With skyrocketing insurance costs and ever-increasing malpractice awards, there can be no doubt that hospitals must strengthen their risk management programs. Failure to do so can lead to out-of-control losses; inability to find, much less afford, insurance coverage; loss of contracts; and plunging morale among staff. These failures also may lead to loss of the community trust, damaged reputation and jeopardized market share. This article will focus on how hospitals can successfully improve their risk management programs. More specifically, it will focus on improvements to a hospital's loss reduction systems.

As a working definition, we use "risk management" to mean a systematic effort to reduce the probability that losses will occur, consisting of three components: loss prevention; loss reduction (or mitigation); and risk financing. The value of loss prevention work is premised on the general rule that it costs less to prevent a liability claim than it does to resolve one after it has occurred. In a similar vein, the value of loss reduction work is based on the rule that it costs less to resolve a claim before it escalates into full-blown litigation. Finally, risk financing ensures that adequate resources are available if losses are unavoidable. 1

In response to recent changes in the insurance markets, most hospitals are restructuring or have already restructured their risk-financing programs. One way that hospitals have changed their risk-financing structures is to self-insure, with significant retention of financial risk (SIR) prior to triggering of reinsurance. Some hospitals have formalized the self-insurance obligation through trusts or captive insurance companies. Although this shift in risk financing structures may eliminate or reduce insurance premiums, it exerts additional pressure on the loss prevention and mitigation components of the risk management program to protect the assets of the organization which are at financial risk.

On loss prevention, most hospitals have institutionalized clinical quality processes designed to keep variation within an acceptable range and to minimize adverse events. There is a considerable amount of information available on clinical quality and physicians and other medical personnel typically have an active interest in these processes. To maintain accreditation with JCAHO and to maintain quality standards, most hospitals have been at least somewhat successful at identifying risks and preventing unexpected events.

However, not nearly as many hospitals have focused on, or have been as successful in improving, their mitigation programs - the institution's ability to manage the reaction to an adverse incident. The obstacles to success in this area are myriad and there are fewer professional resources available to assist in this process, especially as insurance companies and brokers have curtailed risk consulting services.

BACKGROUND

Dramatic increases in insurance premiums over the past several years reflect significant changes in the industry. Until recently, hospitals enjoyed the benefits of a "soft" market -- relatively low premiums, expanding services, and fierce competition between insurers at every renewal. Since 2001, however, two factors have combined to radically "harden" the market. Collapsing equity markets have essentially eliminated the ability of insurers to rely on investment income to supplement premium income and subsidize losses from insurance operations. Concomitantly, damage awards - some at catastrophic levels -- have continued to climb. 2 The confluence of these developments has resulted in unsupportable losses for liability insurers.

The impact on hospitals has been severe. Some liability insurers, such as The St. Paul, have completely withdrawn from certain lines. Others have decreased their participation significantly, and imposed more stringent underwriting standards. Those who are still willing to write coverage have pumped up their premiums at an astronomic rate. The Georgia Hospital Association, for example, estimated that during 2002 many of its members experienced rate increases of 100 percent to 300 percent, with some facilities seeing increases of a staggering 700 percent to 900 percent.

In response, many hospitals have sought alternative sources of insurance. The Ohio Hospital Association recently announced plans to invest $10 million in a new insurance carrier that it has formed, for the purpose of providing malpractice coverage to physicians and hospitals. Similarly, the West Virginia Hospital Association members, in reaction to the departures of St. Paul and PHICO, initiated a feasibility study for a hospital-owned captive insurer, which could provide stability and predictability for their hospitals.

High quality hospitals have focused attention on the effectiveness of their risk management systems, in light of the hardened insurance market. Many such hospitals have concluded that a restructuring in which the hospital retains more risk is not prudent without a corresponding effort designed to strengthen and improve the hospital's risk management program. Many of the successful hospitals encountered and overcame similar challenges to improving their mitigation programs. This article will examine some of the typical challenges faced, and how they were addressed.

PSYCHOLOGICAL BARRIERS TO INTROSPECTION ON LOSSES

Whereas most hospitals acknowledge the importance of identifying, discussing and addressing the root causes of problematic events, some naturally are reluctant to do so. Not only is the subject matter intimidating to some and abhorrent to others, the discussions are typically fraught with ego and other emotional issues relating to blame for the event. There is also concern about confidentiality and exacerbating already potentially significant legal exposure. To top it off, dealing with these issues may bring into internal conflict power brokers within the organization.

