Ergonomic Exposures

The Overlooked Cost Cutter

Musculoskeletal disorders account for the majority of occupational injuries, but too few resources are dedicated to preventing them.
By: | July 1, 2015 • 3 min read
older worker in uniform moving,taking out,putting,segregating,lifting on (from) shelves in warehouse

Musculoskeletal disorders (MSDs) accounted for one-third of all occupational injuries and illnesses in 2013, according to the Bureau of Labor Statistics. Costs for workers’ comp claims involving MSDs are already around $26,000 on average, and can increase when costs associated with absenteeism, retraining, and lost productivity are taken into consideration.

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Despite these numbers, there are few proactive methods in place to identify risk factors for the development of a musculoskeletal injury and prevent it from occurring. Rather, approaches to these types of injuries are typically reactionary.

“Companies respond when an employee asks, by which time they already have pain or discomfort,” said Nate Rogoff, software specialist with Humanscale, a manufacturer of ergonomic products. “Ergonomists aren’t able to get ahead.”

Stats compiled by Humanscale show that there is only one certified ergonomist for every 100,000 workers in the United States. Many companies simply overlook the impact that improved ergonomics can have on decreasing injury claims and boosting productivity.

“Most employers do not proportionally allocate their resources — their time, talent and treasure — related to their injury experience and exposures,” said Tom Hilgen, senior risk control consultant at Willis Risk & Analytics. An article written by Hilgen details one company that was allocating only 5 percent of its cost-control resources to ergonomics, even though musculoskeletal injuries accounted for 50 percent of its incurred costs.

Ergonomists’ limited reach is further constricted by corporate silos that separate initiatives by risk management, safety and human resources departments.

“Safety and risk management have their own metrics, and operations have their own metrics, but they often are not aligning them. There needs to be the right alignment of business metrics that includes the impact of MSDs properly and how they affect costs associated with injuries, with absenteeism, turnover, and production quality and schedule,” Hilgen said.

Stats compiled by Humanscale show that there is only one certified ergonomist for every 100,000 workers in the United States.

Collection and sharing of the right data can help companies predict what injuries are likely to occur in which workers, rather than wait for them to appear.

Lagging indicators like type of injury, total count and total dollar amount of claims, and top causes of injuries can help employers pinpoint their top exposures, Hilgen said. But it’s also imperative to track the performance of existing ergonomics interventions.

“The best predictor of future performance is how well are they doing on a daily, weekly, monthly basis in terms of prevention of MSDs,” he said. “We call that a scorecard. We look at their ergonomics processes and score them between zero and 100 to see how they’re doing in terms of implementing best practices for prevention of MSDs.”

But best practices circle back to the professional ergonomists who come in such short supply. In addition to integrating efforts across an organization, employers need to strengthen the expert base from which they draw their best practices.

There are some tools that companies can use to help streamline and focus their efforts on MSD prevention.

Alan Hedge, a professor in the Department of Design and Environmental Analysis at Cornell University developed a software tool called Sonexes that uses predictive analytics to predict work-related MSDs based on the risk factors within a particular work environment.

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“[The tool] uses a rule-based algorithm or expert system which utilizes the knowledge and expertise of an ergonomist or practitioner through the software,” said Rogoff, a colleague of Hedge’s. The program checks results from an employee’s checkups against its rule-based system — based on established best practice — to produce a prediction of potential injuries.

“It was created to assist practitioners and ergonomists because they’re so outnumbered,” Rogoff said. “It allows them to gain visibility on their entire employee workforce at the same time. Within the software, they can drill down to different departments and identify high-risk individuals. It allows them to better prioritize their interventions.”

As safety, wellness and employee health initiatives grow inextricably linked, large companies are being called more and more to break down silos, improve communication and share data across all departments. Ergonomics can get lost in these efforts, but the high costs associated with MSDs certainly demand some attention.

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]
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Pharmacy Trends

Drug Trend Report: Costs Up, Usage Down

Despite a decrease in utilization of pharmaceuticals among injured workers, sharp price increases continue to drive costs upward.
By: | June 12, 2015 • 2 min read
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The introduction of new specialty medications, rising costs of compound medications, and an increase in the average wholesale price of oxycodone with acetaminophen are among the key drivers of pharmacy costs in the past year, according to Healthcare Solutions. The pharmacy benefit management company is the latest to issue a drug trend report based on in-network paid pharmacy transactions in a comparison of 2014 and 2013.

