This article is sponsored by Omni Agency. This article is based on a Skilled Nursing News virtual discussion with Michael Rosado, Director of Risk Management and Ari Gross, COO of the Omni Insurance Agency. The discussion took place virtually on November 17, 2022 during the SNN Risk Summit. The article below has been edited for length and clarity.
Michael Rosado: Omni Insurance is an insurance brokerage. We’re a national agency. We cover all lines of insurance. However, our specialty is health. We do nursing homes of all sizes from small little 30 to 40-bed units all the way up to hundreds and hundreds of beds.
We do hospitals and we do home care agencies. I personally am a Code Rule 59 and 60 consultant in the state of New York, which means that I certify businesses as either unsafe, and I’ve seen the worst of our industry, or unusually safe. I help businesses get extra credits that they’re entitled to. We see both ends and all the stuff you’re going to see today are taken from actual loss runs from actual nursing homes in our industry today.
Ari Gross: I started out about eight years ago working for a brokerage called Oxford Coverage for coverage that specialized in nursing homes, mostly on the GLPL side. Obviously, there are a lot of overlaps with what Mike’s team does and the Risk Management and Claims Management. After that, we were purchased by Hub International.
I was there for three years running the long-term care division at which point I moved over to this wonderful group at the Omni Agency.
Mike and I are really concentrating on, after the growth of the agency, it’s really taking care on the claim side which is how to keep clients after you land them.
Rosado: We’ll start with a rhetorical question. What makes nursing homes a dangerous place to work? Why are insurance companies so hesitant? Why is it so hard to write sometimes? What challenges do insurers have when they look to write your premium? Why do we obsess? Here we are. Nursing homes have one of the highest occupational illness and injury rates among all industries. That includes firemen, policemen, loggers, construction.
Of all those industries we just mentioned, nursing homes have the highest occupational illness injury rates. The typical eight-hour workday, a nurse may be asked to manually lift an estimated cumulative weight of 1.8 tons. It’s a lot of weight in one day, and takes a toll on the body. Nursing homes are only growing. Currently, there are about 1.4 to about 1.5 million people resigning in nursing homes today. That number is expected to keep growing at a pretty exponential rate.
One of the challenges we face is while our residents are growing, there is a very high and unusually high turnover rate in the nursing home industry. When polled, 38% of nursing home staff reported their intention of leaving within two years. This is not the profession, they need to keep up until they retire. It’s very difficult to maintain safety standards and training when there’s a revolving door. In terms of injuries, CNAs missed the equivalent of 50 years at work.
Well, they did miss 50 years of work in 2021 due to strains and sprains. There’s an accident rate of about 166 per 10,000 employees. That’s more than five times the national average for all other industries. The problem is compounded by the fact that as Americans, we continue to get larger. It’s projected by 2030 half of all Americans are going to be classified as obese. What do accidents cost you? Direct and indirect cost. We’ll start with direct cost, the true cost of claims.
For every $10,000 spent on your worker’s comp program, assuming that you work at a 2% margin, you need to generate half a million dollars of revenue. That’s one of the reasons we obsess. That revenue, it’s a lot to generate half a million dollars. That money can be applied in a lot of different ways. When we look at claims and frequency, these numbers stand out. With $10,000, you have to generate half a million, that’s a lot. Another direct cost increase in premium. Frequency and severity leads to increases in premium.
This is money you don’t necessarily have to pay. You run a safe program, we can look for discounts. If you’re unsafe or you have a lot of frequency and severity, you have no access to tier-one carriers. Tier-one carriers offer a lot of benefits. They include better websites, better claims management, better lawyers. You want to work yourself up to those tier-one carriers or on what? Now let’s talk about the indirect cost of claims. Examples of the indirect cost of claims are time lost from work by an injured employee. Loss of efficiency due to breakup of a crew.
Loss time by a supervisor. Your supervisor has work to do. When an employee is injured unnecessarily, they’re busy making sure that person shift is taken care of. Training costs for new and replacement workers, damage to tools and equipment in the accident. Time of damage equipment out of service. Lost production for the remainder of the day. CNA goes down at 10 o’clock in the morning, that’s a whole day that people have to make up for that person. Damage from, and this is a little severe but happens, fire, water, chemical, explosions, failure to fill orders and meet deadlines.
Overhead costs while work is disrupted, other miscellaneous costs. There are about a hundred of them, so we won’t go into them. Importantly, time required to complete state forms. When an injury does occur, there are forms that your HR staff and your supervisors have to be busy with. The more unnecessary injuries, the more forms to complete, the more unnecessarily time is wasted. Unknown cost of accidents includes human tragedy. You have someone who’s been working for you for 10 years, they go down with an injury, they rupture their back, that toll weighs on the rest of their team.