Regardless of this disinclination to air "dirty laundry," unless the reluctance to address these issues is overcome, an effective risk management program will be impaired. Conversely, facilitation by a skilled third party can be invaluable by providing senior management with the impartiality and expertise necessary to get the conversation started, and keep it on track as the self-evaluation continues. The cost associated with using an outside expert must be weighed against a failure to improve loss reduction functions in the hospital. With concerns about confidentiality and privileges, the involvement of attorneys and other professionals should be considered to create the environment necessary to foster accurate self-evaluation and improvement planning.

  • Utilize advanced facilitation and mediation techniques to help with emotionally charged discussions
  • Seek out and use third parties for their expertise and greater objectivity.

HIDDEN COSTS AND INTANGIBLE LOSSES

A critical step in evaluating the performance of the risk management program is accurately assessing the true cost of risk. Some hospitals underestimate the cost of adverse events because they have not accounted for hidden costs and intangible losses attendant to resolving such situations.

For example, time losses for administration, nursing, customer service, public relations, technical, risk management and other personnel involved in claims handling and legal proceedings can be significant, but often is hidden. A surprising amount of hospital staff resources can be expended in resolving incidents and claims when the time spent by such personnel is tracked and measured. We recommend examining incident reports and studying the process of how the organization responds to incidents - doing so can reveal the expenditure of time by personnel that is not being captured as a cost of responding to the incident.

Furthermore, intangible losses and costs from adverse events and poor risk management must not be overlooked. Although difficult to calculate, the loss of trust, reputation, and good will in the patient and physician communities, and among peers, can be among the most devastating losses. Mechanisms may be created or borrowed from other industries to assist in factoring these intangible losses into the final calculation of the cost of risk. The use of savvy marketing specialists can help organizations gain insight that is not otherwise available, as to the perceptions of the community and marketplace.

  • Analyze the hospital's incident report data to generate a complete roster of personnel involved in handling an incident and study the amount of time and effort they expended beyond their normal duties.
  • Create a methodology for factoring in the value of intangible losses when considering the cost of adverse events. Look at methodologies used by JCAHO, Leapfrog and other standards organizations and use industry standards as benchmarks.
  • Pay attention to media coverage and local and regional rankings and contextualize with claims and adverse events.

" TOP-DOWN - BOTTOM-UP" COMMITMENT TO IMPROVEMENT

Nearly all hospitals with highly effective risk management programs have a "top- down/bottom-up" commitment to quality and customer-service orientation - especially as they relate to prevention and mitigation. Commitment of the organization sustains the active participation of the many different people involved in managing risk and mitigating losses. While commitment at the board level creates the mandate to improve the risk management program, the commitment of individuals throughout the hospital is required to fully implement plans to improve prevention and mitigation functions.

Board-level commitment to quality improvement and risk management activities is critical to success. Western Professional Insurance Company describes this as a "commitment from the governing board and administration evidenced by the dedication of resources necessary to support implementation and day-to-day program activities." 3 When changing risk management philosophy and behavior, board commitment helps overcome the inertia of an organization and its affiliates. It allows the organization to prioritize the use of assets for loss prevention and loss reduction activities. Managed tactically, board commitment can be a source of patience and stamina, both of which are necessary to make positive and lasting changes to the hospital's risk management program. It can assist senior management in bridging the gap between the hospital and the independent medical staff on potentially divisive issues.

A spouse of a hospital board member was admitted on an emergency basis. 4 The board member spent a considerable amount of time in the hospital attending to his spouse. After observing the functioning of the hospital, it became the board member's mission to substantially improve and revamp the quality assurance and loss reduction functions of the hospital. He chaired the quality standards committee of the board, recruited several influential members to serve on the committee and began exerting pressure on senior management to focus attention on improving quality assurance and loss reduction functions. This level of board commitment forced the organization to overcome inertia and make the difficult choices required to create sweeping changes in risk management philosophy and practices, including the decision to change the interaction between the nursing establishment and the leadership of the independent medical staff.

Most hospitals cannot afford to wait for personal epiphany to intervene at the board level. We have seen senior management effectively use outside advisors to assist in the process of creating the commitment at the top levels of the organization. One of the most effective ways that we have observed is a high-quality presentation to the board during a retreat. Many boards have an annual or semi-annual retreat with senior management to allow for more detailed and lengthy discussions about items of strategic importance to the organization. Usually conducted away from the hospital campus, retreats offer some psychological distance from day-to-day demands and allow interested parties to behave in a somewhat more detached manner when discussing a potentially uncomfortable topic, such as losses relating to general and professional liability. Guest presentations often get the conversation started and skilled facilitation can lead to renewed commitment from the board on the issues of quality and risk management.

  • Board level support for quality and risk programs is key to ensuring the availability of the resources needed by an organization to excel in quality and risk management.
  • Senior management needs to work with the board to create the vision/mission statement for quality and risk management programs, translate the concepts into practice throughout the organization, and create performance measures that can demonstrate improvement.

Change to the risk management program requires personnel throughout the organization to change behavior and commit to the purpose for making changes. If they do not understand and believe in the risk management program principles, their behavior will reflect that and will be perceptible to patients and families. We have seen hospitals use the highly regarded guides on structuring risk management programs and still fail because the employees closest to the patients were not oriented to the new program and its basic principles.

A hospital was in the process of changing its loss reduction program to provide a greater degree of participation from the nurse managers. 5 Senior management felt that in many cases, the nurse managers already had established positive working relationships with patients and their families over comfort and care issues and were influential in the relationship between the hospital and the family in the loss mitigation context. When the plan was rolled out, nurse managers had not fully accepted the formalization of their responsibilities in the loss reduction function. Assuming that the nurse managers were "plugged in" to the system, the risk manager was frustrated repeatedly when they failed to respond to situations requiring loss reduction activity. In the risk manager's view, significant opportunities to handle relationships with patients' families were lost, leading to greater expenditures of time and resources to resolve situations. Nurse-manager acceptance did not occur until after the Chief Nursing Officer personally met with each manager to reinforce the message and address individual concerns.

The first critical point to focus on earning bottom-up commitment occurs during the design of the improvement plan. At that point, the input of all stakeholders should be considered to maximize the perception of participation. Broad-based participation from the employees during the planning stage tends to make broad-based acceptance of subsequent changes easier to achieve. Trained facilitators are highly effective in this process - especially if the interviews are designed to protect the identity of the staff member and the facilitator is perceived as being independent.

A hospital attempted to obtain the input of its workforce on certain quality issues using voluntary surveys and random interviews. 6 Their response to the voluntary surveys was poor; less than 3% of the employees turned in a completed survey. Employees approached the interviews with suspicion and concern about whether their identities would be associated with the input that they gave. Senior management terminated the project, and waited for a period of time before taking a different approach. They then engaged an outside firm to conduct anonymous interviews with the employees. Instead of relying on voluntary or random participation, the outside firm had a two-stage process where they first sought to identify the opinion leaders at all levels in the workforce as determined by their peers. They interviewed the opinion leaders in confidence and produced a wealth of information concerning risk management issues as seen from the "trenches." By targeting the opinion leaders, the hospital had an advantage in earning the bottom-up commitment of the organization regarding improvements to the risk management program.

  • Get the input of many people - especially opinion leaders - to give them the opportunity to own a piece of the changes that are to come. Use third party interviewers for confidentiality to allow people to speak without fear of reprisal.
  • Make sure that people know what the hospital expects of them regarding participation in the risk management program and that they agree to live up to the expectation.

The second key point to focus on earning bottom-up commitment occurs during implementation of the improvement plan. At that point, training and education should be carefully crafted to ensure comprehension and successful orientation. Hospitals need to ensure that key players are adequately oriented and trained on concepts, practices and specific processes. Beyond specific training for the key personnel, certain general concepts regarding risk management should be part of the orientation for all employees of the hospital. This will serve to reinforce the bottom-up commitment of the employees to the hospital's risk management program. There is a more detailed discussion of training issues later in this article.

INABILITY TO RESTRUCTURE ACROSS ORGANIZATIONAL DIVISIONS

A significant impediment to achieving meaningful improvement in risk management can be a generalized institutional unwillingness to restructure across divisional lines and through stratified hierarchies. In practical terms, this may be manifested in intra- and inter-departmental conflict, and hospital-medical staff conflict. The natural organizational resistance to change often is magnified if such change (even if demonstrably necessary) would require changes to departmental or positional responsibilities and/or reporting relationships.