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“In 2014, Healthcare Solutions’ book of business saw a 4.1 percent increase in the total pharmacy spend,” the company said. “This is attributable to an increase in the cost of prescription medications.”

The company reported an overall 8.6 percent price increase of prescription medications, including average wholesale price (AWP) increases of 12.5 percent for brand name drugs and 7.9 percent for generics. The increase in prices for generic drugs was “unexpected” following years of flat levels and the authors expect the increases to continue as newer medications come off patent.

“There were some significant inflationary factors regarding generic product pricing,” the report said. “One of the main contributors to the overall increase in spend was the AWP increase in hydrocodone with acetaminophen combination products.”

“The introduction of higher cost specialty medications will need to be monitored closely, as with the Hepatitis C medications” which came into the arena during 2014.

Last fall, the federal government changed hydrocodone combination products (HCPs) from a Schedule III to the more restrictive Schedule II, the authors noted. While the change has resulted in a “20 percent reduction” in the use of HCPs, “the manufacturers are now required to follow stricter guidance, management and label changes which resulted in an increase to the AWP for the medication.”

Utilization of pharmaceuticals among injured workers decreased by more than 3 percent, according to the report. Included was a reduction in the use of opioids.

“In relation to cost management, HCP price increases were offset by the gains in decreased utilization,” the report said. “The introduction of higher cost specialty medications will need to be monitored closely, as with the Hepatitis C medications” which came into the arena during 2014.

Payers who provide workers’ comp benefits to health care workers have been especially impacted by the rising costs of medications to treat hepatitis C, the authors reported. Each treatment can cost $100,000, and the trend is expected to continue.

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Specialty medications that target large claimant populations are being developed. For example, Pfizer Inc. and Eli Lilly and Company are creating Tanezumab. Described as a “new, non-narcotic medication to treat chronic pain,” the drug “has the potential to offer an innovative treatment to help millions suffering from painful conditions.” However, the medication “may add a significant cost to payers who cover chronic pain claimants.”

Compound medications increased in terms of the “number, complexity and cost” in 2014, the report said. “In the past 4 years the average cost of compounds has escalated 225 percent.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected]
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Sponsored: Lexington Insurance

Pathogens, Allergens and Globalization – Oh My!

Allergens and global supply chain increases risk to food manufacturers. But new analytical approaches help quantify potential contamination exposure.
By: | June 1, 2015 • 6 min read
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In 2014, a particular brand of cumin was used by dozens of food manufacturers to produce everything from spice mixes, hummus and bread crumbs to seasoned beef, poultry and pork products.

Yet, unbeknownst to these manufacturers, a potentially deadly contaminant was lurking…

Peanuts.

What followed was the largest allergy-related recall since the U.S. Food Allergen Labeling and Consumer Protection Act became law in 2006. Retailers pulled 600,000 pounds of meat off the market, as well as hundreds of other products. As of May 2015, reports of peanut contaminated cumin were still being posted by FDA.

Food manufacturing executives have long known that a product contamination event is a looming risk to their business. While pathogens remain a threat, the dramatic increase in food allergen recalls coupled with distant, global supply chains creates an even more unpredictable and perilous exposure.

Recently peanut, an allergen in cumin, has joined the increasing list of unlikely contaminants, taking its place among a growing list that includes melamine, mineral oil, Sudan red and others.

Lex_BrandedContent“I have seen bacterial contaminations that are more damaging to a company’s finances than if a fire burnt down the entire plant.”

— Nicky Alexandru, global head of Crisis Management at AIG

“An event such as the cumin contamination has a domino effect in the supply chain,” said Nicky Alexandru, global head of Crisis Management at AIG, which was the first company to provide contaminated product coverage almost 30 years ago. “With an ingredient like the cumin being used in hundreds of products, the third party damages add up quickly and may bankrupt the supplier. This leaves manufacturers with no ability to recoup their losses.”

“The result is that a single contaminated ingredient may cause damage on a global scale,” added Robert Nevin, vice president at Lexington Insurance Company, an AIG company.

Quality and food safety professionals are able to drive product safety in their own manufacturing operations utilizing processes like kill steps and foreign material detection. But such measures are ineffective against an unexpected contaminant. “Food and beverage manufacturers are constantly challenged to anticipate and foresee unlikely sources of potential contamination leading to product recall,” said Alexandru. “They understandably have more control over their own manufacturing environment but can’t always predict a distant supply chain failure.”