You become family when you work together for years. You lose popular workers to unsafe acts, it weighs on you. Finally, reputation. A couple of people go down unnecessarily with injuries. You’re known as an unsafe place to work. What should be our goals? What do insurance companies look for? We want you to become what’s called an HRO or a high-reliability organization. High-reliability organizations are defined as organizations operating in hazardous conditions that have fewer than a fair share of adverse events.
When we look at the top of the food chain, the pinnacle HROs, we’re looking at examples. Nuclear power plants, aircraft carriers, air traffic controls. Think about your local airport for any of you from New York, JFK, or LaGuardia. Look at all those planes coming in and out. Seems chaotic. They have systems and subsystems in place. It’s a highly dangerous juggling act they’re pulling but they’re very few incidents.
Gross: I just want to point out, Mike. This is why sometimes, even though it’s such a dangerous nuclear reactor, the workers’ comp rates are lower than a hospital.
Rosado: That’s 100% sure, Ari. Correct. Thank you, sir. How do we achieve an HRO? We start with a safety culture. Everybody throws the word safety culture around pretty loosely. We’re going to define safety culture for you. Ari, you want to take it?
Gross: The safety culture in the company is, it starts off from top-down management when the owners and the operators, the administrators and the corporate officers, when they take it seriously. When Mike and his team goes in to do a training and all of the employees see that the C level are listening to everything and they want to drill down and all the employees to follow. It’s the only way that it works. When you have Mike’s team come in and do training and just with at the CNA level, and it stops at the director of nursing.
There’s nobody on top of the director of nursing to make sure that anything that she’s trying to implement is actually going to be enforced. That’s why Mike’s goal is always to bring in the top of the team and have it trickle down.
Rosado: Correct. Top-down is key right there. Again, what we’re looking for is we’re looking to adjust people’s values, attitudes, beliefs, behaviors as they pertain to safety and make your organization a safe place to work. Let’s go on to the next slide. The cost of your safety culture. This is an interesting exercise that we pulled off. We took loss runs from four real nursing homes at different levels of safety culture and risk management and risk awareness. We’re going to start with the worst and show you how that actually applies to your premium.
What does it cost you to ignore safety? Ari’s going to help me with this. He’ll rate you some of the claims, and then we will talk about how it impacts your premium. I’m just going to put it up on the screen. This is a nursing home and some of their injuries. We have contusions and strains from catching a falling patient. Sorry, I got to move this over just a bit. From catching a tilting Hoyer lift while transferring a resident.
Strains from preventing a resident from falling and a fracture from the same resident sitting on the employee’s hand. They didn’t have control when they did the transfer. A torn rotator cuff from transferring a heavyset patient from a bed to a wheelchair, a resident in a wheelchair rolled over an employee’s foot. Then that same resident hit that employee in the knee with their oxygen tank. Then finally, this is a real thing, a trip and fall from a wooden board covering a sewer drain. They just didn’t have time to put it into the sewer drain cover. They used a wooden board.
This is about this poor safety culture as you can see, company A is lacking in many areas. There were an extraordinary amount of incidents. There’s improper training practices not existing OSHA practices. Inadequate building parking lot and equipment maintenance. A horrifying lag time of over two weeks. Initial treatment was at hospitals. People were injured, they were just cut free. Instead, go treat yourself, present back when you can, and a sad communication with the carrier and the broker.
Gross: I would just go back to the prior slide and remind everybody that the pitiable communication with the broker is really something that could have prevented the other four because oftentimes somebody who’s operating a hospital, a nursing home, they know how to care for patients and it shouldn’t be their job to handle all the other things or to know where to turn for them. Talking to a broker that can happen immediately. Over here in this slide, you see where the experience MOD of 1.51.
If you have your annual premium of 451,000, you’re going to get penalized based on your 1.51 MOD, which is your old experience because you have high losses and you’re going to have another $230,000 in premium to pay just because you have prior claims. Just because you’ve demonstrated that you don’t know how to take care of employees and not have them get injured on the job. This is the penalty that the workers’ comp board is going to insist that you pay. The reality is that you think that insurance companies are paying your claims, but the reality is that you are paying your claims.
The insurance company is going to finance them for you for three years. The same way your bank that you work with is a for-profit company, the insurance companies are for-profit companies. The goal here is to make your risk much more profitable to them without paying claims so that they’re happy to charge you less in premiums. When they pay more, you’re going to pay more.
This excerpt has been edited for length and clarity. To watch the full discussion on video, please visit:
Omni Insurance agency helps clients save money on renewals, as well as ensure their claims stay under control to protect future years’ expenses. To learn more, visit: https://www.theomniagency.com/.
Companies featured in this article:
