Healthcare, like every industry, must comply with government regulations. It won’t be an exaggeration to say that some of the most stringent laws regulate the healthcare industry, and violation of those often results in serious consequences. Some of those range from crippling fines to shutting down organizations and even prison time for people found guilty of breaching the rules.
Those laws are in place for good reason. They prevent unethical practices at hospitals, research laboratories, and pharmaceutical companies. People’s lives are on the line, so organizations are often faced with the risk of violating some regulations unintentionally. It is the reason healthcare risk management has become an integral part of the industry. Risk management in healthcare comprises multiple clinical and administrative systems, processes, and reports for detecting, analyzing, alleviating, and avoiding risks.
Risk management in health care has become such a big concern that a separate department is looking after it. Numerous health tech companies have rolled out healthcare risk management software to help hospitals deal with potential legal problems before they arise. This has become commonplace as situations that give rise to legal complications could cost a hospital management anywhere between a few hundred thousand to a few million dollars in punitive fines and damages. So, taking steps to eliminate or mitigate risks has become an important part of day-to-day operations.
2. What is Risk Management in Healthcare?
As we have seen earlier, almost every industry faces legal, operational, and financial risks. But when it comes to healthcare, there is the question of patients’ lives. This added layer of risk is not only legal but also ethical. So, it becomes necessary for healthcare organizations to invest in risk management measures. But what are those exactly?? In this section, we will explore it in detail.
As mentioned earlier, hospital risk management comprises all the clinical and administrative processes to determine, analyze, mitigate or avoid risks. By implementing steps toward risk management, medical organizations go on to ensure the safety of patients and even the organization. The organization stands to protect its reputation, value, assets, and financial situation.
The origin of this practice lies in guaranteeing the safety of patients’ health. Medical science has come a long way in the last fifty years. We are discovering previously unknown medical conditions that might threaten a patient’s health in the long run. So, it became important for hospitals to follow certain protocols to avoid endangering the health of their patients. In case of violation, the hospital would have to bear the expenses of legal action. However, today the matter has gone beyond the concern of patient safety.
The last decade has seen healthcare technologies and custom healthcare software solutions permeate many aspects of clinical workflows. With this comes the concern of patient data security. Additionally, the rapid pace of medical science has meant newer considerations regarding matters of risk, such as reimbursements, evolving regulations, and even politics. This means that managing risk for healthcare organizations has become complicated. To add to the complexity, there is a growing push toward value-based reimbursements more than ever in the wake of the Covid-19 pandemic. This is where the political climate could also play a role in influencing risk analysis in healthcare. With a value-based reimbursement model, the providers would have to bear the financial risk of care, not the payers.
In this way, risk management in the healthcare industry has evolved to include more criteria, bringing up more challenges. Providers must stay one step ahead by developing newer hospital risk management plans.
3. The Purpose of Risk Management in Healthcare
As we have discussed earlier, it has become extremely important for hospitals and other healthcare organizations to adopt risk management measures. As technology plays an increasing role in the industry, it has brought newer challenges for providers to address. In this section, we will discuss the role of risk mitigation in the healthcare industry.
As the name indicates, risk management for hospitals is just that – managing the risks that might arise from day-to-day administrative and medical operations. The task has become so important that there are designated professionals called risk managers. The job of a risk manager and his or her team is to analyze various processes and determine which ones might lead to any problems for the hospital. Moreover, the team for risk mitigation also devices various protocols that doctors, nurses, radiologists, pathologists, the insurance department, and the medical billing department must adhere to.
These protocols are designed after thoroughly considering existing government regulations, and any eventuality regarding treatments, medical claims, reimbursements, out-of-pocket payments, and consultations are assessed for legal consequences. Risk managers are specifically trained to identify these scenarios and act accordingly before any of them can cause harm. Because of the evolution of the healthcare risk management process, there is improvement in patients’ safety, better clinical outcomes, and patient experience.
Risk managers work in the following departments of a medical organization –
- Readiness to handle emergencies
- Incident response
- Insurance & claims
So, it is no surprise that future risks must be evaluated thoroughly for any threat to patient health or the probability of liability. Consequently, when the potential risks have been identified, a mitigation plan specific to an organization can be formulated with the help of clinicians, administrators, and the legal team.
