Risk management in healthcare is potentially more important than in any other industry. In most industries, an organization develops and implements risk management strategies to prevent and mitigate financial losses. The same can be said for healthcare but in regards to patient safety rather than financial safety. Risk management in this industry can mean the difference between life and death, which makes the stakes significantly higher.

Malpractice Crisis And Impact

The malpractice crisis was not a positive event for healthcare. At least it didn’t seem that way at the time. Hospitals were being hit with higher settlements and more plaintiff verdicts. This led to higher insurance rates and decreased availability of some specialties. These are all negatives, of course, but out of this difficult time came the advent of proactive risk management. (For more, see: Why Is Health Care So Expensive in the U.S.?)

Prior to the crisis, risk management was reactive. Problems wouldn’t be solved until they became realities. Today, it’s a much different environment, and thanks to proactive risk management, healthcare organizations are saving both capital and lives.

The key to success has been a centralized reporting system. In previous years, data wouldn’t be shared across all departments. Today, all data is shared and available, which reduces patient risks, cuts costs and improves process efficiency. It also allows for the identification of opportunities for improvement in clinical, operations and business areas. Furthermore, by taking a more collaborative approach to risk management, healthcare organizations can now use a policy system allowing it to conduct business to meet compliance standards. (For more, see: Identifying and Managing Business Risks.)

Risk Managers

Just like in any type of organization, process is imperative for sustainable success. While having a proactive risk management system in place is a positive step toward preventing and mitigating risks, it will only be effective if all employees are well-trained and know how to implement these strategies for prevention, react to the unavoidable, and who to report to with concerns. That person should be the risk manager.

A risk manager is often someone who has experience in handling risk-related issues in multiple settings. This individual should be able to identify and evaluate risks, which should then reduce the potential for injury to patients, staff members and visitors. A risk manager should also analyze current risk management strategies. If certain strategies are used for specific medical conditions and it is found these strategies tend to lead to dangerous side effects, those strategies need to be altered. That said, all employees should recognize anything that would present increased risk. (For more, see: The Evolution of Enterprise Risk Management.)

For example, a registered nurse should notice if a bed rail should be modified. But detecting risks and making adjustments to reduce those risks goes much further. They include not filling expired prescriptions (prevents abuse), following up on missing test results (to increase consultations), tracking missed appointments (to manage risks), increased communication with patients (reduce improper taking of medication), and preventing falls and immobility. 

Risk Management Ladder

The risk ladder is also known as prioritization. First, a healthcare organization must establish what could happen, how likely something is to happen, and what the severity would be. From there, it must be determined how that organization can mitigate those risks and limit their impact, and what the potential exposure of those risks would be if they were not contained. As you might have noticed, when it comes to healthcare risk management, the first priority is always safety, not finances, but finances also matter. 

Financial Risk Management

The goal here is to avoid losses and expenses that could impact the bottom line, which is the same in any financially-prioritized organization. The first step for healthcare organizations is to research industry trends so it can analyze its current risk management strategies to see if it’s ahead or behind the curve. If it’s behind the curve, making adjustments could save a significant amount of capital. And while the focus here is on the financial aspect, saved capital can ultimately lead to improved care and patient safety.

Common financial-related risk management goals for healthcare organizations include decreasing malpractice claims, reducing the number of falls, using skin protocols to prevent skin ulcers and improving communication with insurance companies to earn points and reduce overall costs.

Step-By-Step Process

All of this information at once can be confusing, so let’s take a simplified approach. If a healthcare organization were to implement a proactive risk management strategy today, it could use a simple seven-step process:

  1. Educate employees in all aspects of risk management strategies, including how to prevent and respond to risks.
  2. Keep accurate and complete documentation, which can be studied and used as a reference.
  3. Departmental coordination keeps everyone on the same page, which expedites the risk management process and adds protection against malpractice claims.
  4. Employees take steps to prevent what is avoidable.
  5. Employees react to risks that are unavoidable with great speed and accuracy.
  6. Learn how to handle complaints to reduce risks to an organization. 
  7. Know how to report an incident to reduce risks to an organization.

Healthcare risk management goes much deeper than the seven steps above, but they are a good place to start. If your healthcare organization doesn’t have an in-house risk management team, it should strongly consider creating one or look into hiring an outside firm. (For more, see: What Are Some Examples of Risk Management Techniques?)

Despite who is in charge of the risk management plan, there are certain points that should always be covered in healthcare: patient safety, mandatory federal regulations, potential medical error, existing and future policy, and legislation impact.

The Bottom Line

Risk management is important for all types of organizations, but it’s especially important in healthcare because human lives might be on the line. A good healthcare risk management plan can reduce patient health risks as well as financial and liability risks. As always, regardless of the industry, a good risk management plan needs to be developed, implemented and monitored. (For more, see: Common Examples of Management.)