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The Value of Risk Management. The Stanford Experience. Jeff Driver Chief Executive Officer The Risk Authority of the Stanford University Medical Network. Objectives:. - PowerPoint PPT Presentation
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The Value of Risk Management The Stanford Experience
Jeff DriverChief Executive OfficerThe Risk Authority of the Stanford University Medical Network
Objectives:Describe what is meant by strategic risk management, value-driven enterprise clinical risk management, and return on risk strategy
Learn a financially successful, translatable, and scalable approach to managing clinical risk through the Stanford example
Identify risk management programmatic outcome measures and expected five year results based on the Stanford Clinical VDERM model
2
Agenda:Context: About Stanford University Medical Center
History of Risk Management
Introduction to Value-Driven Risk Management at Stanford
Financial and Other Outcomes
Clinical Risk Management
Concluding Remarks
CR
CRM
FIN
CNTX
VDRM
3
HISTORY
Context: The Stanford University Medical Network
CNTX
4
Context: Risk Management ServicesCNTX
5
Risk Management Services
Agenda:Context: About Stanford University Medical Center
History of Risk Management
Introduction to Value-Driven Risk Management at Stanford
Financial and Other Outcomes
Clinical Risk Management
Concluding Remarks
CR
CRM
FIN
CNTX
VDRM
6
HISTORY
The History of Risk Management
The Evolution of Risk Management
1700sModern theory of
probability
1955-1964“Modern” Risk
Management, self-protection, insurance
1980sMedical malpractice
crisis; high premiums, partial coverage
1985 - COSO
1990sRisk Management
becomes a “corporate affair”
1999 IOM report; focus on patient safety
2008National HealthCare
Quality ReportRisk Management
profession is in status-quo mode
7
Early Risk Management
Traditional Risk Management
Enterprise Risk Management
2013AIG Study
“Clear need to improve patient
safety to provide an ROI”
HISTORY
2004COSO publishes Enterprise Risk Management
Integrated Framework
2009ISO 31000
standards released
2002Sarbanes-Oxley Act & National Patient Safety Goals (The Joint Commission)
The History of Risk Management
8
The New Religion of Risk Management, Peter L. Bernstein, Harvard Business Review, March/April (1996): 47-51
Early Risk Management
Early Risk Management
The theory of probability, an instrument for risk management, began in 1654 with a game of dice.
All the risk-management tools we employ today stem from the developments between 1654 and 1754.
HISTORY
The History of Risk Management
9
Early Risk Management
Traditional Risk Management (TRM)
HISTORY
Risk Management Handbook for Healthcare Organizations: The Essentials , R. Carrroll, P. Nakamura, 5th Edition, Volume 1 , 2006
Traditional Risk Management focuses on preventing loss through insurance and claims.
Traditional Risk Management offers a fragmented view that can be reactive and not focused on business vision and strategy.
The History of Risk Management
10
Early Risk Management
Enterprise Risk Management (ERM)
In 1992, in response to financial fraud in the 1980s, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) created a process for examining risk across an entire organization to protect, create shareholder value and make good decisions.*
Regulations shaped the COSO process to allow audits, rather than focus on actions to mitigate risk for all losses.**
Healthcare has been slow in adopting ERM and there has been little improvement in patient safety. According to a US government report, 44% of all 2008 adverse events were preventable and 1 in 7 experienced an adverse event.***
*Enterprise Risk Management Handbook For Healthcare Entities, R. Carroll, P. Nakamura, R. Rose, 2nd Edition, 2013
HISTORY
**The End of Enterprise Risk Management, D. Martin, M. Power, AEI-Brookings Joint Center for Regulatory Studies, 2007 *** Adverse Events in Hospitals: National Incidence Among Medicare Beneficiaries, OIG 2010
The History of Risk Management
11
*Rethinking Strategic Risk, H. Ristuccia, Risk Management, April 10, 2013
The use of data to make good, consistent and transparent decisions is critical to managing future strategic risk.*
Pharmaceutical and energy industries have been successful using this. Some examples are:
Chevron made $78 billion more**SmithKline Beecham tripled their return from 5:1 to 15:1***
HISTORY
Data Analysis for Decision Making