4. Role of Risk Management Technology
Managing risk at hospitals is done best through a consolidated and integrated healthcare system. Many medical organizations use disjointed solutions to assess risk regarding compliance, claims, clinical safety, treatments, and so on. While these help in individual capacities, they make it difficult for a cohesive workflow and an effective response since important information might get overlooked.
In light of this, it becomes necessary to have an aggregated, real-time view of all risks across the hospital. Such a bird’s eye view keeps risk managers abreast of any developments and facilitates better preparedness. That is where healthcare risk management software technology comes into play. Recent advancements in healthcare software product development have unveiled some innovative ways to streamline the process of looking at risks. With the advent of such software, the purposes of managing risks have expanded. Some of them are –
a. Smoother Compliance
Newer risk management software technologies enable healthcare organizations to manage compliance better. As mentioned earlier, such platforms help administrators to aggregate all the organizational information on risk into one centralized repository with a user-friendly interface. Moreover, some health risk management software also enables hospitals to manage and monitor every stage of a protocol implementation.
This quick access to consolidated information in one place enables the management to make informed decisions. Risk management software streamlined things like following up, reporting, and staging a response to any eventualities.
b. Reduces Overhead
Since risk management software offers a single, integrated platform for risk managers to work with, it reduces the need for multiple software solutions for individual departments. As a result, there is a reduced cost of procurement, cost of installation, integration, support, and upgrades. The best part is that a uniform software solution across the risk management workflow throughout the hospital ensures seamless electronic data exchange and, thereby, better governance.
Another advantage of avoiding the need for multiple software is security. Solutions for every integrated healthcare department to work as one system might have individual security problems that might cause breaches in the future. But a single, uniform software for risk management won’t face as big a challenge with cybersecurity as multiple integrated healthcare solutions.
c. Patient Care
A single health care risk management software prevents data silos. Moreover, data integration is prevented even if multiple solutions are integrated to work cohesively. This makes it easier for the relevant stakeholders to access that data for making impactful decisions. When it comes to patient care, a single point of storage and access to data facilitates better clinical decision. In other words, providers can improve the standard of care and the overall medical experience for the patients if they have access to the required information faster.
Furthermore, knowing things beforehand makes it possible to see the warning signs of any trouble well before it happens. This is true for disease management and even liability for the hospital. So, investing in reliable healthcare management software helps improve risk management and translates into better remote patient care.
d. Protection From Liability Due to Incidents
Working in the healthcare industry, it is natural to expect unforeseen incidents to cause harm to your patients or your hospital’s reputation. Whether it is patient fatality because of a risky procedure, a data breach because of a cyberattack, unforeseen side effects of treatments, or the outbreak of an epidemic, good risk management software enable managers to make plans to mitigate the fallout and benefit all stakeholders involved.
Such a preventable approach helps doctors and other managers respond faster and avoid legal consequences. Data aggregation into a user interface through software greatly improves risk management for healthcare.
5.Developing a Risk Management Plan
As the old saying goes – “failing to plan is planning to fail.” This holds for almost every industry, and risk management is no exception. It is more important since people’s lives are literally on the line. So, it becomes extremely important for medical risk managers to develop a risk management plan. In this section, we discuss the ways to formulate such a plan.
To come up with a plan to mitigate the ill effects of any risk, it is first necessary to know the types of risks that might occur. Furthermore, it is also important to understand the consequences of each of those risks for individual providers and the organization. After assessing the risks most likely to impact your organization, the next step is to develop appropriate responses for each scenario. All of this can be summed up in the following points –
- The situations that might occur
- The likelihood of those situations occurs
- The consequences of each of those scenarios
- How to reduce the chances of such a situation ever arising?
- How to mitigate the consequences of those situations
- Can the consequences be avoided? If yes, then in what manner?
- Out of the multiple outcomes of any situation, which are the ones that cannot be avoided?
Numerous things need to be included when developing a plan to handle risks. Let’s look at some of them –
1. Staff Training
This is one of the most important activities for managing risks in almost every industry. Medical risk management is incomplete without staff training in legal requirements and compliance. Things like yearly reviews, training new employees, and training related to specific equipment and technologies are necessary for healthcare risk management.
Regarding risk management regarding technologies, such training should also be expanded to include the usage of the latest medical technologies like advanced telehealth solutions and remote health monitoring systems. Such platforms are likely to carry legal requirements unique to them, which even experienced doctors and nurses might have little to no experience handling.
A hospital management would probably face complaints about things ranging from long wait times, the behavior of the staff, effectiveness of treatments, side effects, and other aspects of testing and scans. So, hospitals and medical organizations must ensure that all staff know how to handle complaints as part of their risk management plans. Assessing the complaints and how they have been handled is important to know what has happened and where improvements can be made.
Effective patient engagement systems go a long way in building rapport with patients and are even necessary to help manage complaints better.
Needless to point out, any plan involving the procedure to manage risks and their fallout must also involve the steps to respond to such scenarios. Doing so as part of the risk management plan in healthcare ensures that all the staff concerned know what to do if anything happens. As a result, the response is faster and more impactful.
The purpose of risk management is to reduce the potential loss for the organization from unforeseen events. This might include financial loss due to settlements arising from legal action or a loss of reputation for the organization. So, any risk management plans for hospitals must also include the protocol to be followed to alleviate the damages or losses from the anticipated risks.
This is usually carried out after the risks have been assessed and their consequences are known. The plan to reduce the damage from those risks must include legal and financial angles.
Every organization, healthcare or otherwise, would wish that they wouldn’t have to face situations involving legal problems or financial losses. But when such incidents happen, earlier planning helps the organization deal with them better. Moreover, it is very important to report the entire lifecycle of the incident. From the reasons for it happening to the nature of the incident itself, its response, and the fallout faced. This helps in the latter review of the incident and everything that happened, enabling the concerned administrators to learn from it. Doing so not only helps mount a better response in the future but also sheds light on how the incident could have been avoided.
6.Components of a Healthcare Risk Management Program
Risk management in healthcare is different from that in other industries. Since people’s lives are at stake, it becomes important to formulate a plan to carry out in case of untoward incidents. In this section, we will discuss the things that make up such a plan and the components necessary when formulating such a plan.
Every plan has components. We can think of it as a way to devise a plan. Given the nature of the healthcare industry, its unique set of considerations must be put into making plans for managing risks. Let’s look at some of those in detail –
Every plan to mitigate the consequences of a problem or avoid problems must begin by identifying the problem. It is the same for every industry, healthcare included. For a hospital, several things can go wrong, or things can be termed as risks. These include patient fatality, alleged staff negligence, claims disputes, adverse reactions to treatments, or things like pandemics, clinical accidents, etc. These are some potential incidents that can either harm patients or cause reputational and financial loss for the hospital.
So, identifying such scenarios is the first step towards managing them effectively, if or when they happen.
On a separate note, there are new things to consider with the rapid adoption of digital medical technologies. So, using platforms like practice management solutions or automated healthcare solutions for care delivery brings about new considerations regarding liability and insurance claims The phase of identifying a potential problem must take these things into account.
II. Rank the Risks
Not all risks carry the same type of consequences. In other words, not all risks are the same. For example – a wrongful death allegation is much more serious than a case of an out-of-pocket payment dispute.
The risks need to be categorized based on their likelihood and severity. While certain risks are more likely to occur, their impact might not be as serious and can be handled through arbitration. On the other hand, some risks might not be as likely, but their occurrence could have severe consequences on the hospital, certain providers, or both. When the complete nature of the risks is established, the risk managers must prioritize them based on probability and consequences. Doing so enables the management to allocate resources appropriately and deal with situations when they arise or if they should.
III. Address Events Regarding Patient Safety
Incidents that cause the death or grievous injury to the patient outside the purview of the patient’s illness or treatment are major events that attract intense legal scrutiny. Needless to point out, it is not to be unexpected at a hospital, and for risk managers, it becomes a legality and health care management criteria. They must develop the protocols to handle such situations and even conduct mock drills to train the staff.
