July 2012
This is Part 3 in a five-part series which presents a creative solution for today's health care crisis. Additional articles in the series can be found here: Part 1, Part 2, Part 4, and Part 5.
How Much Does Hospital Utilization Vary Anyway?
If higher hospital utilization rates are associated with less affordable health care, one might wonder how much hospital utilization varies from one region to another. Table 3 shows some interesting statistics about this.
The construction industry's reputation has been tarnished by poor quality performance. Construction defects decrease the satisfaction of property owners and erode the confidence of the financiers, buyers, and end users of construction projects.
Total construction costs are increased by lost productivity, and higher rework and insurance costs. Defective construction undermines the reputations of affected contractors and threatens their profitability.
Until recently, Construction Financial Managers outside the homebuilding sector may not have heard of or thought much about construction defects. However, these defects are now an industry-wide issue.
Likewise, while formerly concentrated in the western states, construction defects are now a national concern to all Construction Financial Managers involved in either general contracting or the specialty trades within commercial building.
With a rise in reported construction defects, companies — now more than ever — need to improve quality during the construction life cycle.
This article discusses the basics of construction defects, and presents the barriers to and indicators of quality construction — in addition to the risk management consequences of poor quality performance.
The Origins of Construction Defects
Construction defects occur at the intersection of construction operations, real estate transactions, contract law, and business insurance.
A construction defect is a component of construction that is not built according to plan, specification, or in conformance to established construction codes and industry standards of care.
To be considered a construction defect in the eyes of the legal and judicial systems, physical damage to tangible property or bodily injury must result from the alleged defective construction.1 Construction defects can also include the loss of use of the "impaired property" — property that is not physically damaged, but is rendered unusable due to defective construction work.
Unfortunately, in our litigious judicial system, reality does not always match theory. Sometimes, "alleged" construction defects are pursued because attorneys think there's a good chance of winning a verdict or receiving a settlement. This can also happen when a group of people, such as a homeowners association, is "unified" for the purpose of class-action litigation.
In the U.S., the general legal doctrine that governs the sale of property is caveat emptor, or "let the buyer beware." In order to receive legal protection, buyers have a general duty to inspect their prospective purchases before taking possession. The legal system recognizes the inherent limitations of such inspections, and therefore distinguishes between two types of defects: patent vs. latent.
There is a fundamental and legal difference between patent defects found during the course of construction and latent defects that manifest later.
Patent defects are regarded as conditions that can clearly be observed or detected in a reasonably thorough inspection prior to the sale or transfer of the property from the seller to the buyer. In contrast, latent defects are faulty conditions in a property that could not have been discovered during a reasonably thorough inspection.
Insurance Thought Leadership joins with our friends at Crisis Care Network in expressing our sympathy to the people, families, and businesses impacted by the tragic violence which took place today in Aurora, Colorado.
This is Part 2 in a five-part series which presents a creative solution for today's health care crisis. Additional articles in the series can be found here: Part 1, Part 3, Part 4, and Part 5.
Variation in Health Care Affordability
To many people's surprise, few studies have reviewed health care affordability. Most analyze cost of health care, not affordability of health care. The AHP HCAI™ is one approach to analyze health care affordability. Table 1 presents information from the 2008 AHP HCAI™.
This is Part 1 in a five-part series which presents a creative solution for today's health care crisis. Additional articles in the series can be found here: Part 2, Part 3, Part 4, and Part 5.
Improving Affordability Through Health And Wellness And Improved Efficiency: An Overview
As we enter a presidential election year, health care reform continues to be a key talking point for all of the candidates. Today's major health care issues are much like those of the past, just exacerbated with today's financial uncertainties. The ever-escalating costs above and beyond the rest of the economy, the growing uninsured and related health care access issues, and ongoing quality of care concerns dominate the dialog. These critical issues can be captured by a few poignant questions:
- Can we afford our health care system today and in the future?
- If we improve the affordability of the system, will the issues be mitigated?
- What are the most obvious ways to improve the affordability of the system?
- Is a complete overhaul of the health care system required?
This series focuses on proposed answers to the above questions and integrates current information with updated research and analysis presented by the author on these important topics.
Understanding Affordability
Affordability, particularly health care affordability, has been misunderstood and oftentimes confused with cost. Affordability is best defined as a measure of someone's or something's ability to purchase a good or a service. It describes whether a person or organization, with limited resources, is able to make a purchase without unacceptable or unreasonable sacrifices. It assumes there is a limited amount of resources to purchase life's necessities.
Health care affordability describes whether a person or organization has sufficient income to pay for or provide for health care costs and not significantly impede their ability to purchase other important services.