As mentioned previously, "top-down, bottom-up" commitment helps with overcoming these issues. Implementing a restructure of the system for mitigation that changes departmental relationships must be done with sensitivity to existing cultures and practices. The techniques for building "bottom-up" commitment are particularly relevant to the process of orienting departments to new responsibilities in the loss reduction system.

Particular attention must be paid to engaging the medical staff, in terms of identifying issues, developing methods of addressing them, and maintaining adherence to the newly developed practices. As leaders of the care team, physicians have a special relationship with patients and their families. Beyond the critical input of physicians in the clinical quality and loss prevention system, physicians can greatly influence loss reduction efforts. Numerous articles and writings on risk management issues emphasize that cooperation from the physician can greatly impact the resolution of a loss situation, especially when the physician has an excellent relationship with the patient. 7

Working with physicians on loss reduction can be complicated when dealing with independent medical staff. Typically, independent physicians have separate risk financing arrangements (i.e. , different malpractice insurer) than the hospital. There are many opportunities for a potential plaintiff to use "divide and conquer" tactics to pit the physician against the hospital. Without coordination, one party can settle quickly with the potential plaintiff, funding the litigation "war chest" and leaving the other party in the "cross-hairs." In the long run, it would be better for the physician and the hospital to create a mitigation system before a loss situation arises so the parties know how to coordinate their efforts toward a resolution of the situation in advance of ever needing to do it. Also, involving the physicians in the clinical quality (i.e. , loss prevention) efforts builds strong unity of purpose between the hospital and physician and encourages physicians to take a proprietary interest in the operations of the hospital even as they maintain their independence.

  • An independent medical staff requires extra attention and work in designing risk management programs.
  • Find ways to involve physicians, first in loss prevention activities, and then growing to include mitigation efforts as well.

INABILITY TO MAINTAIN THE APPROPRIATE LEVEL OF ONGOING INTERACTIONS WITH PROFESSIONALS (ATTORNEYS, CLAIMS PERSONNEL, ETC.)

If early recognition and rapid response to adverse events are keys to mitigation efforts, they are even more effective when utilizing a well-planned strategy. It is widely recognized that rapid response to adverse events is more effective than a slow response or inaction. However, a rapid inappropriate response can be more damaging than no response at all. One way to ensure that a rapid response maximizes the opportunities for positive resolution of an adverse event is to gather as much information as is reasonably possible and consult with the right professionals early to plan the response.

Many hospitals fail to contact professionals early enough in the process. The reasons for such failures can range from simple inattention to a desire that the issue will go away without the involvement of outside professionals. Some risk managers are concerned about involving outside professionals because of budgetary constraints. The same principle holds true with respect to notifying claims personnel with the hospital's brokers and insurers. Often, these professionals are brought in later in the process to respond to escalation from patients and their families, as opposed to early when escalation might have been avoided.

To some extent, the terms of insurance policies will dictate when and for what types of events the insurer must be notified in order for coverage to ensue. Nearly every insurer in the general and professional liability market for hospitals prefers to know about situations earlier than later and would like to have closer relationships with their insured hospitals when it comes to handling those situations prior to the litigation stage.

Having such a relationship can benefit both parties. The hospital often is able to access resources of the insurer that can assist in analyzing the potential claim, give guidance as to the value of the potential claim, and provide advice on resolution strategies. The insurers, on the other hand, can experience firsthand how the hospital's loss reduction efforts function and either gain confidence in the hospital's risk management program or offer suggestions for improvements.

Attorneys often can add considerable value when involved in building the strategy for the response to an adverse situation. Whether in-house or outside, attorneys with considerable professional liability litigation experience are important resources for risk managers in discussing issues such as litigation-preparation strategies, confidentiality, mandatory reporting requirements, etc. Regular meetings can create continuity of communication and ensure that incidents are covered and developments in each case are monitored by the risk manager and counsel.

A hospital developed a close working relationship with one of the leading local malpractice defense attorneys. 8 The relationship blossomed when the hospital began self-insuring its professional and general liabilities. The law firm negotiated a flat monthly fee to cover weekly meetings with the risk manager and for general telephonic consultations. This was done to encourage the use of counsel early and regularly in devising strategies in response to adverse events. When an incident developed into a claim, the hospital and the firm would then use a different fee schedule for attorney hours devoted to the claim. With this strong link between risk manager and attorney, the hospital enjoyed considerable success in resolving a large number of disputes at an early stage and with very low cost.

  • Use professional resources early in the process so they are able to render advice prospectively.
  • Litigators and insurance claims representatives have knowledge and experience that can be valuable in strategizing responses to an adverse event.
  • Be creative with fee structures to remove disincentives to using professionals early in the process.

PERSONNEL ISSUES

The "rubber meets the road" when people must actually execute the risk management program. We have seen issues arise when hospitals' hiring, training, and retention programs fail to ensure that individuals with the required skills and experiences are employed. This is especially the case for key positions such as risk managers and other managers who have significant contact with patients and their families.

At a general level, every employee of the hospital is a potential loss reduction participant through the delivery of excellent customer service. Many successful hospitals take concepts and practices from the hospitality industry. These hospitals relied on the power of every employee to create an atmosphere of courtesy, respect, integrity and compassion, which in turn are critical assets when handling an incident with loss potential. Excellent customer service can create relationships with patients and their families that are marked by these attributes.

Managerial employees of the hospital must be skilled in interpersonal relations and have greater knowledge and training about risk management principles and procedures. Rapid and appropriate response to an event with potential loss consequences is a hallmark of a good loss reduction program. While there are many different ways to handle interactions with patients and their families, managers are authority figures and are often required to respond in some fashion before bringing in other risk management resources. Effective loss reduction requires specialized skills including the ability to facilitate conversations under extreme stress, negotiate emotionally charged situations, maintain honest and appropriate communication with patients and their families, and actively participate in the entire risk management processes. These skills help maintain the atmosphere of respect, trust, and compassion, which is critical to successful loss reduction activity.

Failure to ensure that individuals with the proper skill sets are employed at each level is problematic for a hospital, and this problem becomes more acute in key management positions. Advanced skills matched with advanced training regarding interpersonal relations and risk management techniques produce the best loss reduction performance. Reinforcement of these skills through the performance evaluation process further enhances the system and helps with retention of consistently high performers.

Hospitals that pay special attention to their personnel issues have workforces that are better aligned and execute better on customer service and risk management issues. When the human resources and training functions are integrated and consistently set the expectations regarding advanced interpersonal and risk management skills, we have seen overall better relations with customers and incidents of good will forming a positive foundation for resolution of potential claims, before litigation is commenced. This is not a new concept and most organizations appear to have embraced it on paper, but we have seen plenty of organizations that do not use these tools to ensure that the "right people" end up in the "right jobs."

We reviewed job descriptions from many sources and found that some employers went no further than to say that employees were expected to comply with policies regarding quality and customer service, which were described in separate documents. We were encouraged to find that many employers were more explicit in their expectations. Unfortunately, we observed that in the recruiting phase, many of these hospitals did not actively screen applicants for the specialized skills and experience to match up with the job descriptions. Then, in the performance evaluation stage, we found that less attention was paid to whether the employee was actually performing up to expectations regarding customer-service issues and loss reduction - and a far heavier emphasis was placed on technical skills and productivity.

With respect to managers, we expected to and did find that the screening process for managerial applicants was more rigorous than the same for general employees. Still, a formal method of screening for advanced interpersonal skills was not commonly utilized in the interview process. And, a common but flawed scenario involved internal candidates moving into managerial positions essentially through attrition, seniority, or superior technical ability.

We strongly recommend that hospitals examine their personnel systems to determine if they are hiring and promoting the very best candidates for every position - especially key managerial positions.

  • Clearly state the hospital's expectations regarding ability to deliver excellent customer service and participate in loss reduction activity.
  • Actively screen applicants to find those who have the highest likelihood of succeeding based on their technical, interpersonal and other skills and properly orient and train new employees regarding customer service and loss reduction activity.
  • Use performance evaluations to measure employees' participation in customer service and loss reduction activity.