If there is a plan in place, it helps the staff respond faster and better. Since such incidents might not always result from error or negligence, planning for such things also makes it easier from a legal standpoint. In other words, if a healthcare risk manager can pre-plan for events that result in serious harm or death to the patient, it will comply with regulations.
Any plan for handling risk in the healthcare industry must also include required measures for reporting incidents. It is required by law to document incidents such as clinical errors, medical device malfunction, improper surgery, medication errors, injuries in the workplace, or sentinel events that must be documented thoroughly, coded, and reported. Sentinel events cause death or grievous injury to patients outside the purview of their illness and treatment, as mentioned before. There is numerous healthcare incident reporting software available to streamline the reporting process.
As part of the broader integrated healthcare solutions, the health care risk management software must feature a reporting functionality as per stipulations. It is one of the essentials of being compliant with existing regulations.
V. Analyze Unconventional Probabilities of Risk
Incidents like problematic treatment, harm to patients’ health due to faulty devices, medication errors, incorrect dosage, and so on are some of the more obvious possibilities where a hospital would face risk. However, most hospitals would’ve undergone sufficient risk assessments and staff training to avoid or deal with them if they occur.
However, several smaller things might incur risks that are not immediately noticeable. These might include mistakes caused by staff exhaustion from overwork. Such a scenario mainly stems from understaffed hospitals, and Understaffed clinics with overworked care providers are bound to make mistakes. This reason is among the most common health risks that are easily missed even by experienced risk managers. Some others could include a lack of proper integration between health systems, leading to inefficient electronic data exchange. This leads to difficulty accessing patient information to help doctors make important decisions.
So, assessing such potential risks becomes important before they cause harm.
7.Enterprise Risk Management
Managing risks must be an integral part of the administrative operations at corporations. An industry as risk-prone as healthcare certainly needs an organization-wide process of handling risks before, during, and after. In this section, we explore enterprise risk management for healthcare in detail.
In simple words, enterprise risk management (ERM) consists of all the activities of planning, coordinating, and managing the workflows at an organization for the specific goal of minimizing risk to the organization. Regarding healthcare, ERM covers medical risks to patients and staff, financial risks to the hospital, reputational risks, and even liability. So, enterprise risk management in healthcare must be comprehensive and cover all the departments at a hospital. Let’s look at where healthcare ERM is applicable –
A. Clinical Safety
As the name indicates, this plan concerns clinical practices involving patient safety. Things like insufficient care, errors in medication or treatment, failure to follow safety protocols, deviance from established processes, and so forth. These risks mainly involve the everyday clinical processes followed at hospitals and clinics.
B. Human resources
Processes and policies affecting the human resources at healthcare organizations also incur risks. A medical organization’s workforce plays a large part in the overall risk management and everyday operations. Decisions that result in understaffing, high attrition rate, or productivity are likely to lead to increased risks for the organization in terms of patient safety and liability due to errors.
Additionally, if the management’s stance on human resources also results in workplace injuries, grueling schedules, and lower efficiency, it would be deemed a financial risk. To sum it up, the sphere of human resources is important for broader enterprise risk management.
C. Financial Concerns
This is perhaps the second most important matter of risk after hospital patient safety. There are numerous ways for a medical organization to incur financial risks – improper claims, litigation due to improper treatment, medication errors, faulty devices, staff negligence, violation of regulatory compliance, and so on. Depending upon the severity of the risk, the cost for the hospital could be anywhere from a few thousand dollars to even millions in damages to a plaintiff.
D. Operational Risk
This type of risk is broad and encompasses every aspect of day-to-day administrative activity. However, it is mostly restricted to the business side of a hospital, not the clinical side. Some factors that might lead to operational risks include compliance failures, credential errors, improper coding, inefficient workflows for filing out claims, following up on those claims, managing patient engagement appointments, and verifying patient eligibility.
When these incidents do happen, they usually lead to financial or legal difficulties. Operational risks make up a major part of hospital risk management processes. All the relevant staff – the doctors, nurses, receptionist, medical coding, insurance claims, and claims specialists – receive training on avoiding operational risks.
