What does medical care for workers’ compensation look like in the future?

March 5, 2024

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The medical world is constantly developing to find new treatment options, leverage emerging technologies, and ultimately, improve patient care. Soon, the medical care landscape may look vastly different. In this blog, I’ll discuss how embracing the changes within workers’ compensation can help ensure we care for injured workers in the most effective ways possible.

Highlights of the current landscape 

An increasing number of injured workers are living with chronic health conditions — diseases that are ongoing and generally not curable. Today, nearly half of the U.S. the population suffer from at least one chronic illness such as heart disease, hypertension and arthritis, according to the American Heart Association

As the U.S. population ages, the adult population with chronic diseases is expected to increase. Rising levels of chronic diseases contribute to the rapid growth in health care spending and other societal costs, including sick time and disability. In fact, three of every four health care dollars are spent caring for individuals with chronic conditions.

Meanwhile, record numbers of physicians, nurse practitioners, physician assistants and other clinicians have recently left the workforce due to retirement, burnout and pandemic-related stressors. In all, 334,000 healthcare professionals across every specialty of medicine left the workforce in 2021, according to a report

Early data shows the staffing shortage will have near-term and long-term effects on patient care — including injured workers — as well as hospital and physician performance. It’s not just affecting the bottom line: organizations are being forced to scale back operations, reduce hours or close doors altogether. It’s also straining facility capacity and supply chain issues, and notably, worsening patients’ experience and quality of care.

As the shortfall continues, however, artificial intelligence (AI) adoption in the medical field is working to balance that pressure. For medical insurance claims, AI aids in strengthening fraud detection efforts, prioritizing claim reviews and streamlining overall processes. It could also play a critical role in transforming modern medicine by helping with image analysis and identifying disease outbreaks and diagnosis.

The value of orthopedic surgeries

We now have more advanced knowledge on certain orthopedic surgeries and their value on a patient’s long-term recovery. This can be hugely beneficial in determining each injured worker’s recovery path, as it could minimize patients electing to have surgeries that will bring little to no substantial outcomes.

Carpal tunnel release and total knee replacement surgeries have both proven through clinical evidence to largely be superior to non-surgical management. Total hip surgery and arthroscopic meniscal repair also show high levels of promise, although there aren’t enough non-surgical randomized studies to sufficiently test against.

Conversely, there is clinical evidence to support no difference in outcome after undergoing several types of common orthopedic surgeries, including arthroscopic partial meniscectomy, rotator cuff repair, subacromial decompression, reconstruction of the anterior cruciate ligamentlumbar spine decompression and lumbar spine fusion surgeries.

The power of TMS

There are exciting new discoveries uncovering the potential of magnetic pulse technology. Transcranial magnetic stimulation (TMS), for example, a noninvasive form of brain stimulation, has shown to alleviate severe depression by stimulating specific portions of the brain through electromagnetic induction. Studies show TMS is also effective at treating post traumatic stress disorder (PTSD) at higher frequencies, as well as physiological indicators and specific behavioral symptoms of Autism.

TMS is also useful for the screening and early treatment of diabetic neuropathy, which involves nerve damage to the peripheral nervous system caused by high glucose concentration. Although studies are in beginning stages, existing studies show that TMS has therapeutical potential for the treatment of pain and pain-related depressive symptoms in patients with disease. 

Additionally, thanks to concerted efforts in recent years that’ve focused on investigating the neurophysiological changes that occur in the brain after a stroke — the leading cause of long-term disability — TMS has aided in understanding the mechanisms underlying recovery of motor function after stroke.

Psychedelic therapy

With the increasing rate of mental disorders globally, several psychedelic-assisted psychotherapies may alleviate some challenges that face conventional psychiatric medicine. 

Psilocybin, a hallucinogenic compound in ‘magic mushrooms,’ has demonstrated potential to treat mood and anxiety disorders, in addition to analgesic effects on the treatment of cluster headaches, intractable phantom-limb pain and chronic pain. Treatment may be feasible, efficacious, toxicologically safe and physiologically well-tolerated, as evidenced by decades of clinical studies. 

