By Lee T. Stevenson
Inflation, rising interest rates, rising costs of litigation, supply-chain squeezes, a pandemic, and labor shortages have all significantly stressed healthcare organizations’ financial plans. The deployment of a well-coordinated proactive risk management program across the entire healthcare ecosystem has never been more important. Traditionally, risk managers in healthcare organizations have focused on patient safety, eliminating medical errors and insurance procurement. But risk managers can further aid their organizations by capturing, organizing and reporting on risk management goals, objectives and results – driving awareness of key initiatives and ultimately providing results. In order to move the business forward, healthcare organizations need to consider investing in ways to support risk managers as a means of investing in their own financial planning.
Below are some crucial workflows for effective risk management – and where executives and boards can better support the department.
Cashflow and Balance Sheet Protection
Is the procurement of insurance aligned with the organization’s objectives?
Healthcare companies need well-rounded insurance to protect their investments, which means that companies need to make sure risk managers are working with the best possible tools and analytics in order to see the big picture, like when viewing the cashflow and balance sheet. Traditionally, viewing data holistically has meant that risk managers were working manually in spreadsheets. These days, new platforms allow data and analytics to be viewed fully and accurately, so that these assets can be evaluated and protected. Now risk executives can easily determine the right balance of laying off risk to an insurer versus taking on large deductibles and retentions, captive utilization, or electing to self-insure certain risks.
Risk Bearing Capacity (RBC)
Is the organization using metrics to gauge risk appetite?
As healthcare needs change, so do the needs of the organization. The type of risk they are willing to take on may also change – understanding this is critically important for risk managers. The most common basis for calculation is how much risk an organization can bear before becoming insolvent. Healthcare companies need to communicate and provide risk managers with new tools and technology so they can measure and synchronize risk bearing capacity across the organization, driving discipline about the ways in which risk is taken on and managed.
Profit and Loss (P&L)
How engaged are you and senior leadership with insurance renewals?
The cost of insurance has skyrocketed over the past couple of years. In order for risk managers to differentiate the organization’s risk, they need to have an active role in the organization’s insurance renewals. Nobody can tell an organization’s story like the risk managers, but they need organized data and analytics to support the renewal submission. Statistics indicate that those that take an active role in renewals can differentiate their risk ultimately receive better pricing. Insurance companies want to know that your organization takes risk seriously and that it’s aligned around mitigating risk. Healthcare organizations can ensure that their risk managers are set up for success by allowing access and insights to senior leadership’s meetings and discussions.
Insurance spend is usually comprised of self-funded losses versus insurance premiums. Therefore, developing a robust loss prevention/reduction plan has the potential to drive the biggest savings.
Risk Management Technology
How modern and useful is your current technology?
Sound risk management includes the use of technology to synchronize mitigation efforts while leveraging data and analytics to support decision making and prioritization. Healthcare companies need to invest in a modern platform for risk managers that provides automated data entry with effortless report generation. A risk manager’s time is too valuable to the company to spend it on data entry and re-creating reports. Look for a system that can be used as the single system of record. A good system will save risk managers considerable time, enhance overall risk management and drive overall total cost of risk down, allowing healthcare companies to focus on how they can best support their clients and patients.
The healthcare environment changes quickly and frequently, which can be jarring for any business that’s ill prepared for potential risks. By investing in streamlined technology solutions to support risk executives businesses will be investing in financial security for years to come.
Lee T. Stevenson is President of LineSlip Solutions, a SaaS provider that automatically converts commercial insurance documents into insurance intelligence.