Claims Outcomes

Experts: Over-Imaging Leads to More Disability

Experts say aggressive and expensive treatment fueled by a sharp increase in spinal imaging is leading to more large-loss claims.
By: | June 1, 2015 • 3 min read
MRI scan of human spine

Physical rehabilitation or cognitive behavioral therapy may lead to better outcomes for injured workers in pain and lower costs for payers, according to several experts. They say diagnosis and treatment based solely on imaging and/or physicians’ expert opinions is creating more disability.

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In a white paper written for insurance brokerage Lockton, the experts say research indicates a 300 percent increase in spinal imaging among Medicare patients between 1994 and 2004 with a corresponding increase in expensive, aggressive treatment. They say a similar expense among injured workers is leading to more large loss claims.

“While these are the latest identified data comparing imaging to spinal fusion and injections rates, we know that the frequency of MRI/CT imaging of the spine has substantially increased since 2004,” they wrote. “The results are greatly disappointing because outcomes for workers have not improved. … Disability rates among working age Americans are higher than at any time in our country’s history, and the problem is getting worse.”

The paper, Red Herrings and Medical Overdiagnosis Drive Large-Loss Workers’ Compensation Claims, was written by Keith Rosenblum, senior strategies for Workers’ Compensation Risk Control at Lockton; Dr. David B Ross, diplomat at the Board of Psychiatry and Neurology; and Dr. Jennifer Christian, president of Webility Corporation and a fellow at the American College of Occupational & Environmental Medicine.

Low back injuries are the most costly musculoskeletal conditions. The report noted that Lockton’s claims database indicates these injuries represent 20 percent of all loss dollars and 25 percent of dollars in claims over $250,000.

“Employers are paying an ever larger percentage of their workers’ compensation dollars on physicians’ less than effective efforts to relieve pain and distress by focusing treatment on the spine,” they wrote. “This is all a direct consequence of false medical certainty about the cause of (and cure for) workers’ pain and distress being created by these images of visible changes in the spine.”

Disability rates among working age Americans are higher than at any time in our country’s history, and the problem is getting worse.

The problem, they say, is that imaging is being used and relied upon way too much. They noted that the American College of Physicians identifies just two conditions appropriate for imaging: severe neurological conditions and serious spinal instability. “Otherwise, routine use of imaging is ‘strongly’ discouraged and is considered in and of itself invalid,” they wrote.

“Far too often today, aggressive medical intervention is undertaken because physicians’ expert opinions are based solely on patients’ subjective pain complaints or imaging studies, neither of which reliably assess the actual source or extent of pain and distress.”

The writers said they are following the integration of new innovative models in diagnosis technology that address potential chronic pain cases as they develop. They said some insurers and third-party administrators are looking into these new technologies early in the life of a claim.

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“In one TPA model for non-subscriber programs in Texas and Oklahoma, they will integrate several promising innovations including the NeuroPAS NPI and NP3 assessments into their medical management process,” the report said. “The goal is to improve outcomes for workers suffering from chronic pain and nip potential high cost claims in the bud.”

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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NWCDC Update

Practical Solutions for a Changing Claims Environment

The agenda for the National Workers’ Compensation and Disability Conference® & Expo will focus on proven solutions for claims challenges.
By: | May 21, 2015 • 3 min read
NWCDC 2014

Many theories are emerging on the future of workers’ compensation in a rapidly changing world, but the National Workers’ Compensation and Disability Conference® & Expo built our upcoming 2015 session program mostly by focusing on existing solutions for claims payers’ current challenges.

WCconf_24thAnnualYet now that building the program for the 24th annual conference scheduled for November 11-13 at Mandalay Bay in Las Vegas is complete, I can also report that the lineup of 32 breakout sessions will include some forward-looking discussions.

Attendees will mostly find practical breakout-session presentations on topics like The Home Depot’s strategy for deploying nurse case managers, Southwest Airlines’ quality-assurance efforts for selecting vendor partners, and how employer Reyes Holdings applied an integrated disability and absence management approach.

Our selection group helped pick speakers often by favoring presentation proposals containing pragmatic solutions to the problems they and their industry colleagues face or see as emerging issues needing greater clarity.

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The selection group included Denise Algire, director, managed care & disability corporate risk, Safeway Inc.; Bill Wainscott, manager workers’ compensation & occupational health, International Paper; Dan Reynolds, editor-in-chief, Risk & Insurance; and myself.

Like the rest of society, though, workers’ comp is seeing many technology-driven changes and more lie ahead, of course. That is driving thought-provoking, insurance industry discussions on topics such as how the future face of employment and increased use of robotics will impact underwriters.

Those are important considerations. But there remains a need to help workers’ comp professionals understand current applications for technology the industry is still coming to grips with, like the application of predictive analytics.

That is why the National Workers’ Compensation and Disability Conference® & Expo will provide sessions like one to be led by ESIS, explaining the industry’s data analytics and predictive modeling capabilities. The presentation will be backed by Georgia Pacific explaining of how it has actually applied the tools to improve claims results.

We did not, however, ignore discussions on emerging changes.

Sedgwick Claims Management Services Inc. and Harbor Health Systems, for example, will discuss evolving medical management topics such “accountable care, value-based pricing and patient engagement.” But with an eye to the practical, the session will also include a senior workers’ comp manager from Boeing sharing how the company’s current practices align with the expected shifts in healthcare delivery.

Our breakout sessions also look to enlighten on controversial topics impacting the workers’ comp industry. Attendees will have the opportunity to hear two opposing views on the movement pushing for more states to allow employers to opt out of their traditional workers’ comp systems as is currently allowed in Texas and Oklahoma.

The full conference agenda will be available online June 22.

But here is a sneak peak at what the agenda will include:

    • Walmart and PRIUM sharing the retailer’s efforts to manage pharmaceutical misuse
    • Pacific Gas and Electric’s adoption of a 24/7 telephonic injury management program
    • LifeTEAM Health and a Kaiser Permanente medical director describing the results from helping injured employees overcome psychosocial risks with a biopsychosocial strategy
    • A discussion on workplace violence, causation, mental trauma and prevention
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  • Explanations of strategies and available tools for administering the Americans with Disabilities Act and leave laws such as the Family Medical Leave Act.
  • A Hyatt Hotels senior occupational health manager on practices for injury prevention, early intervention, and claim-severity mitigation.

It’s an agenda built with an aim to meet the needs of a cross section of workers comp and disability management professionals, including medical providers, attorneys, claims managers and risk management department leaders.

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.
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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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