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Risk Scenario

Blind Faith

An auto manufacturer thinks their tech supplier escaped typhoon damage. Closer inspection reveals quite the opposite.
By: | September 15, 2014 • 9 min read
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

Part One: Cocky Sons of Guns

With a steady, fluid motion, Ray Fines stretched his six-foot-two-inch frame to its limit and smacked the tennis ball toward his opponent Robert Gailey on Gailey’s ad-court side.

Scenario_BlindFaith

Fines served with a lot of top-spin, so the shorter Gailey had to hop a little on his return, but he reached out and backhanded the ball masterfully down Fine’s forehand side for a winner.

Someone whistled appreciatively from the grassy court-side banks of the hard-surface courts at San Diego’s Corona del Playa Country Club: Neither Fines nor Gailey looked over.

For one, they were both well-paid executives with the highly successful niche luxury automobile manufacturer Charing Motors, based in San Diego. The company’s 2014 revenue was $850 million.

It was fair to say success had gotten to their heads a little bit and they tended to be socially unapproachable.

Scenario Partner

Scenario Partner

They were also two of the club’s top players and were used to people watching them play.

“Game and set,” Gailey said as Fines trotted over to pick up the ball.

“One more?” Fines asked, looking over to Gailey and hoping for a chance at revenge.

“Nah, we need to get set up for the barbeque tonight,” Gailey said. “I’d better get back to the house or I’m going to be the one getting grilled.”

After showering, Gailey and Fines stopped in the clubhouse for some sparkling water and freshly squeezed orange juice, fortified with raw vegan supplements. They were quietly hydrating when Gailey, flipping through the news feeds on his mobile phone, stopped.

“Hmmm,” he murmured.

“What?” said Fines, Charing Motors’ risk manager.

“Looks like there’s a sizable tropical storm heading for mainland China. Could turn into a typhoon,” said Gailey, the company’s procurement director.

“We don’t have any suppliers there,” Fines said.

“No, we don’t,” Gailey agreed.

“But some poor son of a gun does. Looks like it’s headed right at the Pearl River Delta. Lots and lots of tech suppliers there,” he said.

“First we miss Tohoku, now we luck out on this. We must be doing something right,” Fines said.

Charing Motors, back in its infancy, had escaped the supply chain damage that many auto manufacturers suffered when an earthquake and tsunami devastated Japan and its economy in 2011.

“Evidently so,” Gailey said, looking up from his mobile phone and flashing a suntanned, winning smile at Fines.

Poll Question

What is your level of visibility into your supply chain?

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Part Two: A Stunning Revelation

Three weeks later, Gailey and Fines were in a conference room, hunched over a speaker phone.

Scenario_BlindFaith

“Good morning,” Gailey said as the other caller beeped on.

“Good afternoon,” said the caller in Taipei, acknowledging the 15-hour time difference between Taipei and San Diego.

After some brief and awkward preliminaries, Gailey got to the point.

“We’re concerned about these delivery delays we’re seeing, Dr. Wu,” Gailey said. “We’re looking at a three-week backlog as things stand, and I’m not confident the delays won’t get even longer,” Gailey said.


There is a long pause.

“Are you with me, Dr. Wu?” Gailey said.

“Yes. I’m with you,” said Dr. Wu.

Dr. Wu, who earned his Ph.D. at Carnegie Mellon University in Pittsburgh, is the chief executive officer of Paramount Technologies, which assembles the collision avoidance and cruise control components for Charing Motors.

“We … it’s hard to explain but we are conducting an investigation into our suppliers. We have some suppliers in the Pearl River Delta in China and we are uncertain as to their status,” Dr. Wu said.

Fines punched the mute button.

“Pearl River? I didn’t think we had any exposure there,” Fines said.

Gailey unmuted the phone.

“Pearl River, you say? That area was heavily damaged by Typhoon Lei, was it not?”

“Yes sir, substantial damage. We have multiple suppliers there we fear have been heavily damaged,” Dr. Wu said.

“Well how long until you? …” Fines began but was cut off by Dr. Wu’s response.

“We cannot offer a timeline on when our investigation will be finished,” Dr. Wu said.

Robert Gailey and Ray Fines just look at each other. In the space of one conversation, their confidence level in the short- to mid-term success of their company plummeted.