TRAINING ISSUES

It is widely accepted in the industry that training and education are key components to any comprehensive risk management program. Every hospital that we have seen has training and education programs already in place regarding risk management issues. In evaluating the effectiveness of these programs, we have consistently seen issues arise in two major areas: failure to train all appropriate staff, and ineffective design of the program to achieve the desired results.

In addition to the risk manager, there are a number of potential players in the incident response who should be trained as part of the risk management team - especially those who have the closest contact with patients and patients' families. Depending on the risk management model used by the hospital, each person who is counted on to participate in the loss reduction activity needs appropriate training and education. Some organizations have taken the view that every employee is a potential player and needs at least some basic risk management training. Others focus the training on risk managers. The variations between those two extremes are many. Where we have seen problems arise is when the reach of the training program does not match up with the risk management program design and when training is not refreshed on a periodic basis to keep up with employee turnover. It is not possible for a risk management program to succeed if the people who are relied upon to perform important duties are not trained and refreshed periodically.

  • Closely analyze the appropriate employees to receive risk management training.
  • Train everyone on whom the risk management program is designed to rely.
  • Retrain periodically to cover for employee turnover and to keep employees "fresh."

Changing people's behavior, especially when under stress, requires a style of training that locks in new behavioral patterns. Risk management skills need to be utilized in stressful situations and in interpersonal contexts. Didactic, lecture-format sessions typically are insufficient to create lasting behavioral changes. To achieve the desired results, training programs must take into account the various learning styles of the employees who are receiving the training and must be rigorous enough to overcome old behaviors and habits.

Some people learn best by reading, others by watching, and others yet by doing. Training programs to teach risk management and especially loss reduction activities must include aspects of all three learning styles to ensure the broadest reach possible. We have observed that repetition of the message while varying the learning style is an extremely effective means of teaching risk management principles and procedures. Additionally, we have seen that active participation by the employees during the training through role plays and other activities is highly effective in ensuring that the desired behavior is exhibited in "live" situations. There is no substitute for the opportunity to practice new behavior in a safe environment before having to perform under pressure.

One training program that yielded very favorable results used the following structure:

  1. the trainer first defined a single risk management principle and then facilitated discussion to test for comprehension;
  2. using one of the class members, the trainer demonstrated use of the principle in a role play;
  3. the class was divided into role-playing groups and were given the opportunity to practice and critique each other while the trainer roamed and observed; and
  4. the trainer brought the groups back together and allowed the class members to share observations regarding the role play and to ask further questions.

We have also found that risk management concepts can be more readily embraced if the employees can relate the concepts to personal experience. Whereas risk prevention concepts can become very technical and clinically oriented, many of the core concepts of risk reduction are based on common-sense interpersonal issues. Establishing an atmosphere of trust and collaboration is critical to resolving conflicts between hospitals and patients without the need to resort to litigation. A "sense of betrayal often contributes to the anger that fuels litigation and the desire for punitive action." 9 Most people have been in at least one stressful situation in which they needed to quickly build trust with another person. Tapping into common experiences debunks any mystery concerning risk management activity and makes the mastery of basic loss reduction skills seem more readily achievable.

  • Pay attention to the design of the risk management program to ensure that it is effective for all different types of learning styles.
  • Give ample opportunities for students to practice desired behaviors in the training setting.

DIFFICULTIES IN DATA COLLECTION AND INTERPRETATION

Successful execution of risk management program improvements depends on access to information. Timely, relevant, and accurate data allows the hospital to take appropriate actions. Systems for collecting the needed information must be designed to ensure the collection of the right data, at the right time, from the right people. Risk managers and others must properly interpret the available data in a timely fashion to inform loss reduction as well as loss prevention strategies.

An ideal data collection system for risk management programs would draw information from various sources throughout the hospital but would remain a separate system to preserve confidentiality and applicable privileges. Certainly, medical records will be reviewed in cases of adverse medical events. Incident reports would provide a considerable amount of information. Other sources could include shift schedules, maintenance reports, personnel records, quality assurance reports, etc.

With documentation already being such a significant issue for every hospital, additional reporting requirements for risk events can create complexity and additional pressure on employees. Care must be taken in creating and implementing the risk management data collection system to anticipate training issues. Attention must be paid to the design of the information flow and retention concerning incidents and risk management. Not only is it critical for the system to provide feedback in "real time," it also must provide meaningful trending data for continuing improvement opportunities. It must support performance measures so the ultimate success of the effort can be demonstrated. Finally, collection and distribution of information must be accomplished in a way that preserves confidentiality and peer review and any other applicable privilege.