MDMA — commonly referred to as “ecstasy” or “Molly” — a synthetic drug that acts as a stimulant and hallucinogen, and lysergic acid diethylamide (LSD), a classical hallucinogen, have both garnered widespread public interest for their treatment potential. 

Trials are investigating MDMA’s efficacy for social anxiety disorder in adults with autism spectrum disorder and for anxiety associated with a life-threatening illness. Meanwhile, studies have noted the experiential effects of LSD-induced behavioral changes in individuals with substance-abuse disorders.

While research on LSD is observational, the most significant evidence exists for MDMA and psilocybin, which have been designated by the U.S. Food and Drug Administration as “breakthrough therapies” for post traumatic stress disorder (PTSD) and treatment-resistant depression, respectively.

Finally, marijuana, or cannabis, contains several active compounds. The best known are delta-9 tetrahydrocannabinol (THC) — the primary ingredient that causes the “high” — and cannabidiol (CBD). Studies on the medicinal use of cannabis are a mixed bag. Research has shown that adults experiencing chronic pain who were treated with cannabis are more likely to report that they experience a  reduction in pain symptoms. It is also being explored as a treatment option for conditions such as epilepsy and schizophrenia. Given the potential for harmful effects, especially when cannabis is smoked, much more research is needed in this area.

These ideas were presented during the 77th Annual Workers’ Compensation Educational Conference and 34th Safety & Health Conference, organized by Workers’ Compensation Institute (WCI). 

Dr. Teresa Bartlett, Managing Director, Senior Medical Officer, Sedgwick

UK MHRA releases roadmap for its forthcoming medical devices regulation overhaul

March 1, 2024

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As the UK continues to develop its own regulatory framework after leaving the European Union, it appears that the medical device industry will be next to see new legislation. The UK Medicines and Healthcare products Regulatory Agency (MHRA) released a roadmap for new regulations in January 2024, outlining the next steps in developing a new framework for medical devices.

The MHRA has been working on new medical device regulations for several years, having originally launched the process with a public consultation in 2021. In the interim, the UK has been operating under the outdated Medical Devices Regulations 2002, which implemented 1990s EU legislation. In announcing the new regulatory roadmap, the MHRA identified three core goals: put patient safety first and help to ensure that patients continue to have access without delay to devices they need; enhance the UK’s position as a world-leading environment for medical technology innovators; and deliver greater international harmonisation.

Key details of the roadmap

The MHRA will roll out new regulations via a series of Statutory Instruments (SIs), starting with regulations for Post-Market Surveillance (PMS) in 2024. The draft PMS SI is in the final stages of the legislative process, and the UK government intends to publish the final SI in early 2024 and expects it to apply near the end of the year. The draft PMS SI that was released last July outlines several key measures, including:

  • Details for what must be included as part of a PMS system, including the methods for collecting PMS data to support improved capturing of PMS data and harmonisation across manufacturers.
  • Enhanced serious incident reporting obligations for manufacturers to support the detection of safety issues sooner.
  • More stringent requirements for manufacturers to conduct periodic reviews of their PMS data, including for implantable medical devices. These requirements aim to support manufacturers in earlier detection of trends/signals that may have an impact on the safety of a medical device.

The MHRA plans to release other core regulations in 2025, which will make up the bulk of the regulatory framework. As identified by the MHRA, the future core regulations will:

  • Introduce improvements for implantable medical devices.
  • Ensure devices have a unique device identifier (UDI).
  • Change the classification of several types of devices.
  • Strengthen the requirements for quality management systems and technical documentation.
  • Include new requirements for the claims manufacturers can make about their medical devices, requiring them to align with their statement of intended purpose.
  • Bring the essential requirements for medical devices being placed on the market in Great Britain into greater alignment with those of the EU.

The medical device industry will have the opportunity to share input on the future regulations, as the MHRA will hold stakeholder discussions in early 2024. The industry should begin reviewing the roadmap and other draft documents released by the MHRA as they await final guidance. Companies who operate in the UK and EU markets should also start considering how the UK regulatory framework is likely to prompt changes in their manufacturing and quality control processes.