Part Three: The Flood in Bao ‘an

Wearing rubber boots, Vince Yee sloshed across his factory floor at the semi-conductor manufacturer Yee Industries in Bao ‘an, causing a pair of two-foot-long grass carp that typhoon flood waters stranded in his shop to swim for cover.

Scenario_BlindFaith

Yee grimaced at the sight of the river fish in his once-pristine manufacturing facility. He climbed up on a flight of concrete steps. Gaining that perch gave him enough elevation to sit down and light a cigarette.

Yee exhaled cigarette smoke and looked out over the water-covered factory floor. Here and there, employees moved about in vain attempts to hoist expensive machinery up on blocks in an effort to lessen the water damage.

It’s Yee that supplies the semi-conductors to Dr. Wu’s Paramount Technologies, without which Wu will not be able to assemble the collision-avoidance technology for Charing Motors’ luxury sedans.

Yee takes another long drag on his cigarette and his cell phone vibrates as he sees a water snake working its way under a water-soaked piece of equipment that cost him $750,000.

“Hello?” Yee says in a dour tone of voice.

“Yes, this is Vince Yee. Yes, Dr. Wu.”

Yee looks out over the factory floor as Dr. Wu talks. From his expression, Yee would rather throw his phone in the flood water then listen to what Dr. Wu is asking him.

“No. No. I have no flood insurance,” Yee said.

“You can’t even get flood insurance down here. I’m 30 centimeters above sea level, Dr. Wu. You know that.”

Yee grimaces in frustration and anger as Dr. Wu asks him another question.

“Your guess is as good as mine, Dr. Wu. It will be a bloody miracle if I ever get back into business at this rate. But I’ll let you know. Good bye.”

Yee turns off the cell, runs his free hand over his face and hair in frustration and then flips his cigarette butt into the flood waters.

Part Four: Searching in Vain

Lee Ackles, Charing Motors CFO, leans back in his office chair and looks away from Robert Gailey and Ray Fines toward the San Diego Harbor.

“I’m just trying to get my head around this and I don’t think I can,” Ackles says to Gailey and Fines, when he brings his gaze back from the water.

“From what you’re telling me, our collision-avoidance system supplier really doesn’t know at this point where it can get the semi-conductors it needs to finish our product,” Ackles said.

“That’s correct,” Gailey said bravely.

“We’ve determined that a lot of their suppliers are single-source. Many of them were in the Pearl River Delta which was so heavily damaged by the typhoon in May.”

“Five months ago,” Ackles said, looking at Gailey and Fines like they had no brains.

“Correct.” It was Fines that managed to speak this time.

“And what have you found out in the past five months?” Ackles asked.

“There’s a lot of variation in product specs, even the names of the products in some of these Asian countries,” Gailey said.

“The semiconductors we’re looking for are really hard to find in Taiwan, Thailand or even mainland China right now,” Gailey said.

“We hope to have this thing nailed down in another month but as it stands, we can’t complete production on the CM-5 or the CM-7 until we do,” Gailey said.

“The CM-5 and the CM-7,” Ackles said. At this point he clicked his mouse and looked at some data on his screen.

“We’re looking at a real punch in the gut unless we can get it done much sooner guys,” Ackles said.

“Paramount Technologies, that’s the company in Taipei?” Ackles asked. He clicked and looked at his computer screen again.

“Wow, $4 million in billings to us last year. Get on a plane, go see Dr. Wu and company and get us a quicker answer. Both of you. Go tomorrow.”

Poll Question

Do you have your supply chain elements and specifications catalogued to account for differing descriptions and specifications in different countries?

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Part Five: A Visit to the Delta

Robert Gailey and Ray Fines are passengers in a 1969 Piper Cherokee 6/260 that is winging its way along the Pearl River toward the Bao ‘an location of Yee Industries. The Piper is equipped with twin pontoons and makes a perfect river landing.

Jackie Chen, the Piper Cherokee pilot, turns and smiles toothily at Gailey and Fines from behind yellow-tinted sunglasses after his plane drifts up to the dock outside of Yee Industries and is secured by a Yee Industries employee.

“Just like I said, gentleman, smooth as silk,” Chen said, mimicking the smooth descent and landing of the plane with his hand.