Hospitals encountering problems with risk management data collection have problems with things like employees not properly documenting incidents, having a culture of "under" inclusiveness in reporting of incidents, failure to deliver information to those who need it in a timely fashion, and inability to translate information into action plans for loss prevention.

We have seen a very successful risk management data collection system that works from a quality assurance program. The hospital developed an online quality assurance form that fed into a confidential data-base that was maintained as part of the quality assurance/peer review system. Every employee was trained to sign onto the hospital network and complete a form in the event they witnessed or were involved in an occurrence with quality implications (anything from a slip and fall in the parking lot to a sentinel event). Department managers and other supervisory personnel were further trained to identify certain quality incidents as needing the attention of risk management. The risk manager would receive an e-mail message inviting him to go to the quality assurance database and look up the report. If warranted, the risk manager would migrate the information over to a risk tracking program that would chart progress of the resolution until completed.

  • The design of the data collection system for risk management must be sensitive to issues of confidentiality and privilege issues.
  • The system must collect the right data from the right people at the right time and deliver the information to those who need it to strategize a response to adverse events.
  • Many of the employees who are the most likely to be providing data to the risk management system already have numerous other reporting responsibilities and the training on the risk management system must be clear to avoid poor documentation.
  • Data must be collated and reviewed for trending and strategic planning for loss prevention activities.

CONCLUSION

At any time, but particularly during a period in which hospitals are increasing the amount of retained financial risk of losses, it is imperative that hospitals develop and maintain effective risk management programs, especially loss reduction efforts. A successful risk reduction effort will entail an honest assessment of the performance of the existing system, the organization's comprehensive commitment to improvement - including the hospital's board and senior managers and the engagement of high-quality advisors, such as legal counsel and consultants. Finally, a hospital should be attuned to customer/patient service skills when hiring - particularly nurse managers - and must implement a through and regularly reinforced training program to enhance these interpersonal skills. A hospital that ignores the value of affirmatively and effectively handling an adverse event is simply hoping for a positive outcome, without having developed behavior and processes that would produce one. Much as no student realistically seeking good marks takes a final exam without diligent study, we suggest that no hospital expecting to limit its exposure should be similarly unprepared. Conversely, a hospital that adopts these recommendations likely will see tangible returns on its investment, in the form of losses that ultimately are prevented or reduced. U nfortunately, every hospital will experience adverse events, no matter how carefully it works to prevent their occurrence. Given the inevitability of such events, we advocate preparation for such situations, so that the hospital does not suffer devastating losses in their wake.

ABOUT THE AUTHORS
David Melloh is a partner in the Health Care Group of Dorsey & Whitney LLP and a consultant with Dorsey Health Strategies.

John Kim is the former Vice President, Corporate Affairs of Northwest Hospital & Medical Center (Seattle, Washington). He has worked with all levels of the risk management structure: daily risk management operations, clinical quality councils, education and training programs, brokers, primary insurers, self-insured trusts, offshore captives, and reinsurers. He may be reached at 206.851.4240 or jayelkay@hotmail.com.

1 See Risk Management Handbook, Yale-New Haven Hospital, Yale School of Medicine, What is Risk Management?, 2003.

2 In a recent radio interview Tom Curry, CEO of the Washington State Medical Association, stated that average cost per claim in Washington State rose by more than 140% from 2001 to 2002 while the number of claims remained fairly constant for the same period.

3 See Developing a Comprehensive Risk Management Program, Western Professional Insurance Company, 2003.

4 Circumstances related here have been altered to protect the identity of individuals and organizations.

5 Circumstances related here have been altered to protect the identity of individuals and organizations.

6 Circumstances related here have been altered to protect the identity of individuals and organizations.

7 See "Why Some Doctors get Sued More Than Others," Medical Economics, Berkley Rice, July 11, 2003, Vol. 80, Issue 13.

8 Circumstances related here have been altered to protect the identity of individuals and organizations.

9 See Monograph - Disclosure of Unanticipated Events: The Next Step in Better Communications With Patients, Part 1, American Society for Healthcare Risk Management of the American Hospital Association, May 2003 at page 5.