Trusted by the world’s leading brands, Sedgwick brand protection has managed more than 7,000 of the most time-critical and sensitive product recalls in 100+ countries and 50+ languages, over 25 years. To find out more about our product recall and remediation solutions, visit our website here.

Weight loss medications in workers’ compensation

February 13, 2024

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There is a lot of media attention surrounding weight loss drugs these days. Whether the story is about the most recent celebrity using these medications or a story of patients having difficulty getting access. In this podcast, we’re joined by Dr. Paul Peak, Dr. Teresa Bartlett and Dr. Andrew Newhouse who weigh in on what these medications are, why they are grabbing all the headlines and how they might impact healthcare and workers’ compensation.

Seamless management of injured workers’ care benefits all stakeholders

December 19, 2023

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It’s no secret that healthcare systems can be difficult to navigate. When care is associated with an injury or illness incurred on the job, the complexities of the workers’ compensation system may further compound the challenges. Many employers opt to work with experienced claims and managed care partners to give employees a better experience, facilitate recovery and return to work, control costs, and ensure full compliance with jurisdictional requirements. However, navigating a patchwork of specialists and ancillary care providers, along with their disparate online systems, can be just as challenging. Here, we will highlight how the seamless management of care for injured workers is a major win for all parties involved in the workers’ compensation system.

Benefits for employers

When an employee gets injured or ill at work, their employer is responsible for making them whole again. It’s a legal obligation, the right thing to do, and in the employer’s best interest. Organizations want the highest quality, most appropriate and timeliest care for their employees to maximize medical efficacy and recovery. What’s more, they want all of that at the best possible price, as Sedgwick’s workers’ compensation book of business shows medical spending accounting for about 50% of claim costs. 

While that combination may sound too good to be true, it is possible when employers work with the right managed care provider. By using a partner with an established network of highly rated, licensed and insured practitioners in the right specialties for occupational medicine, as well as pre-negotiated treatment discounts, employers can take advantage of rates well below fee schedule while providing employees with outstanding care. Premier managed care providers can offer “wholesale” rates for care due to their buying power and careful oversight; many also conduct bill reviews to yield an additional 10-15% in savings — with no additional work required by their employer clients. 

Another way we help employers reduce claim costs is by applying sound healthcare price management techniques. Among Sedgwick’s workers’ compensation clients, 32% of medical spending is on ancillary care, which includes durable medical equipment (DME) like canes and wheelchairs, as well as prosthetics, orthotics and supplies (POS). Much like in the pharmacy sector, managed care providers use formularies and product catalogs to identify generic equivalents — for everything from name-brand bandages to crutches — so employees receive equally effective care and supplies at significantly lower prices.

Fully integrated managed care programs offer benefits beyond cost savings, too. When injured and ill employees are referred for treatment through a managed provider network, claims are reviewed by clinical experts to ensure medical necessity and appropriateness of care. The use of well-vetted and credentialed network providers means a more accurate assessment of the warranted treatment plans. This approach brings tremendous value to any employer’s program — especially when it comes to high-cost products and services, such as custom prosthetic devices, diagnostic imaging and in-home healthcare services. System integrations further simplify processes and create efficiencies, and vendors and providers get paid faster due to pre-negotiated pricing.

Benefits for claims handlers

Workers’ compensation claims examiners and case managers on programs with integrated managed care are at a distinct advantage. Thanks to seamless technology interfaces, they can refer workers for care and order necessary medical supplies from multiple sources directly from their established claims system — without having to log onto separate vendor portals. 

Claims professionals know that having screens dedicated to managed care within their system of record is a real differentiator. Streamlining the number of password-protected websites they must use in their daily jobs promotes efficiency, lowers the risk of human error or data breach, reduces frustration and busy work, and improves their overall work experience. Furthermore, the integration enables electronic billing information to be transmitted directly to the claim file — and medical bills can be processed without further human touch if reserves are in place on the claim! 