**Chevron Overcomes the Biggest Bias of All, C. Spetzler, SDG White Paper 2011
***How Smithkline Beecham Makes Better Resource Allocation Decisions, P. Sharpe, T. Keelin, Harvard Business Review, March – April 1998
Agenda:Context: About Stanford University Medical Center
History of Risk Management
Introduction to Value-Driven Risk Management at Stanford
Financial and Other Outcomes
Clinical Risk Management
Concluding RemarksCR
CRM
FIN
CNTX
VDRM
12
HISTORY
Introduction to Value-Driven Clinical Risk Management at Stanford
13
BEST BETTER BASELINE
WORSE“The Merely
Useless”
WORST
“The Worse Than
Useless”
• Firm builds quantitative methods
• Inputs are validated with proven statistical methods
• Additional empirical measurements are used where optimal
• Portfolio analysis of risk/return is used
• Quantitative methods are used utilizing some proven components
• Scope of risk management expands to include more forms of risk
• Management’s intuition drives risk assessment and mitigation strategies
• Formal risk management is not attempted
• Detailed “soft” or “scoring” methods are used or misapplied quantitative methods are used but not counted on by management
• May be no worse that baseline except it wastes time and money
• Ineffective methods used with great confidence, even though they add error to evaluation
• Much effort spent on seemingly sophisticated methods but no objective, measurable evidence that they improve on intuition
• Methods cause erroneous decisions to be taken that would not have otherwise been made
Risk Management Success/Failure Spectrum
Migration from Traditional Risk Management to Value-Driven Risk Management
VDRM
14
Hubbard, Douglas: The Failure of Risk Management, 2009
Building on Traditional and Enterprise Risk Management
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Early Risk ManagementVDERM uses data and decision analysis in the risk process.
VDRM
FINFinancial and
OtherOutcomes
C&LClaims and Litigation
Management
CRM
Clinical Risk Management
Stanford’s Formula for Value-Driven Risk Management
VDRM
16
5yrs/49% $
Agenda:Context: About Stanford University Medical Center
History of Risk Management
Introduction to Value-Driven Risk Management at Stanford
Financial and Other Outcomes
Clinical Risk Management
Concluding Remarks
CR
CRM
FIN
CNTX
VDRM
17
HISTORY
Financial and Other Outcomes
FIN
18
Risk Management OutcomesFIN
19
Metric DesiredResult
Observed Result
Comment
Reporting Pattern Faster Inconclusive Average incident to report lag is one year
Frequency Lower Lower Annual reported claims dropped 29%
Closing Pattern Faster Inconclusive Small number of closed claims
Severity Lower Inconclusive Some large post-PEARL closed claims
Overall Cost Lower Lower 49% reduction over 5 years
* Reinvestments in Loss Control Programs vs. Premium Rebates and Holidays
PEARL vs. University of Michigan
Insurance Premium Compared to Average
Insurance Premium (FN1)
Premium Compared to Hospital Benchmark (FN2)
Stanford Hospital 20% lower 11% lowerStanford Clinics 18% lowerLucile Packard Children’s Hospital at Stanford 13% lower 27% lowerLucile Packard Clinics 32% lower
Aon Premium Benchmarking Study - 2012
FIN Premium Benchmarks
(FN1) Average insurance premium estimates were calculated using the data provided by SUMC and informal indications provided by two carriers per year.
(FN2) The Aon benchmark premiums are calculated using the Aon Hospital Professional Liability and Physician Professional Liability Benchmark Analysis.
20
Premium Benchmarking Study Primary ProgramSeven Year Average
Agenda:Context: About Stanford University Medical Center
History of Risk Management
Introduction to Value-Driven Risk Management at Stanford
Financial and Other Outcomes
Clinical Risk Management
Concluding Remarks
CR
CRM
FIN
CNTX
VDRM
21
HISTORY
Value Driven Clinical Risk Management =International Organization for Standardization ISO 31000 Risk Management Standards + Modern Decision Analysis Science
CRM
22
Source: ISO 31000:2009 Relationships between the risk management principles, framework and process.
• Risk IdentificationIdentify sources of risk, areas of impact and consequences.
• Risk AnalysisUnderstanding the risk and whether it needs to be fully evaluated.
• Risk EvaluationCompare the level of risk established in the previous stage with the risk tolerance criteria established.
• Risk TreatmentModification of risk and decision on treatment option.
23
Platform for CRM: ISO 31000CRM
24
Platform for CRM: SimplifiedCRM
Five Critical Steps
CRM Platform for CRM - Simplified
25
Value Protected & Value Created
Figure out what types of future events might prevent or slow the achievement of objectives or enhance the prospects of success.
