Enterprise risk management in healthcare organizations

Today’s healthcare organizations work in an environment that is defined by an increasing demand for services, reduced reimbursements, and unforgiving regulations. Add to this already difficult mix, reduced staffs and demanding work schedules and you have increased risk at every level of the operation. Healthcare organizations have traditionally taken an episodic approach to risk, where unfortunate events are handled as they occur. However, in today’s environment, the most successful healthcare organizations practice enterprise risk management (ERM), which focuses on a forward thinking, proactive approach to reducing risk.

ERM vs. Traditional risk management

Risk management in the healthcare setting traditionally focuses on clinical events using a silo approach; that is, primarily reactive, on an incident-by-incident basis. ERM, however, represents a fresh look at risk management, where identifying, mitigating and managing risk is a shared responsibility across the organization. Changing an organization’s approach from “after the fact” risk management to a proactive focus can be vitally important, not only for healthcare facility owners and employees, but also for healthcare patients. Ultimately, this new approach enables organizations to treat risks as opportunities to improve operations.

Consider the example of a patient injury: In a traditional risk management model, a patient injury is usually viewed as falling within the domain of clinical services or, possibly, housekeeping services.

However, a patient injury has the potential to produce serious repercussions that affect every area of the business. It may result in a costly claim based on neglect or quality of care — which could negatively impact the company’s reputation and customer satisfaction — which could, in turn, affect census — which certainly would affect company finances — which could, in turn, affect staffing levels — which are impacted by workplace rules and mandated regulations.

This example clearly demonstrates the interconnectivity of risk among every area of business operations, and the reason ERM emphasizes a holistic, organization-wide approach that looks at the synergistic effects of risk.

 ERM — A new and improved approach

The foundational building blocks of ERM are an all-inclusive, company-wide commitment to treat risk management as a shared responsibility with the following goals:

• To advance safe and trusted healthcare
• To optimize organizational readiness to effectively manage uncertainty
• To utilize data to identify and prioritize risks
• To encourage multi-disciplinary accountability

A well-developed ERM plan is driven by the support and engagement of management at the highest levels of the organization, and includes interdisciplinary committees incorporating every key department. However, no two healthcare organizations are exactly the same, so these teams may be implemented differently depending on the size and structure of the organization. This element of adaptability is one of the reasons that ERM is such an effective and productive approach to managing risk.

Committees employ a variety of tools in “risk and opportunity identification.” These include traditional methods such as adverse event reports, consultant reports and inspections, staff meetings and department reports, peer review and quality outcome data. ERM also includes risk evaluation methods which are less traditional, but particularly valuable and effective as forward-looking tools and for their ability to cultivate collaboration and teamwork. These methods include brainstorming, focus groups, interviews, and patient satisfaction surveys.

Decision analysis and planning the path forward

Where traditional risk management programs focus on value protection and risk mitigation, ERM turns this model around. Using data and evaluation tools, and relying on insights and input by employees, ERM places equal emphasis on value creation. In this model, an engaged and focused, cross-functional team identifies opportunities to change processes, which contributes significant value to the organization by reducing risk, improving patient and job safety and satisfaction, and enhancing efficiency and service quality.

Decisions about risks are evaluated and analyzed for benefits (rewards/value) and disadvantages (costs/risks). In practice, ERM produces options and alternatives and importantly reliably informed choices for planning a path forward.

Finally, ongoing communication throughout the organization — on the purpose, progress and results of the ERM process — serves the primary goal and principle of ERM: to cultivate an environment of shared responsibility and accountability for risk management, while helping to cultivate a stronger sense of teamwork and collaboration.

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