Integrating the management of medical care with the workers’ compensation claims process also helps examiners focus on their primary responsibility, which is supporting injured and ill workers in their time of need. When examiners feel confident they’re referring workers to quality practitioners and equipment providers in well-managed networks, they can devote their energies to communication, removing barriers, and managing the fiduciary responsibilities of their assigned claims. 

To further support workers’ compensation claims examiners, some leading managed care providers have added ancillary care coordinators to their teams. These professionals spend a lot of time getting to know the services, equipment and supplies they manage, so they can ask the right questions and work with examiners to enlist the right resources on their claims. Care coordinators’ in-depth knowledge helps them readily identify issues as they arise and escalate them to the appropriate medical experts for accurate and prompt resolution. 

Benefits for injured workers

The ultimate beneficiary of effective management of care in workers’ compensation is, of course, the employee. The efficiencies and oversight of integrated programs enable workers to promptly secure appropriate and high-quality medical care after an on-the-job injury or illness, which helps them get back to health and productivity faster. Employers that include ancillary care in their programs offer a seamless experience to employees needing medical equipment, supplies or special services. The assigned examiner and care coordinator collaborate to arrange for ordering, delivery and setup, as well as any fittings or training that may be needed. Streamlining the process gives the employee the best possible experience and increases the likeliness they’ll use all available resources to achieve maximum recovery. 

With the constant threat of an unfavorable experience going viral on social media, combined with a lingering tight labor market, it’s more pressing than ever to take good care of your employees. One easy way to do that is to partner with a managed care provider with integrated capabilities that can bring the highest level of care to your workers’ compensation program.

EU Health groups propose solutions to MDR and IVDR concerns

October 2, 2023

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Frustration with the EU Medical Devices Regulation (MDR) and In Vitro Diagnostics Regulation (IVDR) continues to mount among industry stakeholders over a lack of quick and economical regulatory approval processes. Since the inaction has resulted in some lifesaving products being pulled from the market, EU medical groups have begun to voice their own suggestions for how to rectify the issue.

Earlier this year, the European Health Commission provided an extension to May 2026 for companies to comply with the MDR and IVDR. However, industry stakeholders want the European Health Commission to do more to address their concerns with the regulatory framework.

Calls for structural reform

Along with 34 national associations, MedTech Europe, a European medical technology trade association, recently sent a letter to the European Commissioner for Health, Stella Kyriakides, calling for structural reform to both the MDR and IVDR. The groups hope that reforms will help ensure that medical technologies can reach healthcare systems across Europe in a timely manner.

In the letter, MedTech Europe and the other signatories called for the designation of a more efficient CE marking system to reduce administrative burdens. The groups have also called for the designation of an ‘innovation principle’ to connect emerging technologies more swiftly with patients and health systems through earlier dialogues with developers, and they’ve argued for the establishment of an accountable governance structure to oversee and manage the regulatory system and notified bodies.

Aligning with regulatory trends

The proposal to create an ‘innovation principle’ would align the MDR and IVDR more closely with current European Commission regulatory trends. Other pharmaceutical and medical device regulations that were introduced more recently than the MDR and IVDR by the Commission have sought to prioritise innovation and market access alongside product safety. For example, the European Clinical Trials Regulation (CTR) will create greater regulatory convergence and efficiency by streamlining the application process for clinical trial applications, allowing for companies to place a greater focus on innovation than on the administrative process.

Similarly, the European Commission’s recently proposed pharmaceutical regulation package also prioritises innovation and market access with measures to (1) provide incentives for companies that produce medicines that achieve public health objectives, (2) reduce the standard regulatory protection period, and (3) increase access to pharmaceuticals.

Meanwhile, another group of healthcare experts have published an academic article outlining recommendations on evaluating high-risk medical devices for children. Their recommendations also include the establishment of a task force on ‘orphan devices’, plus the designation of a clear definition for the term ‘orphan device’ itself (the name given to devices that treat rare health issues and are produced in small quantities). The group explains that resolving this issue would enable the taskforce and other groups to find ways to protect designated critical orphan devices.