And while companies of various sizes are impacted by a contamination, small to medium size manufacturers are at particular risk. With less of a capital cushion, many of these companies could be forced out of business.

Historically, manufacturing executives were hindered in their risk mitigation efforts by a perceived inability to quantify the exposure. After all, one can’t manage what one can’t measure. But AIG has developed a new approach to calculate the monetary exposure for the individual analysis of the three major elements of a product contamination event: product recall and replacement, restoring a safe manufacturing environment and loss of market. With this more precise cost calculation in hand, risk managers and brokers can pursue more successful risk mitigation and management strategies.


Product Recall and Replacement

Lex_BrandedContentWhether the contamination is a microorganism or an allergen, the immediate steps are always the same. The affected products are identified, recalled and destroyed. New product has to be manufactured and shipped to fill the void created by the recall.

The recall and replacement element can be estimated using company data or models, such as NOVI. Most companies can estimate the maximum amount of product available in the stream of commerce at any point in time. NOVI, a free online tool provided by AIG, estimates the recall exposures associated with a contamination event.


Restore a Safe Manufacturing Environment

Once the recall is underway, concurrent resources are focused on removing the contamination from the manufacturing process, and restarting production.

“Unfortunately, this phase often results in shell-shocked managers,” said Nevin. “Most contingency planning focuses on the costs associated with the recall but fail to adequately plan for cleanup and downtime.”

“The losses associated with this phase can be similar to a fire or other property loss that causes the operation to shut down. The consequential financial loss is the same whether the plant is shut down due to a fire or a pathogen contamination.” added Alexandru. “And then you have to factor in the clean-up costs.”

Lex_BrandedContentLocating the source of pathogen contamination can make disinfecting a plant after a contamination event more difficult. A single microorganism living in a pipe or in a crevice can create an ongoing contamination.

“I have seen microbial contaminations that are more damaging to a company’s finances than if a fire burnt down the entire plant,” observed Alexandru.

Handling an allergen contamination can be more straightforward because it may be restricted to a single batch. That is, unless there is ingredient used across multiple batches and products that contains an unknown allergen, like peanut residual in cumin.

Supply chain investigation and testing associated with identifying a cross-contaminated ingredient is complicated, costly and time consuming. Again, the supplier can be rendered bankrupt leaving them unable to provide financial reimbursement to client manufacturers.

Lex_BrandedContent“Until companies recognize the true magnitude of the financial risk and account for each of three components of a contamination, they can’t effectively protect their balance sheet. Businesses can end up buying too little or no coverage at all, and before they know it, their business is gone.”

— Robert Nevin, vice president at Lexington Insurance, an AIG company


Loss of Market

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While the manufacturer is focused on recall and cleanup, the world of commerce continues without them. Customers shift to new suppliers or brands, often resulting in permanent damage to the manufacturer’s market share.

For manufacturers providing private label products to large retailers or grocers, the loss of a single client can be catastrophic.

“Often the customer will deem continuing the relationship as too risky and will switch to another supplier, or redistribute the business to existing suppliers” said Alexandru. “The manufacturer simply cannot find a replacement client; after all, there are a limited number of national retailers.”

On the consumer front, buyers may decide to switch brands based on the negative publicity or simply shift allegiance to another product. Given the competitiveness of the food business, it’s very difficult and costly to get consumers to come back.

“It’s a sad fact that by the time a manufacturer completes a recall, cleans up the plant and gets the product back on the shelf, some people may be hesitant to buy it.” said Nevin.

A complicating factor not always planned for by small and mid-sized companies, is publicity.

The recent incident surrounding a serious ice cream contamination forced both regulatory agencies and the manufacturer to be aggressive in remedial actions. The details of this incident and other contamination events were swiftly and highly publicized. This can be as damaging as the contamination itself and may exacerbate any or all of the three elements discussed above.


Estimating the Financial Risk May Save Your Company

“In our experience, most companies retain product contamination losses within their own balance sheet.” Nevin said. “But in reality, they rarely do a thorough evaluation of the financial risk and sometimes the company simply cannot absorb the financial consequences of a contamination. Potential for loss is much greater when factoring in all three components of a contamination event.”

This brief video provides a concise overview of the three elements of the product contamination event and the NOVI tool and benefits:

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“Until companies recognize the true magnitude of the financial risk and account for each of three components of a contamination, they can’t effectively protect their balance sheet,” he said. “Businesses can end up buying too little or no coverage at all, and before they know it, their business is gone.”

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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 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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