Housing affordability is often defined in terms of the ratio of how much it costs to purchase the median-priced home in a particular marketplace (i.e., mortgage payment with 20% down) to the average income in that particular market. For example, if the median price for a new home is $500,000, an 80% mortgage would be $400,000. The monthly payment for that mortgage at 6% interest would be about $2,400. If the average annual income in that community is $75,000, one metric of affordability would be as follows:
($2,400) / ($75,000 / 12) = .384 or 38.4%
This says that 38.4% of the average person's gross income is required to pay the mortgage payment for the median house. If another region has a lower ratio, their housing would be more affordable, and vice versa.
Health care affordability could be defined in a similar way: how much does health care cost divided by how much is available to spend on health care?
Shows Underpaying Or Violating Other Rules For Employing Foreign Workers Risky Business
Underpaying and failing to meet other H-2A visa program requirements for its employment of temporary foreign agricultural workers was an extremely costly mistake for Yerington, Nevada-based onion grower Peri & Sons.
Under a consent order entered by U.S. Department of Labor Administrative Law Judge Steven Berlin in San Francisco, Peri & Sons must pay a record total of $2,338,700 in back wages to 1,365 workers, plus a $500,000 civil money penalty to the Department of Labor for failing to properly pay foreign agricultural workers working under the H-2A visa program.
The consent order announced by the Labor Department Wage and Hour Division on July 10, 2012 reminds U.S. businesses of the need to meet compliance responsibilities when employing foreign workers and illustrates the significant risks that employers of foreign workers risk by failing to meet minimum wage and hour, overtime and other requirements for the employment of foreign workers.
The record back pay order stems from charges brought by the Labor Department's Wage and Hour Division after it determined that Peri & Sons violated the Fair Labor Standards Act and the H-2A visa program requirements by underpaying H-2A employees involved in irrigation, harvesting, packing and shipping of onions sold in grocery stores nationwide.
All of the affected workers came to the U.S. from Mexico under the H-2A temporary agricultural worker visa program. In most cases, their earnings fell below the hourly wage required by the program, as well as below the federal minimum wage of $7.25 per hour for a brief period of time. Investigators also found that workers were not paid for time spent in mandatory pesticide training or reimbursed for subsistence expenses while traveling to and from the U.S. Additionally, Peri & Sons did not pay the worker's return transportation costs at the end of the contract period.
Understanding your exposure to technology and implementing baseline controls should always come before you consider insuring those risks.
What is a firewall? What would I do with a privacy policy? What is encryption and why would my company need to encrypt any of our data? How would I implement an incident response plan? How many personal health records do we have in our database? Do we do background checks? Who has access to our server room? Why do I need to answer so many questions just to get a proposal for insurance?
These are the types of questions that come up during the cyber insurance application process, and this is often the first time someone outside of the IT department has had to answer them. With the growth of the cyber insurance industry, now estimated to be almost $1,000,000,000 in gross written premium for 20111, risk managers, insurance agents and boards of directors are wondering why they now also have to talk to the IT department when discussing risk management and their insurance renewal.
A vendor mistake, administrator's misconfigured firewall or even an improperly negotiated cloud contract can pose a systemic risk to your corporation.
As regulatory expectations continue to be set higher (due to increased enforcement of the Health Insurance Portability and Accountability Act of 1996 and the Health Information Technology for Economic and Clinical Health Act, attention of 46 different state notification laws that are enforced by State Attorney Generals, Fair and Accurate Credit Transactions Act) and consumer opinion is constantly being expressed in the form of class action suits, these situations continue to get more difficult to mine through.
Plaintiff attorneys' allegations addressing monetary damages as a result of privacy or security breaches are consistently being brought. Not having adequate controls is the common focus of such suits that follow a breach. Additionally, the bad actors that are trying to improperly gain access to your information will consistently focus on firms who lack simple/intermediate controls.
According to Verizon, 96% of attacks were not highly difficult and 97% of breaches were avoidable through simple or intermediate controls.2 Your own data (account lists, legal documents, vendor agreements, price lists, R&D information, trade secrets) and client/patient information (personally identifiable information/health records) are what the hackers want.
Implementing baseline controls is the first element of fixing your cyber problems.
Oh, the games people play, especially politicians. Only political junkies really care about the difference between taxes and penalties contained in ObamaCare. What Americans care about is "What is it going to cost me?" Sure, the Republicans can holler that the president lied that the health reform costs were not taxes. And, the Democrats can continue the canard that the now constitutionally defined taxes are still penalties.
The reality is that there are no new costs in ObamaCare. They have been there all along. But, most Americans never knew. As Nancy Pelosi famously said, "We will have to pass the bill for you to find out what is in it." That is how they did it. Politicians violate Americans' trust with the "Fooled Ya" game.