E. Technological risk
The healthcare industry has rapidly adopted digital technologies over the last decade. So, it should be no surprise that technological solutions would carry a certain degree of risk for the hospitals. Things like patient data privacy, electronic medical records, and healthcare interoperability carry risks varying from legal to operational risks to patient safety since improper medical records management might impact the quality of care.
Healthcare cloud computing is also a newer technology requiring dedicated risk analysis.
8.Ways to Manage Risk in Healthcare
So far, we have discussed the nature of risk in healthcare and how it might affect the quality of care, safety of patients, and the reputation of the medical organization. In this section, we will discuss in detail how to manage organizational risks if you’re in the healthcare industry.
The sheer scale of the healthcare industry has resulted in numerous ways organizations would face risks. So, risk management in this industry has become an integral part of operations, much like insurance. There are dedicated professionals called risk managers who work with senior administrators to ensure that the hospital and the staff prevent risks or mitigate the fallout if prevention isn’t possible.
Let’s look at some of the ways that risk managers can help reduce the chances of incidents –
1. Conducive Organizational Culture
This is perhaps the first step in establishing best practices regarding risk management. The culture at the hospital should be such that all employees feel safe to report any activity they think might be harmful. Moreover, the staff should be empowered to do so without the fear of getting fired or any other kind of reprisal. The reporting must preferably be anonymous, with a special team dedicated to assessing the reports and taking appropriate measures.
As long as there is no fear of punishment, there will be cohesion and a conducive environment for efficient risk management activities to flourish. Repeated research and studies into the highest performing and most innovative companies have revealed the existence of such a culture.
2. Staff Education
Any plan is only as good as the people implementing it. This holds across all walks of life, so educating the staff about risks is certainly one of healthcare’s best risk management tools. The staff needs to know what to do and how to respond to any event with risk of any kind. Doing so ensures that everyone is drilled and knows his or her job. This will ensure that there is no panic and the plans laid out will be followed properly.
However reliable, any healthcare risk management software will never replace good old human intuition. The training must be carried out regularly to keep everyone up-to-date on new developments. Moreover, adopting newer technologies must also be followed by adequate education to help the staff perform as required.
3. Inter-Department Communication
Risk management at large hospitals needs to cover most of the entire organization’s activities. But there are bound to various departments for different services provided. Specialties like cardiac care, pediatrics, oncology, radiology, insurance, claims, pathology, and so on would have dedicated teams of professionals and specialists. Each department would have obligations regarding compliance, risk analysis, liability, etc.
So, for any effective risk management plan to work, each department must work cohesively and communicate seamlessly. Only then can risk management issues in hospitals be sorted.
4. Work with Upper Management
A hospital, like most corporations, needs money to pay the wages and carry out all of its activities. In light of this, it should come as no surprise that there is bound to be bureaucracy and red tape, not to mention clashes with the upper echelons of the management. Risk management, by nature, is bound to create undesirable situations that the senior management rather not deal with. The creation of protocols for mitigating outcomes of risk requires full support and cooperation of all levels of the management.
In doing so, there won’t be any unnecessary hurdles or bureaucracy for risk managers to deal with, nor will there be any fear of reprisals from the upper levels.
5. Organizational Transparency
This is another vital factor in formulating a plan to manage potential risks. It is common for different departments to have a level of rivalry. Hospitals, like every organization in almost every industry, must deal with their brand of politics. These usually arise from rivalries, missed promotions, favoritism, disagreements, or a culture of fear.
Under such circumstances, it becomes difficult for risk managers to do their job satisfactorily and implement any plans in case of undesirable incidents. When there is transparency and open acceptance of liabilities, risks, and outcomes, everyone can work together better to come up with working solutions. It is a win-win for everyone – the hospital, the risk managers, the staff, and the patients.
6. Establish Priorities
This is where the previous factors weigh in – working with upper management, inter-departmental cohesion, and transparent processes across the organization. The upper management would be worried more about the finances, while the doctors would place the care process above all else, and the insurance department would focus on out-of-pocket payments and claims. So, the risk managers at a large hospital would have their work cut out for them in managing everyone’s expectations and varying priorities. So, it becomes necessary to establish where the priorities lie when developing a plan for managing risks and mitigating them.