The coding of medical malpractice claims is the center of
our patient safety model.
CODING
Identify: The Model MethodologyCRM
26
Identify: Clinical Coding
Clinical Coding
Focuses on what needs to be fixed• Technical: human factors,
skills, cognitive issues• Communication: provider
to provider, provider
Prioritizes where to focus resources• Surgery, OB, ED, nursing,
medication issues• Frequency and volume,
clinical severity, financial losses
Identifies who is involved• Physicians, nurses,
residents, fellows, technicians, etc.
Supports resourcing solutions; how can we make it happenLeadership buy-in, financial investment in patient safety initiatives
CRM
27
What (is alleged to have) happened delayed dx, missed dx, wrong dx, failure to dx skill based, retained FB, pt management post-op improper placement of C-line, improper choice of
tx pregnancy, labor/fetal distress, delivery falls, enviro hazards, assaults (non-employee)
Why it (might have) happened narrow dx focus, no consults, patient monitoring scheduling, reporting results, follow up
monitoring med record, informed consent, patient education improper use of equip, inexperience, poor
technique
Who was the provider/service(s) involved
Emergency Service Radiology, Pathology, Nursing Medicine (Gen Med, Cardio/Hem
Onc/Hospitalist…) Surgery (Gen Surg, Bariatric/Cardiac/Urology…) OB/GYN, Orthopedics, Neurosurgery
Responsible Service (1 primary + secondary)
Primary and secondary contributors Includes all providers in a specialty
CRNA in Anesthesiology NP in OB
Contributing Factors (RN review, multiple)
Clinical judgment Clinical systems Communication Technical skill
Major Allegation (based on complaint, 1-1 ratio)
Diagnosis-related events Surgical events (non-anesthesia) Medical treatment events Obstetrical events Safety & security events
Identify: Using an Accident Causation TaxonomyCRM
28
Five Critical Steps
CRM Platform for CRM - Simplified
29
Determine which risks are most critical and how individual risks are related to each other. Value Protected
& Value Created
CRM Assess: Sample Risk Register
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IMPA
CT
LIKELIHOOD
CRM Assess: Sample Heat Map
31
Five Critical Steps
CRM Platform for CRM - Simplified
32
Evaluate outcomes and decide which risks need to be addressed
Value Protected & Value Created
Value andRisk Map
ProbabilityAssessments
Quantified ValueModel
Waterfallof Value
Tornado Diagram
Strategic DecisionInsights
Dashboards/Monitoring
A B C D E F
1
2
3
4
5
uu uuuuu
uuuuu uu
••
QuantifiedHeat Maps
VA
LU
E C
RE
AT
ION VALUE PROTECTION
Utilizing decision analysis methodologies throughout the risk evaluative process expands the value proposition of risk programs.
Evaluate: Sampling of Decision Analysis ToolsCRM
33
Five Critical Steps
CRM Platform for CRM - Simplified
34
This is where the action is. Develop and follow steps to reduce risks at the top of your list as well as steps to increase potential benefits.
Value Protected & Value Created
35
CRM Risk Assessment and Mitigation
Stanford University Medical Center Risk Mitigation Strategies in Process
Factors Obstetrics Neurosurgery Orthopedics SHC Nursing LPCH Nursing
Clinical Judgment(38%)
6 interventions 2 interventions 2 interventions 4 interventions 2 interventions
Technical Skill(26%)
3 interventions 4 interventions 2 interventions 4 interventions 4 interventions
Communication(14%)
4 interventions 5 interventions 3 interventions 5 interventions 6 interventions
Administration/ System issues(12%)
2 interventions 5 interventions 2 interventions
Five Critical Steps
CRM Platform for CRM - Simplified
36
Determine if your risk management process has been effective. Monitor the timeliness and effectiveness of the various outlined steps to reduce risks and boost gains.
Value Protected & Value Created
37
Agenda:Context: About Stanford University Medical Center
History of Risk Management
Introduction to Value-Driven Risk Management at Stanford
Financial and Other Outcomes
Clinical Risk Management
Concluding Remarks
CR
CRM
FIN
CNTX
VDRM
38
HISTORY
FINFinancial and
OtherOutcomes
C&LClaims and Litigation
Management
CRM
Clinical Risk Management
Stanford’s Formula for Value-Driven Risk Management
VDRM
39
5yrs/49% $
40
The Value of Risk Management
Concluding Remarks