The Value and Purpose of Risk Management in Healthcare Organizations
Deployment of healthcare risk management has traditionally focused on the important role of patient safety and the reduction of medical errors that jeopardize an organization’s ability to achieve its mission and protect against financial liability. But with the expanding role of healthcare technologies, increased cybersecurity concerns, the fast pace of medical science, and the industry’s ever-changing regulatory, legal, political, and reimbursement climate, healthcare risk management has become more complex over time.

Moreover, with the value-based care movement and today’s risk-bearing models such as bundled payments and CMS’s pay for performance programs, financial risk is increasingly shifting from payers to providers and requires a broader view of risk management. In May of 2017, Moody’s Investor Services released a report highlighting the link between risk management and a hospital’s operating margins: “Maintaining high clinical quality will increasingly impact financial performance and reduce the risk of brand impairment as reimbursement moves away from a fee-for-service model and towards a greater emphasis on value and outcomes.”

For these reasons, hospitals and other healthcare systems are expanding their risk management programs from ones that are primarily reactive and promote patient safety and prevent legal exposure, to ones that are increasingly proactive and view risk through the much broader lens of the entire healthcare ecosystem.

For these reasons, hospitals and other healthcare systems are expanding their risk management programs from ones that are primarily reactive and promote patient safety and prevent legal exposure, to ones that are increasingly proactive and view risk through the much broader lens of the entire healthcare ecosystem.

While members of the industry understand the significance of expanding risk management in healthcare beyond patient safety and medical liability, the transition has been slow. According to the Healthcare Financial Management Association (HFMA), “Despite the growing importance of programs today, and the raised awareness of their importance, many healthcare providers have been slow to adopt a more sophisticated approach . . . . The current state for most providers falls between ‘basic’ and ‘evolving’ maturities for ERM programs.”

Evolution of Healthcare Enterprise Risk Management (ERM)
To expand the role of risk management across the organization, hospitals and other healthcare facilities are adopting a more holistic approach called Enterprise Risk Management. ERM includes traditional aspects of risk management including patient safety and medical liability and expands them with a “big picture” approach to risk across the organization.

Banking is the art and science of measuring and managing risk in lending and investment activities. So that bank turnout surpluses commensurate with their risk perceptions. Risk is an integral part of banking operations and risk management is aimed at enhancing the stakeholders’ value besides maintaining sound capital: managing assets and liabilities in lending investment activities.