The "Fooled Ya" game is played by the unique Washington, DC rules of the Congressional Budget Office (CBO). Costs are estimated over a 10 year period. What happens after ten years doesn't count in this game. Here is a Real Life vs. Washington, DC example of how the "Fooled Ya" game works:
If you have a 10 year contract to lease a car for $500 per month, what is the cost? Most would say $500 for 12 months yields an annual cost of $6,000. Therefore, the cost of the contract over 10 years would be $60,000. But what if your 10 years of payments for that contract were delayed by 4 years? Under the "Fooled Ya" rules your contract costs would only be $6,000 for 6 years or $36,000. The last 4 years of the contract are initially ignored as outside their calculation period.
Of course, in the real world the actual cost of your contract is still $60,000. In the "Fooled Ya" game the actual total costs are not disclosed until time passes and the added years are made a part of a new 10 year calculation period. That is, only after 4 years would the full $60,000 cost be recognized under "Fooled Ya" estimates.
"One of the biggest cost drivers in Workers' Compensation is seemingly 'average' claims that take a turn for the worst and result in several years of medical treatment and disability."1
Too often seemingly innocuous claims lay under the radar, unnoticed until the damage is done. In this article, Mark Walls does an excellent job of pointing to several conditions that should serve as indicators of impending trouble. He discusses issues such as return to work, comorbidities, and psycho-social factors that can contribute to claim deterioration. His ideas are good and there are many more indicators that can be added to the list to recognize creeping calamity.
More Indicators
In fact, there are many subtle tip-offs in claims that could lead to effective prevention if noticed earlier. Delayed injury reporting and treatment is one. We know from industry research that a delay between the date of injury and first medical treatment is a predictor of claim complexity, regardless of the reason. Speculation regarding motivators of delay in filing a claim or to seeking medical treatment may not be as important as actually identifying the situation early and intensifying scrutiny of the claim. The opportunity is to discover claims with migrating intensity early, thereby avoiding unnecessary cost.
Knowing Is Not Enough
Unfortunately, knowing what conditions in claims might lead to trouble is not quite enough. Trying to apply the knowledge without a defined process has variable results. Manually identifying claims with perilous conditions is an inconsistent and inefficient endeavor because mere humans simply cannot do it well. Professionals, busy with a myriad of tasks, cannot monitor claims consistently enough to detect insidious conditions. Better process tools are needed and, happily, they are available.
Computer-Aided Medical Management
Technology can be made a powerful work tool in Workers' Compensation. A specially designed computer software program will monitor current claim data combined with historic data continuously, something mere humans cannot do. A custom computer program will detect trouble every time and notify the appropriate person in the organization so that focused intervention is mobilized.
A software program designed to spot combinations of data elements that portend risk and cost is a powerful cost control tool. It continually searches the data without human involvement. When an adverse situation is discovered, it automatically notifies the right persons.
A great way to foster a safe work environment and involve employees and management in safety initiatives is to maintain an effective Safety Committee. In fact, safety committees can be so valuable in some states they are actually required. Even if your organization already has a safety committee in place, there are approaches that can be implemented to improve their effectiveness.
Who Should Be On A Safety Committee?
Both management and employees should be involved in an organization's safety committee. Including members from all areas of the operation dramatically increases the effectiveness of any safety committee.
What Does It Mean To Be A Member Of Your Organization's Safety Committee?
Safety committee members play a critical role in keeping their coworkers safe and their organization productive. When a safety committee identifies and addresses workplace hazards, it prevents injuries.
Safety committee members should assist in:
- Identifying unsafe conditions and correcting the problems.
- Spotting unsafe acts, counseling workers, and addressing these issues with appropriate management.
- Ensuring that proper work behaviors are "enabled" and supported.
- Evaluating root causes of any accidents or near misses.
- The development of needed safeguards and following up on their implementation.
Safety committee members lead by their own example and should continuously seek suggestions, and relay any feedback about workplace improvement from coworkers. In this way, committee members can improve safety in the workplace based on the knowledge of front-line workers. Through the safety committee, employees can help both in preventing losses and maintaining compliance with safety and health regulations.
Insurance Thought Leadership aggregates best practices from highly respected experts in their field. Insurance Thought Leadership provides knowledge and experience at a time when its needed most, times of sweeping change and market uncertainty.
Whether it’s Healthcare, Worker’s Compensation, Property & Casualty, Auto, Sophisticated Life Insurance designs, Directors & Officer’s, Safety, Risk Control or other Claims Management, Insurance Thought Leadership promises to deliver the most relevant mind share the industry has to offer.
| July 2012 | ||||||
|---|---|---|---|---|---|---|
| S | M | T | W | T | F | S |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| 8 | 9 | 10 | 11 | 12 | 13 | 14 |
| 15 | 16 | 17 | 18 | 19 | 20 | 21 |
| 22 | 23 | 24 | 25 | 26 | 27 | 28 |
| 29 | 30 | 31 | ||||
Dave Dias
David Axene
Jeff Pettegrew
Jennifer Weathersbee
Mark Webb