This is necessary as any fallout from untoward incidents would affect a hospital legally and financially while also inviting bad press.
7. Periodic Assessments
It is important to assess the plans at regular intervals for their feasibility when making plans to handle unforeseen situations. This is an important measure in the overall risk management efforts since there are changing regulations, newer technologies, and evolving challenges to address. A risk management strategy for in-person care might not be viable in the case of telehealth and virtual care. Similarly, in light of the growing push towards value-driven reimbursements, the conventional mode of reimbursement might be subject to scrutiny from new government regulations.
So, it becomes necessary for risk managers to assess their plans from time to time and look for areas where those might be rendered moot. It might be possible to harness medical informatics to learn more about illnesses and their outcomes or even about administrative workflows like claim rejections and find better solutions.
9. Types of Risk Facing the Healthcare Industry
We have seen what it takes to manage and mitigate risks in the healthcare industry and the role risk managers have to play to make it happen. But while discussing how risks can impact a hospital, it is necessary to discuss the types of risks the healthcare industry faces. In this section, we explore some of them in detail.
Risk managers in the healthcare industry must consider multiple factors that might lead to undesirable incidents. Their job is to formulate plans to deal with those and control their after-effects if they occur. But it is also necessary to know the risks out there. Here are some of them –
a. Physical Violence
In recent years, there has been an increasing number of hospital incidents where individuals have committed violent acts against patients, doctors, and other staff. These individuals include distraught family members of patients, disgruntled former staff, and random people who have sought to harm. Preparing against this type of risk or trying to mitigate its fallout would involve the police. Any harm to patients within the hospital premises might attract a lawsuit from the victim or the victim’s family.
People’s data is highly valuable for people who know how to use it. In recent years, hackers and cybercriminals have gotten bolder with their attacks. When it comes to healthcare, a breach of electronic health records could jeopardize the confidential medical information of countless people. If the integrity of this data is compromised, it will affect the care they receive in the future since doctors refer to people’s medical history when making clinical decisions. So, a cyberattack targeting this data could severely impact the patients’ care. Hospitals face more serious risks, as stringent regulations protect people’s medical information. These laws mandate a certain degree of data security measures, and organizations that violate this face harsh penalties. So, any healthcare risk management software would need to feature adequate data security measures.
c. Infections at Hospitals
Hospitals routinely deal with a wide range of illnesses. Some of those might be highly infectious and even end up putting other patients and staff in harm’s way. During the height of the Covid-19 pandemic, numerous hospitals worldwide were potential hotspots for the spread of infection. The waiting rooms are perhaps some of the most likely places where a person might spread infectious diseases to other patients.
So, hospitals must sanitize operating rooms, waiting rooms, and places where patients are admitted. This process must be thorough to prevent anyone else from contracting any infection. It is estimated that such infections cost the healthcare industry in the range of billions every year. Risk managers must prioritize this, and any healthcare risk management software must collect relevant information from corresponding data points.
d. Telemedicine Risks
Telemedicine has become one of the most popular buzzwords in healthcare technology. Although the technology wasn’t new, its use was catalyzed after the pandemic, when travel restrictions forced people to stay indoors. On the one hand, it has shown enormous potential to extend access to care to remote, underserved locations. On the other hand, it has also raised the problem of the quality of care and payer reimbursements.
Some patients feel that a virtual consultation is not as effective as an in-person one and that physicians might miss out on symptoms. Furthermore, numerous insurance payers don’t consider the extent of care delivered virtually to be the same as or on par with that delivered in person. This forms two risks for hospitals – from the point of view of patients and financial risk as payers might not reimburse completely for the services delivered.
The healthcare industry comes with multiple risks due to the very nature of its operations. With the rapid adoption of technologies, new risks are bound to arise, leading to changing government regulations. So, healthcare risk managers are responsible for assessing things from multiple angles and updating their management strategies to match the evolving climate of the industry.
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Written by Riken Shah linkedin
Riken's work motto is to help healthcare providers use technological advancements to make healthcare easily accessible to all stakeholders, from providers to patients. Under his leadership and guidance, OSP Labs has successfully developed over 600 customized software solutions for 200+ healthcare clients across continents.