HEALTHCARE ORGANIZATIONS NEED TO RECOGNIZE REPUTATIONAL RISKS AND BUILD A PROCESS FOR MITIGATING THEM

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Best Risk Management Strategies for Your Medical Practice

By Nir Kossovsky, MD, CEO of Steel City Re

Instead of reaping the reputational rewards and laurels for its heroic performances during the COVID pandemic, healthcare organizations are being slammed by crises.   Are they all unrelated or are they, in fact, interconnected? Employee morale, retaining and attracting talent, professional employee unionization, conspiracy theories that undermine community health, physical security of facilities, and exorbitant jury verdicts in med mal cases – these are all part of one large, systemic problem: institutional reputation.

The ultimate strategic cure is a robust, enterprise-wide reputation risk management process that leads to reputational resilience.

Many healthcare organizations continue to view reputation as a marketing or communications issue. Marketers have created mission statements of patient primacy, published testimonials of miraculous recoveries, and flooded media with images of joy, care, and comfort. 

Stakeholders – from employees to community members to conspiracy theorists – aren’t buying it.

Every time a patient gets an incomprehensible bill, every time a nurse feels abused or inadequately protected, every time a continuing education program emphasizes billing rather than quality of care – it disappoints stakeholders and undermines reputation.

Reputation is based on the degree to which expectations align with real world experience. When you set expectations high and fail to meet them, stakeholders get angry and tangible economic impacts follow. When your reputation is based on a series of failed expectations, all future statements about projected performance, goals and values become subject to what’s known in the financial world as a “liar’s discount.”

Is it any wonder that health systems around the country are suffering staff shortages and an increase in union organizing activity? Is it any wonder that 78% of the public does not trust hospital executives, according to a new study

Is it any wonder that a sizable number of people believe unsourced information they read on social media over scientific evidence offered by world-class medical institutions? Is it any wonder jury verdicts are going through the roof, along with malpractice insurance premiums? And with margins already under pressure, is it any wonder that punitive Medicare reimbursement cutbacks accelerate the financial death spiral?

I’ll say it again.  All these things are related. They are all a product of an industry-wide reputational deficit.

Organizations leaving this reputational crisis unchecked may find themselves financially weakened to the point that they, and not their competitors, succumb to the industry’s relentless drive for consolidation – a trend that has continued despite the pandemic. 

It should be evident that the time for thinking about reputation risk purely as a marketing challenge has long passed.  For some, it may be too late, but for those with the internal political will to survive, there is a way forward.

A healthcare organization’s chief legal officer should lead the development of the risk management and governance framework, overseeing enterprise-wide intelligence gathering and reporting, and ensuring continuing process fidelity.

Reputation risk can be managed by centralizing enterprise-wide intelligence on stakeholders across corporate silos; adapting corporate operations to optimally meet inherently conflicted expectations; managing stakeholder expectations to operational realities; and building capacity to absorb losses from those left disappointed.

Management needs to understand clearly the expectations of each stakeholder group, starting with employees, and either ensure it has processes in place to meet them – or manage expectations to meet reality. And it needs to calculate through every silo and among every stakeholder group what the cost will be of disappointed stakeholders.

Legal counsel, risk managers, CFOs and marketers need to work together, with a common understanding that issues like staffing and employee morale do not exist in silos – they represent reputational issues with potential impacts on the entire enterprise. Human Resources cannot simply address employee complaints and engage in more aggressive recruiting but, operating in a vacuum, fail to recognize the potential political or regulatory implications of the current situation. Government Relations, left in its own silo, may also not recognize the potential political damage until it has already reached a boiling point. Most CFOs will probably be focused on income and expenses and won’t have reputational issues on their radar screens until cash flows are already being affected.

While today’s reputational crises may be based on staffing and employee anger, tomorrow, it may be related to financial or regulatory issues, or quality of care. Stakeholders – whether employees or patients or government officials or credit rating agencies – are going to be asking themselves: “Is this situation an anomaly, a short-term blip for an otherwise well-run organization, or is it a symptom of systemic failures?”

That’s where marketing and communications come in. Once a strong reputation risk management system is in place, risk managers or  Counsel can then engage outside underwriters or other trusted, objective sources to validate that process using sound, proven metrics. And marketers will then have a strong story to tell, building a reputation based on good governance, strong operational controls and meeting the expectations of stakeholders.

Organizations with strong reputations, those that meet or exceeded their stakeholders’ expectations during times of crisis, are going to be preferred employers and preferred providers. Their care will be better and their payment for services will include bonuses. Those that have failed to anticipate those expectations are going to have a challenging road ahead.

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Dr. Nir Kossovsky, MD, is CEO of Steel City Re, the exclusive provider of parametric reputation risk insurances and advisory services using a risk management framework informed by behavioral economics.

Formerly a practicing physician, Kossovsky served on the FDA’s medical device advisory panels and was a Trustee of Excela Health Systems, a tenured faculty member of the UCLA School of Medicine, the Chief of UCLA Medical Center’s Autopsy Service and a Deputy Coroner in Los Angeles County.

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