Gailey and Fines both try forced smiles but just clamber out instead.

Walking up the path to the Yee Industries factory, Fines scanned the property and saw little sign of activity.

“Doesn’t look like they are even close to operational,” Fines said.

“Who knows,” Gailey said as they reached the factory door.

Entering the factory through an open side door, Gailey and Fines encounter a factory floor that is now dry, but shows no indication of being able to achieve full production anytime soon.

In one corner, six employees are sitting around a table hand-fashioning some semiconductor parts.

“Can I help you gentlemen?” said Vince Yee, as he approached the Americans.

“We’re looking for Vince Yee,” Gailey said.

“I’m Vince Yee,” said the factory owner.

“I’m Robert Gailey and this is Ray Fines. We’re with Charing Motors out of San Diego in the U.S.”

Yee stared at Gailey and Fines blankly.

“You’ve heard of Charing Motors?” Fines said.

“No. Never heard of it,” Yee said.

Gailey and Fines pause as this latest piece of information resonates.

“We make cars,” Gailey said.

“You want to buy this factory? You could make cars here in China,” Yee said.

“That’s not what we had in mind,” Fines said.

The conversation with Yee yielded one piece of productive information. After looking at the specs of the semiconductors Charing Motors needs to assemble its collision-avoidance system, Yee gave Fines and Gailey the name of a Pearl River manufacturer still at full production.

This manufacturer, though, is upstream in Panyu.

“Can you take us to Panyu?’” Gailey asked Jackie Chen as he and Fines get back to the Piper Cherokee.

“Can I take you to Panyu? I was born in Panyu,” Jackie Chen said with a chuckle.

“Just get in and fasten your seatbelts.”

As the Piper Cherokee takes off, Ray Fines and Robert Gailey avoid eye contact, neither of them knowing how soon they’ll be able to get the part they need to keep crucial manufacturing processes going.

It will be a full year until Charing Motors can resume full production. The privately held company recorded a 40-percent revenue drop for fiscal year 2015.

Poll Question

How prepared are you to find alternate suppliers in the event your supply chain is disrupted?

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Poll Question

Overall, how would you rate the resilience (i.e., the ability to resist or bounce back quickly from disruption) of your supply chain?

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Bar-Lessons-Learned---Partner's-Content-V1b
Risk & Insurance® partnered with FM Global to produce this scenario. Below are FM Global’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance®.

1. Demand more from first and second-tier suppliers: It’s not enough to trust that your first and second-tier suppliers have an adequate knowledge of their suppliers’ property-CAT exposures and resilience. Insureds, working through their brokers and carriers, should create contractual certainty with their suppliers that their supply chain will be resilient in the event of a natural catastrophe or some other supply chain interruption.

2. Identify at-risk locations: Locations such as the Pearl River Delta of China is a prime spot for property losses, business interruption and supply chain problems due to the extremely high concentration of technology, automotive and telecommunications parts suppliers in natural hazard-exposed locations. As vulnerable as it is, however, the Pearl River Delta is just one example of a super-exposed location that could result in substantial business interruption should a windstorm, earthquake, flood or some other event transpire.

3. Involve the claims executives: In mapping out business interruption, property and supply chain risk and risk transfer options, make sure to involve the claims executives from your carrier in the discussion. Involving only the broker and the carrier at renewal time could result in an incomplete understanding of your company’s claims recovery chances in the event there is a loss.

4. Pinpoint single-source suppliers: One of the most vulnerable parts of your supply chain is that occupied by single-source suppliers. The use of single-source suppliers in some cases might be unavoidable, but identifying those parts of your supply chain that are single source and addressing them with specific risk management strategies is a good idea.

5. Everyone gets hit: Never assume that just because you haven’t suffered a substantial property, business interruption or supply chain loss that you won’t. An increasing complexity of global supply chains and economic forces that dictate business establishment in natural hazard-exposed areas almost guarantees, that sooner or later, your company will face a peril of one kind or another.


Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at dreynolds@lrp.com.
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Risk Scenario

The Scales of Justice

Two employee injuries at the same company produce two very different outcomes.
By: | August 26, 2014 • 9 min read
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

Frankie and Hector

“It’s a great day for the Irish!”

