapy.

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Surgical episodes provide an ideal opportunity to employ bundled payments for all treatment associated with a given procedure. Other creative iterations of value-based payments could be used as well, such as the Ohio BWC’s program for knee injuries.

While there is no fast-track to value-based care in workers’ compensation, there are certainly steps we can and should take today. With Medicare paving the way through proven models and successful outcomes, it’s time we bring what’s working elsewhere into our world.

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Sponsored: Liberty International Underwriters

Cyber: The Overlooked Environmental Threat

Environmental businesses often don't see themselves as a target, but their operations are just as vulnerable to the threat of an industrial cyber attack.
By: | August 3, 2016 • 6 min read
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“Cyber breach” conjures fears of lost or ransomed data, denial of service, leaked corporate secrets and phishing scams.

But in a world where so many physical operations are automated and controlled by digital technologies, the consequences of cyber attacks extend far beyond the digital realm to include property damage, bodily injury, and even environmental pollution.

Industrial companies that deal with hazardous materials — like power plants, refineries, factories, water treatment facilities or pipelines — are heavily dependent on automated technology to maximize their efficiency. Other sectors use technology to control HVAC systems, power and utilities, placing their properties at risk as well.

Cyber risks like theft of personally identifiable data have been highly publicized in recent years, but physical risks like pollution sparked by a cyber breach may not be as obvious.

“It’s significant to lose 100,000 customers’ Social Security numbers,” said William Bell, Senior Vice President, Environmental, Liberty International Underwriters, “but can you imagine if a waste treatment facility’s operations get hacked, gates open, and thousands of tons of raw sewage go flowing down a local river?”

In many industrial complexes, a network of sensors gathers and monitors data around machinery efficiency and the flow of the materials being processed. They send that information to computer terminals that interpret the data into commands for the hardware elements like motors, pumps and valves.

This automation technology can control, for example, the flow of pipelines, the level of water or waste held in a reservoir, or the gates that hold in and control the release of vast quantities of sewage and other process materials. Hackers who want to cause catastrophe could hijack that system and unleash damaging pollutants.

And it’s already happened.

In 2000, a hacker caused 800,000 liters of untreated sewage to flood the waterways of Maroochy Shire, Australia. In 2009, an IT contractor, disgruntled because he was not hired full-time, disabled leak detection alarm systems on three off-shore oil rigs near Long Beach, Calif.

Just last year, cyber attackers infiltrated the network of a German steel mill through a phishing scam, eventually hacking into the production control system and manipulating a blast furnace so it could not be shut down. The incident led to significant property damage.

According to a leading industrial security expert and executive director of the International Society of Automation, “Today’s operational technologies—such as sensors, SCADA systems, software and other controls that drive modern industrial processes—are vulnerable to cyber attack. The risk of serious damage or compromise to power and chemical plants, oil and gas facilities, chemical and water installations and other vital critical infrastructure assets is real.”

“The hacks could come from anywhere: a teenager looking for entertainment, a disgruntled worker, or more sophisticated criminals or terrorists,” Bell said. “There are certainly groups out there with political and ideological motivations to wreak that kind of havoc.”

LIU_SponsoredContent“We are working to bring the cyber component of environmental risk to the forefront. Cyber security is not just an IT issue. Industry executives need to be aware of the real-world risks and danger associated with an industrial cyber attack as well as the critical differences between cyber security and operational technology security.”

— William Bell, Senior Vice President, Environmental, Liberty International Underwriters

The cleanup cost of an environmental disaster can climb into the hundreds of millions, and even if a cyber breach triggered the event, a cyber policy alone will not cover the physical and environmental damage it caused.

The risk is even more pointed now, as resource conservation becomes increasingly important. Weather related catastrophe modeling is changing as both flooding and drought become more severe and frequent in different regions of the U.S. Pollution of major waterways and watersheds could have severe consequences if it affects drinking water sources, agriculture and other industrial applications that depend on this resource.

Managing the Risk

LIU_SponsoredContentUnfortunately, major industrial corporations sometimes address their environmental exposure with some hubris. They trust in their engineers to remove the risk by designing airtight systems, to make a disaster next to impossible. The prospect of buying environmental insurance, then, would be superfluous, an expression of doubt in their science-backed systems.

Despite the strongest risk management efforts, though, no disaster is 100 percent avoidable.

“We are working to bring the cyber component of environmental risk to the forefront,” Bell said. “Cyber security is not just an IT issue. Industry executives need to be aware of the real-world risks and danger associated with an industrial cyber attack as well as the critical differences between cyber security and operational technology security.”

The focus on network security and data protection has distracted industry leaders from strengthening operational technology security. Energy, manufacturing and other industrial sectors lack best practice standards when it comes to securing their automated processes.

After the Homeland Security Act of 2002, the Department of Homeland Security began comprehensive assessments of critical infrastructure’s cyber vulnerability, working with owners and operators to develop solutions. It also offers informational guides for private companies to do the same. The National Institute of Standards and Technology also continues work on its cyber security framework for critical infrastructure. Although this helps to establish some best practices, it does not completely mitigate the risk.

Many businesses don’t see themselves as a target, but they need to look beyond their own operations and property lines. They could be an attractive target due to their proximity to densely populated areas or resources such as waterways and highways, or nationally or historically significant areas. The goal of a cyber terrorist is not always to harm the target itself, but the collateral damage.

The Role of Insurance

LIU_SponsoredContent“Environmental liability is still by and large viewed as a discretionary purchase,” Bell said, “but the threat of a cyber attack that can manipulate those systems and ultimately lead to a pollution incident is added incentive to buy environmental coverage.”

Liberty International Underwriters’ environmental coverage could respond to many pollution conditions set off by a cyber breach event.

“Property damage, bodily injury and cleanup of any pollution at or emanating from a covered property would likely be taken care of,” Bell said. “The risk is not so much the cyber exposure but the consequence of the attack. The resulting claims and degradation to the environment could be severe, especially if the insured was a target chosen because of their unique position to have a large effect on the local population and environment.”

LIU also offers dedicated Cyber Liability insurance solutions designed to manage and mitigate the cost of responding to a cyber attack and any resultant loss of data and associated liability. Coverage includes proactive data breach response services designed to help organizations comply with regulatory requirements and prevent data breaches.

LIU’s loss control managers are also on hand to conduct assessments of insureds’ properties and facilities to examine potential environmental impacts. They can educate brokers on the importance of enhancing cyber security to prevent an environmental accident in the first place.

“People are relying more and more on their systems, automaton is increasing, and the risk is growing,” Bell said. “We’re all focused on protecting data, but the consequences of a cyber breach can be much farther reaching than data alone.”

To learn more about Liberty International Underwriters’ environmental coverages and services, visit www.LIU-USA.com.

Liberty International Underwriters is the marketing name for the broker-distributed specialty lines business operations of Liberty Mutual Insurance. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. This literature is a summary only and does not include all terms, conditions, or exclusions of the coverage described. Please refer to the actual policy issued for complete details of coverage and exclusions.

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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 Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.

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LIU is part of the Global Specialty Division of Liberty Mutual Insurance.
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