An Alaska Airlines flight performed an emergency landing on January 5, 2024, when a portion of the Boeing 737 Max 9 aircraft’s fuselage experienced structural failure. For reference, the purchaser has the option of adding an emergency evacuation exit at this spot in the fuselage. In the case of Alaska Airlines, they chose not to make this an exit so the subcontractor responsible for the construction of the airplane replaced the exit with a plug to seal the opening. This is where the hard lesson is learned.

Over the past decade, Boeing diversified its aircraft production process by employing subcontractors to build component parts of the aircraft, and Boeing assumed the role and responsibility of the final assembly. This responsibility included the work product of the subcontractor.

Unfortunately, when it came to the Boeing 737 Max 9 airplane used by Alaska Airlines, initial reports showed that the plug was missing key components, including securing bolts and nuts. Because it is unknown if other 737 Max 9 airplanes have similar issues, the fleet has been grounded until further inspections have been completed.

There are many fields that use subcontractors and while the use of subcontractors is an economic decision made by the general contractor overseeing the entire process, the general contractor is responsible for assuring quality control. In the case of Boeing, if the initial report of missing parts is correct, then Boeing as the general contractor should have identified the problem during the final assembly of the aircraft. Similarly, it is no different from purchasing a car, discovering a problem with that car and then discovering the deficiency was a result of the subcontractors’ doing. Wouldn’t you look to the manufacturer to correct the problem and not the subcontractor that produced the defective part?   

It is the same with MC Innovations. Our Total Program Management – or TPM – program uses a general contractor model to provide administrative services to its self-insured property, casualty, and liability clients. With few exceptions, MCI uses subcontractors to provide the package of services required by our clients. Our directive is for the MCI Team to provide the services the MCI client requires and not expect the client to accommodate the structured service of the contractor. While MCI will hold its subcontractors responsible for failure to comply, it is ultimately MCI’s responsibility to prevent such incidents. MCI’s two largest clients have operated under the TPM umbrella for over 25 years, proving our services are able to meet the unique needs of our clients.

The first step to avoiding illness or injury is to stay cool. Some days, especially in the dead of summer, may be easier said than done. However, even on the hottest days, there are things you can do to ensure you are as cool as possible. First, you should make sure you are wearing proper clothing. Light weight, loose fitting clothing is best on hot days. Tighter clothing can trap heat on your skin and stick to your body due to perspiration. Next, you should carefully plan your day, trying to avoid the middle of the day for strenuous activities when the heat, and the sun, are at the highest. If possible, try to schedule time during the day that you can spend in an air-conditioned environment. According to the Centers for Disease Control, CDC, even a few hours of AC can help your body stay cooler when you go back into the heat. Pacing yourself when working in the heat will also help you avoid illness. Even if you pace yourself while working, it is important to listen to what your body is telling you. If at any point you are gasping for air, feeling faint or light-headed or dizzy, you should immediately stop working and get into a cooler environment. Because sunburn can affect your ability to cool down and can make you dehydrated, you should always protect yourself by wearing a wide-brimmed hat, sunglasses and applying sunscreen with SPF 15 or higher a minimum of 30 minutes prior to going out. You should also continue to reapply according to directions. Broad Spectrum or UVA/UVB protection is best. Lastly, you should avoid heavy and/or hot meals. These foods will actually add heat to your body, increasing your chances of illness and injury.

Car dealerships are not the only place where undisclosed fees can add up quickly. Third-Party Administrators (TPAs) have adopted similar practices. Over the years, TPAs have figured out how to make their bottom-line price appear lower than what it is. In fact, some TPAs use their ancillary services as an additional source of undisclosed revenues. These services may include bill review, telephonic and field case management, Pharmacy Benefit Management (PBM), Independent Medical Exams, diagnostic services, and surveillance. These services, undoubtedly, have enhanced the quality of the claims service. However, a deeper look into accounting and payment processes can prove to be problematic: undisclosed TPA revenues.  

Today the workers’ compensation environment presents an evaluation problem. The administrative fee (unallocated expense) is generally the proposed bid price while the allocated administrative expenses such as medical expenses are paid from funds dedicated to paying direct claims cost. These are two separate and distinct funding sources for workers’ compensation and must not be intermingled.

Assume three proposals are submitted in response to an RFP and ranked from the lowest to highest bid:

This same scenario can be found repeating itself in pharmaceutical pricing. AWP, or Average Wholesale Price, is the “sticker price” representing the cost of manufacturing pharmaceutical drugs, similar to that of the MSRP on a new car. Let’s look at today’s market to see where the problem begins.  If we assume a brand drug has an AWP of $100, we are led to believe this is the price a pharmaceutical company must be paid to cover all of its cost and required profit. Anything less leaves the manufacturer with a loss which, as we all know, is not sustainable and ultimately would drive the company out of business. However, in today’s market, we see the cost paid for workers’ compensation pharmaceuticals being offered at 20% to 30% discounts and in some cases, that discount can be as high as 60%. We should take a second to do the math. The manufacturer has stated that in order to stay in business, it must receive $100. So, why is the purchase cost discounted by as much as $60 below the alleged cost of production? Additionally, the distribution company’s and the pharmacy’s charges have yet to be added to the bill. SOMETHING IS NOT ADDING UP. Unfortunately, this is worse than the auto example where the consumer doesn’t have a clue.

It doesn’t stop there. A Pharmacy Benefit Management Company (PBM) plays an important role in the distribution of drugs to the injured worker. The PBM accesses a pharmacy network to gain preferred pricing. The PBM then sells its distribution services to a third-party claims administrator (TPA) and typically offers an average discount of, for example, 30% off the AWP. The TPA then goes to the employer whose workers’ compensation program they administer and offers the employer a discount of 20% off AWP.

So, what do we have? Here is an example:

1. 1. Employer receives a bill for a prescription with an AWP of $100 with a discount of 20%, or a payment of $80
   2. The TPA retains 15% of AWP to cover the cost of operation. The $80 pot drops to $65.
   3. The PBM receives the $65 and withholds 15% of the AWP to cover the cost of operations, leaving a balance of $50
   4. A Pharmacy receives the $50 and retains $10, leaving a balance of $40.
   5. The manufacturer receives a payment for the drug in the amount of $40, a shortfall of 60% from the AWP.

Coming in at second, costing U.S. businesses $10.58 billion and accounting for 18.1 percent of the total injury burden, is falls on the same level. There are five types of falls on the same level. First and probably most recognizable is slip and fall. This is where there is a lack of traction between your feet and the walking surface. Second is trip and fall. Under this fall, the worker trips over an unseen item causing a fall. Next is stump and fall. This usually occurs when the worker’s foot hits something heavy, usually flooring, abruptly stopping the employee’s pace. Then there is step and fall, when the worker’s foot enters an unseen hole or dip, causing them to fall. This includes curbs, potholes, or even not knowing where the last step on the flight is. Lastly, forced rotation fall, where the employee’s ankle turns, or the foot is not able to hold their weight.

The next category of injury also involves a fall, but to a lower level, rather than on the same level. This type of fall accounts for 10.7 percent or $10.58 billion in workplace injuries. This includes falling from one level to another and falling through a surface.

Being hit by an object ranks fourth, costing $5.61 billion and adds up to 9.6 percent of injured workers. Lastly is execution or bodily reactions. This includes bending, reaching, twisting, climbing, kneeling or sitting. This costs businesses $4.71 billion and accounts for 8 percent of injured workers.

As health care costs rise, the role of PBMs as prescription reviewers has come under fire. This is due to the cost of prescription drugs and the effects on consumers. The cost of insulin and EpiPens, for example, became a hot topic news story before the COVID pandemic, as patients began having to ration medicine when they were not able to afford rising copays.

At this point in the field, it became clear that one way many Pharmacy Benefit Managers earn their profit is through administrative fees charged for their services, through spread pricing – that is the difference between what is paid to pharmacies and the negotiated payment from health plans – and shared savings where the PBM keeps part of the rebates or discounts negotiated with drug manufacturers. This has caused concerns with PBM business practices, focusing on transparency to consumers regarding rebates and reimbursements.

MC Innovations has partnered with a nationally recognized PBM to offer the industry’s first Transparent Pharmacy Pricing program (TPP). This allows clients to better understand both drug prices and the often-undisclosed associated TPA fees. Thinking in terms of buying a car, an example that parallels the PBM situation, we often don’t know what the dealership paid for a car, making it impossible to determine the quality of any deal struck. Additionally, MCI’s PBM partner brings a new world of technology to the PBM market, which is designed to assure a higher quality of drug treatment care for the injured worker.

While OSHA does not have specific standards about working in cold environments, employers have a duty to protect workers from hazards. Employers should have safety initiatives in place prior to winter weather beginning by establishing safety standards, promoting a company culture of workplace safety, and training supervisors and workers to properly prevent, identify and treat cold-related illnesses and injuries seriously. 

Employers should create a plan to address all cold-related workplace hazards posed by sudden weather changes which can include temperature drops, snowstorms and wind advisories, among others hazards. When working in cold temperatures is unavoidable, care should be taken to reduce workers’ time exposed and physical demands to below-freezing temperatures by scheduling work for the warmest part of the days or rotating staff in and out for strenuous projects.

Clearing snow and ice from walking surfaces and putting down ice melt soon after a storm can avoid winter-weather-related slips and falls in the workplace. While outside surfaces should be monitored closely, employers should not forget indoor floors can become slippery surfaces. For any wet areas that can’t be immediately addressed, signage should be posted.