Scenario_ScalesJustice

Whether they loved him or found him annoying, workers in the seafood and meat departments in the Better Harvest grocery store in Boston’s Back Bay knew the meaning of that booming morning greeting very well.

It declared that boisterous fish cleaner and erstwhile fish-counter salesman Frankie Burns was at work, and he wanted everybody to know it.

Despite his sometimes jarring presence, most people loved Frankie. Frankie knew seafood, having worked on his family’s cod boat when he was younger. Now, at 55, he provided a knowledge of local fish and shellfish that was an asset in a store catering to the Back Bay’s educated, prosperous consumers.

Barrel-chested, with forearms, shoulders and biceps solidly built from years of manual labor, Frankie cheerfully and proudly unloaded the tubs of hake, pollock and flounder sold by the market.

This May morning, though, would prove to be a wake-up call for the hard-living Frankie. As he had thousands of times before, Frankie hoisted a heavy tub of iced pollock up onto the fish-cutting counter. This time, though, his back gave out.

“Whoa,” Frankie said as he clutched his lower back, wincing at the piercing, unfamiliar pain there.

Whoa indeed.

Testing revealed that Frankie had aggravated a chronic degenerative back condition. His claim was found to be compensable.

Scenario Partner

Scenario Partner

With 180 stores nationwide and close to $8 billion in sales, Better Harvest’s human resources department was well-versed in the amendments to the Americans with Disabilities Act that were enacted in 2008.

Following Better Harvest’s well-documented procedures, and at Frankie’s reluctant request, Back Bay store manager Gracie Walker granted Frankie an accommodation under the ADA.

For now, Frankie was done hoisting ice-filled fish tubs. The store would need to find another fish cutter as the heaviest thing Frankie would be permitted to lift would be paper-wrapped one pound cod fillets.

“Hey, a job’s a job,” Frankie said, as he hoisted a beer and a Fenway Frank with his brother Petey at a Sox game that summer.

————–

Hector Velasquez was the fish cutter in Better Harvest’s Brentwood, Calif. store.

At 53, Hector’s idea of a good time was to go Zydeco dancing with his latest and greatest girlfriend Vera at the Puma Club in nearby Venice Beach.

That’s exactly what Hector was doing on a steaming hot California night during a performance of his favorite Zydeco band, the Vallejo Oyster Crackers. But Hector made a misstep due to a slippery combination of spilled beer and crushed peanut shells on the dance floor of the Puma Club.

Vera tumbled to the ground with Hector but popped right back up, adjusting her hair and skirt in the process. Hector wasn’t so lucky.

“Honey, are you hurt?” Vera said.

Hector, whose love of beer, fried seafood and tortillas had left him with a stout belly, tried to get up but couldn’t.

Another dancer, seeing Hector in distress, stopped Hector from trying to move.

“Stay still, man,” the Zydeco dancer said. “You might have really hurt yourself.”

Hector’s fellow dancer put his hand on Hector’s belly to still his movements and pushed a chair cushion under his head.

“Be still a minute, man, and breathe — breathe against the pain,” the Zydeco dancer said.

Hector looked up at the man thankfully and started to breathe more deeply, his beer belly rising and falling with each labored breath.

Hector couldn’t make it to work the following Monday and filed for leave under the Family Medical Leave Act.

Poll Question

How familiar are your risk management and human resources departments with the amendments to the Americans with Disabilities Act that were enacted in 2008?

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Tough Medicine

Hector rested for a few days, trying to dull the pain with Ibuprofen and light beer. Given that he wasn’t hurt at work, Hector didn’t go to a doctor, thinking he might end up bearing the cost of treatment that he couldn’t afford.

Scenario_ScalesJustice

On the Thursday after his injury, Hector got a ride from a buddy and came back to work. Hector is self-medicating, taking unhealthy doses of Ibuprofen in an attempt to perform his job.

He barely made it through Thursday and Friday, depending on co-workers to cover for him. Over the weekend, home resting but still in substantial pain, Hector faced the music.

“There’s no way, man,” he said, looking at his bent-over body in the bathroom mirror.

“I gotta talk to somebody.”

The following Monday, Dave Wagner, the general manager of the Brentwood Better Harvest store, got a knock on his office door.

Being the GM of this store, with its affluent and demanding customer base, was no joke. Dave Wagner was one busy man.

“Hector, what’s up?” Dave said.

“I need to talk to you, Mr. Wagner. It’s my back. I hurt it bad the other night and I can’t do any lifting, not much anyway,” Hector said.




Dave did some rapid-fire mental calculations as he gestured Hector to a chair.

“Sit down Hector, sit down,” he said.

Hector moved slowly to sit down, telling Dave everything he needed to know about how badly Hector was hurting.

“I’ll tell you what Hector, I’ll tell you what,” Dave said, as memories of Better Harvest HR emails concerning the ADA flashed through his formidable memory.

“Hold on a sec,” Dave said and popped down at his desk. In two clicks and a couple of scrolls, Dave scanned some emails from HR.

“Reasonable accommodation” is the phrase that stuck in Dave’s mind as he rapidly scanned the emails.

“You don’t have to lift,” Dave said, turning back to Hector. “You can work the counter. How does that sound?”

Hector, although in substantial pain, brightened some.

“That sounds good Mr. Wagner, thank you,” Hector said. But Hector’s feeble attempts to stand up sent Dave a message.

“Talk to Marcus and tell him what I said and I’ll talk to him too,” Dave said, as Hector made his way out.

As Hector went off to find Marcus, the manager of the seafood department, Dave engaged in professional, removed reflection.

“We’ll see what’s reasonable. I’ll give it three months,” he said to himself, before his vibrating cellphone distracted him.

“Cripe,” the harried Dave said to himself, looking at the number and picking up his phone.

“Dave Wagner,” he said impatiently to whoever was on the line.

Three months came and went, and Dave had to make a call. Hector just wasn’t that strong on the counter.

You had to have serious customer service skills to handle Brentwood and Beverly Hills customers and Hector was flailing. Complaints about him were coming at Dave from all sides, customers, co-workers, you name it.

“Reasonable means reasonable,” Dave said to himself as, worn down with complaints about Hector’s customer service shortcomings, he moved to terminate him.

Poll Question

How well do you document interactions with employees that touch on ADA or Family Medical Leave Act compliance issues?

View Results

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The Wheel Turns

After his firing, it didn’t take long for the befuddled Hector to hook up with a gifted, ambitious employment rights attorney, Lucia Yamamoto, a graduate of Berkeley Law and a passionate defender of workers’ rights.

Scenario_ScalesJustice

This is how the pre-trial negotiations went between Yamamoto’s firm, The Workers’ Rights Center, and the firm that did defense work for Better Harvest’s employment liability carrier, Apex Insurance.

“Okay guys, this is an easy one,” Yamamoto said on the phone call with the Apex defense team.

“We don’t see it that way,” was the game response from Ed Kleindinst, the defense lead for Apex’s law firm, Kleindinst, Evans, Hale & Brown.

“Oh really?” Yamamoto said, her derision palpable.

“You got two guys, practically the same age. They’re both working the same job. I mean this is beautiful,” she said.

“You accommodate one guy, and he’s still got a job,” Yamamoto said.

“Your GM in the Boston store continues to accommodate him, according to widely disseminated company policy…,” she continued.

“I don’t think you’re in a position to know how widely disseminated it was,” Kleindinst responded.

“Like it matters,” Yamamoto shot back.

“The other guy, same company, you terminate after 90 days even though it’s not presenting an undue hardship to your business. Instead, he was terminated because the manager felt he had accommodated him for long enough, which runs contrary to the company policy,” Yamamoto says.

“Been there 20 years, married with four children. Never been disciplined in his working life. Hello? Are you guys still there?” she said.

“We’re here,” Kleindinst said, this time with a little less vigor, pushing the mute button and rolling his eyes at his co-counsel in one of the Kleindinst, Evans, Hale & Brown conference rooms.

One of the partners jotted a note on a sheet of paper and slid it in front of Kleindinst.

There was a pause — orchestrated on the part of both Yamamoto and Kleindinst.

“Well, you’re not saying anything,” Yamamoto said.

“Go on, please, counsel,” Kleindinst said.

“Oh I’ll go on, I could go on all day with this one,” Yamamoto said.

“Two million,” she said.

“Oh come on!” Kleindinst said.

“See you in court!” Yamamoto replied.

Kleindinst’s partner jerks his head at the sheet of paper, trying to focus Kleindinst.

“One million,” Kleindinst said.

“One and six or we go to court and no more of this,” Yamamoto said.

There is another pause.

“Gentlemen, are we done?” said Yamamoto.

Kleindinst looked at his co-counsel, who nodded and pulled back in his chair.

“Yes, we’re done,” Kleindinst said.

***

“I really, really don’t like her,” Kleindinst said to his partner after he hung up.

“Like it matters,” his partner said.

Poll Question

Are you aware of the section of the ADA which stipulates that employees seeking an injury accommodation shouldn’t have to compete with other employees for the accommodation?

View Results

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Bar-Lessons-Learned---Partner's-Content-V1b

Risk & Insurance® partnered with Sedgwick to produce this scenario. Below are Sedgwick’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance®.

1. Medical review: Make sure you request and document medical reviews of any request for leave or accommodation under the Family Medical Leave Act or the Americans with Disabilities Act as part of the overall interactive accommodation process.

2. Consistency: Different injured employees with debilitating chronic conditions should be treated with consistency under the Americans with Disabilities Act, regardless of whether their need for accommodation is due to a work-related injury, a non-occupational injury or illness or for another medical need.

3. Document, document, document: Companies need to make sure that standard procedures regarding leave or accommodation under the Family Medical Leave Act or the Americans with Disabilities Act are in place, up to date and triggering interactive process review – as well as clearly communicated to employees. Companies also need to document that they have communicated changes to those policies in a comprehensive and timely manner. A robust information management platform is key to supporting the process and necessary documentation.

4. The leave option: Although the goal of ADA/ADAAA is to keep people at work and every effort should be made to meet an accommodation request, supervisors need to keep in mind that there may be cases where a workplace accommodation isn’t possible or advisable due to the significant hardship it would place on their business; time off from work may be the only option. Shoe-horning an employee into a task they are unfit for may do more harm than good.

5. Disabled means disabled: Under the law, even if a condition is “controlled” by medication or some other treatment method, a disability is still a disability. Be very careful not to treat someone with a chronic condition differently just because they’re asymptomatic.

Additional Partner Resources

ADA Accommodation Services

Sedgwick Connection Blog



Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at dreynolds@lrp.com.
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Sponsored: Lexington Insurance

The Re-Invention of American Healthcare

Healthcare industry changes bring risks and opportunities.
By: | September 15, 2014 • 5 min read
SponsoredContent_Lex

Consolidation among healthcare providers continues at a torrid pace.

A multitude of factors are driving this consolidation, including the Affordable Care Act compliance, growing costs and the ever-greater complexity of health insurance reimbursements. After several years of purchasing individual practices and regional hospital systems, the emergence of the mega-hospital system is now clear.

“Every month, one of our clients is either being bought or buying someone — and the M&A activity shows no signs of slowing down,” said Brenda Osborne, executive vice president at Lexington Insurance Co.

This dramatic change in the landscape of healthcare providers is soon to be matched by equally significant changes in patient behavior. Motivated by growing out-of-pocket costs and empowered with new sources of information, the emergence of a “healthcare consumer” is on the horizon.

Price, service, reputation and, ultimately, value are soon to be important factors for patients making healthcare decisions.

Such significant changes bring with them new and challenging risks.

Physician integration

Although physicians traditionally started their own practices or joined medical groups, the current climate is quite the opposite. Doctors are now seeking out employment by health systems. Wages are guaranteed, hours are more stable, vacations are easier to take, and the burdens of running a business are gone.

“It’s a lot more of a desirable lifestyle, particularly for the younger generation,” said Osborne.

Brenda Osborne discusses the changing healthcare environment and the risks and opportunities to come.

Given the strategic importance of successfully integrating acquired practices into a larger healthcare system, hospitals are rightfully focused on how best to keep doctors happy, motivated and focused on patient safety.

A key issue that many hospitals struggle with is how to provide effective liability insurance for their doctors. Physicians who previously owned their practice are accustomed to a certain type of coverage and they expect that coverage to continue.

Even when operators find comparable liability insurance solutions for their doctors, getting buy-in from their staff is often an additional hurdle to overcome.

