The Purpose of Risk Management in Healthcare

There is no way around it: Risk management is necessary for healthcare facilities. In an industry with high stakes, small errors in healthcare can lead to significant injuries, fatalities and increased costs for providers. Risk management works to improve patient safety and care, cut costs and ultimately benefit providers’ bottom lines.

What is Risk Management for Healthcare Facilities?

Risk management is the process of assessing a facility’s health, safety and privacy risks for patients, physicians, staff and data. Once risks are assessed, facilities develop risk mitigation protocols and implement new practices consistently across the organization, Becker’s Hospital Review reported. Then, facilities monitor the effects of these changes. It is a continuous process, requiring consistent measurement of current risks and implementation of improved best practices.

When the risk management process works, patients have an overall better experience. With consistent protocols and best medical practices in place, patients are less likely to:

• Experience unnecessary tests and treatments.
• Develop common complications like infections.
• Face an extended hospitalization stay.
• Be readmitted to the hospital.
• Deal with insurance denials.

Benefits of Effective Risk Management on a Facility’s Bottom Line

When facilities have a strong risk management process, they experience fewer errors, inappropriate services, readmissions and patient complaints. This improvement in care and patient experience contributes to profit growth and improves their bottom line. For example, between January 2012 and November 2014, the Hospital Engagement Network, which works with hospitals to reduce inpatient harm and readmissions through improved care, enabled nearly 1,500 hospitals across 31 states to save $988 million from all the errors and injuries that were prevented.

The beneficial connection between risk management, patient experience and financial growth was also confirmed through a study by Accenture. The global professional services company found U.S. hospitals that provided “superior” patient experience had a 50 percent higher financial performance than providers who offered an “average” patient experience. The level of a facility’s patient experience was based on a Hospital Consumer Assessment of Health Providers and Systems score. The study also found a better bottom line was linked to superior patient experience for all types of hospitals.

Cost of Poor Risk Management

A weak risk management process can lead to negative consequences for patients including inappropriate tests and treatments, negative medical events, longer hospital stays, higher costs and more readmissions. However, patients aren’t the only ones who suffer from poor risk management. Doctors are more likely to face civil malpractice suits when risks are not properly controlled, in turn leading to high malpractice insurance costs. It is estimated that nearly $100 billion is spent on malpractice cases and defensive medicine, according to CNN.

In addition to doctors, facilities are also at risk for malpractice claims and government penalties. Specifically, Medicare reimbursements can be withheld due to preventable readmissions for patients with six common conditions: heart attacks, heart failure, hip and knee replacements, pneumonia, chronic lung disease and coronary artery bypass graft surgery. For the 2017 fiscal year, Medicare will withhold $528 million for 2,597 hospitals across the country.

Creating an Effective Risk Management Strategy

An effective risk management process for any healthcare facility must address overall patient safety and prevention of common medical errors while maintaining protocol consistency. With the rise in cyberattacks against healthcare organizations, it also must establish stronger cybersecurity practices to protect patient privacy.

According to Investopedia, to create an effective risk management process, facilities should:

• Hire or train a risk manager.
• Conduct a thorough risk assessment of the facility.
• Standardize best practices within the facility, utilizing technology to establish workflows.
• Establish how to handle patient complaints.
• Educate all employees regarding risks and new best practices.
• Create accurate documentation regarding risks, best practices and incident response.
• Focus on building a culture of safety, reporting and transparency.

Virginia Mason Medical Center in Seattle is a strong example of the benefits of creating a stronger risk management process. By integrating their risk management and patient safety departments in 2006 and focusing on a transparent culture, the hospital decreased malpractice claims approximately 50 percent and reduced professional liability premiums 62 percent within nearly 10 years, according to the National Patient Safety Foundation.

At Advanced Medical Reviews (AMR), an independent review organization (IRO), risk management is a priority in our business practices and our cybersecurity policies. As Megan Kaufman, General Manager of AMR notes, “We rely on Physicians to complete our independent medical reviews, so we are heavily invested in establishing efficient and secure workflows that support our physician reviewers and maintain the integrity of our reviews.” As actively practicing physicians, physician reviewers not only play a part in ensuring effective and appropriate care is provided to patients, but they also contribute to the same goals risk management aims to bring to healthcare.

Having a strong risk management process is just one of many components to prioritizing patient safety and well-being. The growing trend of consumerization in healthcare means facilities must focus on patients in all endeavors, including the medical case review process. Advanced Medical Reviews is equally committed to improving our processes, as we continue to abide by the highest quality of standards in our commitment to our clients and their patients.