Considering these calls for reform to the MDR and IVDR and the fact that Commissioner Kyriakides has admitted more changes to the regulations are likely needed, manufacturers should continue to take advantage of opportunities to engage with regulators and provide input on the reform process.

Ensuring eligibility and increased regulatory obligations

It is also critical for manufacturers to ensure they have completed the necessary administrative steps to be eligible for the MDR transition extension. Companies should also ensure they understand if they are eligible and what category of eligibility they might fall into per the Medical Device Directive.

In proposing the establishment of a new accountable governance structure to oversee regulatory agencies and notifying bodies, industry members should understand that this will likely lead to significantly increased regulatory obligations for manufacturers amid greater enforcement power for that entity.

Learn more > Trusted by the world’s leading brands, Sedgwick brand protection has managed more than 7,000 of the most time-critical and sensitive product recalls in 100+ countries and 50+ languages, over 25 years. To find out more about our product recall and remediation solutions, visit our website here.

Recovering from dental practice losses without pain reliever

September 25, 2023

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The healthcare sector is evolving at an astonishing rate. Consider for example that it took biotechnology company Moderna just one hour in January 2020 to formulate an effective SARS-CoV-2 vaccine, based on their messenger ribonucleic acid (mRNA) technology. Advancements in technology are changing the dental field, too, but like other healthcare facilities, dental practices are not immune to property losses. In this commentary, we explore typical equipment found in a dental office, common perils, post-loss recovery options and how collaborating with manufacturers helps instill certainty.

Read EFI Global’s latest commentary paper. Click here.

Pharmacy trends: pain management in workers’ compensation

September 14, 2023

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Pain is one of the most common reasons adults seek medical care in the United States. According to the Centers for Disease Control and Prevention (CDC), American healthcare providers write 259 million prescriptions for opioid pain medication each year — enough for every adult in the country to have their own bottle of pills. Meanwhile, there is insufficient evidence to support the long-term benefits of opioid therapy for chronic pain.

This longtime rise in opioid prescriptions has occurred in tandem with sharp increases in opioid-related overdose deaths and widespread opioid use disorder (OUD). Due to alarming reports regarding this epidemic, opioid use is finally trending down, according to the CDC — except for synthetics like fentanyl. Guidelines have changed in recent years to curb the use of opioids as a first-line approach to pain treatment not associated with cancer.

Prescribers are moving away from opioids and searching for safer pain treatment options. At the same time, patient prescriptions and workers’ compensation claims are seeing an uptick in opioid dependency management medications.

From opioids to alternatives: trends

As prescribers shift to alternative pain management methods, opioid prescription trends are moving in the right direction, as suggested in a 2023 Enlyte LLC report. From 2021 to 2022, the proportion of opioid scripts and costs dropped 1.3% and 2.5%, respectively. The number of injured employees using opioids has continued to decline (down 2.7%) as well.

Opioid potency in prescriptions has also dropped. Morphine milligram equivalents (MME) and morphine equivalency doses (MED), values used to compare the potency of an opioid dose relative to milligrams of morphine, determine a person’s cumulative intake of opioids in 24 hours and are helpful indicators of dose-related risk for adverse reactions, including overdose.

Dosages higher than 50 MME per day increase the risk of overdose at least twofold, compared to smaller ones, says the CDC. Importantly, opioid claims with high MED decreased from 2021, and average daily MED levels per script decreased as well (down 5.3% and 2.8%, respectively).

Opioid dependency/reversal medications on the rise

Even as workers’ comp claims involving opioid decline, there has been a notable rise in prescriptions for managing opioid use disorder (including in workers’ comp). These drugs, commonly referred to as medication-assisted treatment (MAT) or medications for opioid use disorder (MOUD), do not cure OUD — there is no known cure. It merely quells withdrawal symptoms. The drugs are, however, demonstrably safe and effective in treating OUD in combination with psychotherapy, such as cognitive behavioral therapy (CBT).

For patients using MAT, there is no real “exit plan” once beginning the treatment and no clear guidelines on how long to continue taking such medications. The Enlyte report found that claims involving prescriptions of MAT medications increased 11.6% from 2021 to 2022, while costs fell during that period. The increase can be attributed in part to injured workers staying on those medications indefinitely and the subsequent push for MAT treatment to be part of their workers’ comp benefits. It also reflects healthcare providers’ efforts to take a proactive and preventive stance on opioid dependency.

Naloxone, a drug used to reverse opioid overdose, is also on the rise in workers’ compensation claims. In 2022, 7.3% of injured workers prescribed opioids with MED>50 (an opioid dosage that increases the risk of overdose twofold) received naloxone, up from 2.5% since the year prior.

Recent regulatory changes likely influenced this trend. In some states, providers are now required to prescribe the drug anytime a high-dosage opioid prescription is filled. This is positive news. Naloxone can act as a safety net for patients — including injured workers — if they do overdose on opioids, and at the very least prevent the financial burden of an emergency room visit.

Effective pain management options

Solutions that have emerged to replace opioids include anti-convulsants (the generic prescription medications gabapentin and pregabalin), nonsteroidal anti-inflammatory drugs (NSAIDs) such as ibuprofen or naproxen, acetaminophen (i.e., Tylenol) and anti-depressants (duloxetine, for one). These medications have proven effective at improving symptoms of chronic pain and garner less dependence, which explains the significant increase in prescriptions.

There is still, however, potential for misuse or abuse. Use of gabapentinoids, specifically gabapentin and pregabalin, have raised concerns — even being FDA approved to treat neuropathic pain — that the medicines are being overprescribed. Both medications can be taken recreationally to produce a high. Some misuse the medications alongside opioids, which significantly increases the risk of unintentional opioid poisoning and death. Still, clinicians are increasingly prescribing both drugs for pain instead of opioids. A 2021 Workers’ Compensation Research Institute (WCRI) report explored the growing use of gabapentinoids for managing pain arising from work-related injuries, and according to a 2022 WCRI study, anti-convulsants are one of the top-three categories of medications by payment share that are prescribed to injured workers.

It is best to consider every patient holistically, as there are often psychological comorbidities that underlie pain and interfere with its resolution. Extensive evidence points to the benefits of nonpharmacologic treatments, such as behavioral health, coupled with non-opioid pharmacologic treatments. Exercise or stretching can increase function, and CBT has been shown to reduce pain intensity in chronic-pain sufferers.

Other types of pain management treatments, such as spinal cord stimulation and nerve blockers, come up in the context of workers’ comp claims, but few studies support their medical use.

Safety, regulatory concerns

Since opioids have fallen out of favor, some physicians have begun prescribing and dispensing over-the-counter, private-label topical medications that are not just expensive and contain higher than recommended strengths of active ingredient; they are also not FDA-approved. Private label topicals are considered specialized products and bypass established pharmacy safety measures with little-to-no utilization review. Drug companies are marketing directly to providers to dispense and prescribe their products — posing a clear financial conflict of interest and safety risk. Many states do not have regulations in place to address these concerns, and any state allowing physician dispensing cannot control how these medications are distributed.

To address such concern, Sedgwick’s dedicated and highly trained team of nurses and pharmacists uses our established proprietary risk analysis indicators and evidence-based medical treatment guidelines to identify unsafe medications, drug combinations and dosages. They utilize evidence-based practices to evaluate medication regimens and collaborate with prescribers to ensure patient safety and medication compliance on our clients’ workers’ compensation claims. Our team of pharmacy experts is here to help employers protect injured workers from harmful medications, treat their symptoms safely and effectively, and control prescription drug costs.

> Learn more — read about Sedgwick’s pharmacy solutions for U.S. workers’ compensation claims.

The basics of business interruption: what professional services firms should know­­

September 11, 2023

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Business interruption (BI) is a significant concern for professional services firms — whether it be lawyers, accountants, medical professionals or consulting agencies. Any disruption, whether due to physical damages or technology downtime, can have a profound impact on their operations, productivity and financial stability.

Factors that contribute to business interruption

It’s important for professional services firms to understand how their operations might be impacted by an incident and how their insurance policies might respond. Some of the common impacts we see in professional service firm losses are outlined below:

  1. Loss of use: Professional services firms rely heavily on their premises and technology infrastructure. Damage to physical premises, such as fire, flood or structural damage, can render them inaccessible — leading to significant operational and productivity challenges. Similarly, technology downtime, particularly in the case of cyber incidents like ransomware attacks, can paralyse operations by limiting access to critical systems and data.
  2. Timing and duration: Shorter interruptions may cause a temporary inconvenience but can be quickly recovered from, while longer disruptions can result in substantial financial losses and potential client dissatisfaction.
  3. Loss of new and/or existing clients: During an interruption, professional services firms may struggle to meet client deadlines or provide the expected level of service. This can lead to dissatisfied clients, damaged relationships, and potential loss of future business opportunities.
  4. Billing: Professional services firms typically bill their clients hourly, based on the time spent on a particular engagement, as opposed to a fixed rate. In the event of a business interruption, understanding the billing structure of the firm as well as staff utilisation and recoverability of chargeable hours is crucial to evaluating the financial impact of an interruption on revenue.
  5. Staffing: Business interruptions can impact the productivity and efficiency of staff. If the interruption causes a backlog of work, staff may struggle to catch up during ordinary work hours. Additionally, understanding the staffing structure, including whether employees are salaried or casual, is important to identify whether there may be any savings in payroll costs and/or increased overtime costs resulting from the interruption.

The role of the insurance policy

A comprehensive understanding of the policy terms is critical in correctly assessing the business interruption for professional services firms. Key policy issues to consider include:

  • Loss of productivity vs. loss of revenue: Loss of productivity, such as reduced efficiency or increased operational challenges, may not automatically trigger a business interruption loss. It is crucial to assess the impact on revenue during the indemnity period to determine if there is a crystallised revenue loss as required by an insurance policy.
  • Increased costs: Business interruptions can result in additional expenses, such as outsourcing work or implementing temporary measures to maintain operations. Understanding if these increased costs are covered under the insurance policy ensures accurate claims assessment.
  • Indemnity period: The indemnity period defines the duration for which the insurance policy provides coverage. Professional services firms should confirm that the indemnity period aligns with their potential recovery time and allows for a reasonable assessment of the financial impact.

Business interruption in action

Sedgwick recently assessed a business interruption claim in which the cloud service provider of a healthcare firm experienced a ransomware attack, leading to server outages. As a result, the firm was unable to access its patient management software and clinical appointments (charged on an hourly basis) were not completed.

The key issue on this claim was whether the appointments missed during the outage period could be delayed and made up later. By analysing profit and loss statements and staff utilisation reports, we established that the business had limited capacity to catch up lost appointments, as its staff were fully utilised. Our review ultimately supported a reduction of $450,000 in billable time due to the outages which could not be delayed and made up later.

This claim highlights the importance of assessing the impact on revenue over the full indemnity period. While initially it may have seemed like the missed appointments would simply be delayed rather than lost altogether, the firm was able to provide support for a genuine loss of income during the interruption period due to a lack of capacity to make up the lost hours.

This claim illustrates the importance of thoroughly evaluating the financial impact of a business interruption for professional services firms. It showcases the need to assess the performance of the business before, during, and after the interruption to determine if there is an actual revenue loss.

Insurance considerations and early engagement with insurers

To ensure a smooth claims process and accurate assessment of coverage, it is crucial for professional services firms to engage with their insurers early. By partnering at an early stage, firms can establish mutual agreement on terms and conditions, ensuring a transparent claims process. This proactive approach minimises the likelihood of disputes and facilitates a more efficient resolution in the event of a business interruption.

Sedgwick’s experts play a vital role in assisting professional service firms and insurers with business interruption claims. To learn more, contact [email protected] or [email protected].