“Physicians listen to two things — physician leaders and data,” said Osborne. “That’s why Lexington provides assessments that utilize deep data analysis, combined with providing insights from leading doctors to help explain trends and best practices.

“In addition, utilizing benchmarks against peers helps to identify gaps in best practices. It’s a very powerful approach that speaks to doctors in a way that will help them improve their risk.”

Focusing on the “continuum of care”

There’s been a fundamental shift in how healthcare providers care for patients: Treatment is becoming more focused on a patient’s overall health status and related needs.

SponsoredContent_LexA cancer patient, for example, should have doctors in a number of specialties communicating and working together toward a positive patient outcome. But that means a change in thinking: Physicians need to work collaboratively with one another — not easy for individuals or groups that are used to being independent. Healthcare is a team sport.

“If there isn’t strong communication, strong leadership, and the recognition of proper treatment procedures between physicians, healthcare providers can increase the risk of error,” said Osborne. “The provider has got to treat the whole patient rather than each individual condition.”

That coordination must extend from inpatient to outpatient, especially since the ACA has led to a rapid increase in patients being treated at outpatient clinics, or via home health or telehealth to reduce the cost of inpatient care

“Home health is going be a growing area in the future,” Osborne continued. “Telehealth will become an effective and efficient way of managing and treating patients in their home. A patient might have a nurse come in and help the healthcare provider communicate with a physician through an iPad or computer. The nurse can also convey assessment findings to the physician.”

Metrics matter more than ever

Patients have not always thought of themselves as healthcare consumers, but that’s changing dramatically as they pay more out of pocket for their own healthcare. At the same time, there’s an increase in metrics and data available to the public — and healthcare consumers are drawing upon those metrics more and more when making choices that affect their health.

SponsoredContent_Lexington“Consumers are going to start measuring physicians against physicians, healthcare systems against healthcare systems. That competition will force everyone to improve the quality of care.”
– Brenda Osborne, Executive Vice President, Lexington Insurance

Think about all the research a consumer does before buying a car. Which dealership has the best price? Who provides the best service? Who’s offering the best financing deal?

“Do patients do that with physicians? No,” said Osborne. “Patients choose physicians through referrals from friends or health plans with minimal information. Patients may be putting their lives in the physicians’ hands and not know their track record.

That’s all going to change as patients’ use of data becomes more widespread. There are many web based resources to find information on physicians.

“Consumers are going to start measuring physicians against physicians, healthcare systems against healthcare systems,” said Osborne. “That competition will force everyone to improve the quality of care.”

Effective solutions are driven by expertise and vision

The rapidly evolving healthcare space requires all healthcare providers to find ways to cut costs and focus on patient safety. Lexington Insurance, long known as the leading innovative and nimble specialty insurer, is at the forefront in providing clients cutting-edge tools to help reduce costs and healthcare exposures.

These tools include:

  • Office Practice Risk Assessment: To support clients as they acquire physician practices, Lexington developed an office practice assessment tool which provides a broad, comprehensive evaluation of operational practices that may impact risk. The resulting report, complete with charts, graphs and insights, includes recommendations that can help physicians reduce risk related to such issues as telephone triage, lab results follow-up and medication management. .
  • Best Practice Assessments: High risk clinical areas such as emergency departments (ED) and obstetrics (OB) can benefit significantly from external, objective, evidence-based assessments to identify gaps and assure compliance with best practices. In addition to ED and OB, Lexington can provide a BPA for peri-operative care, prevention of healthcare-acquired infections, and nursing homes. All assessments result in a comprehensive report with recommendations for improvement and resources along with consultative assistance and support. .
  • Continuing Education: In an effort to improve knowledge, decrease potential risk and support healthcare providers in the use the most current tools and techniques, Lexington provides Continuing Medical Education credits at no cost to hospitals or their physicians.
  • Targeting the Healthcare Consumer: With Medicare reimbursement impacted by patient-satisfaction surveys, assuring a positive patient experience is more critical than ever. Lexington helps hospitals understand and improve the patient experience so they can continue to earn the trust of healthcare consumers while preserving their good reputation. .

To learn more about Lexington Insurance’s scope and depth of the patient safety consulting products and services healthcare solutions, interested brokers may visit their website.

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

Lexington Insurance Company, an AIG Company, is the leading U.S.-based surplus lines insurer.
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