Healthcare Education

The Importance of Risk Management in Healthcare

October 19, 2021

The Importance of Risk Management in Healthcare

Strong risk management strategies can help healthcare facilities operate better while also improving the care they provide to their patients.

Risk management involves identifying worst-case scenarios – emergency situations, equipment issues, and other factors that could harm patients, lead to litigation, or negatively impact an organization's finances. Solutions include crafting strategies to handle risks, plus putting in place contingency plans for potential catastrophes, which can range from natural disasters to disease outbreaks to cyberattacks.

"Risk management is important for all types of organizations, but it’s especially important in healthcare because human lives are on the line," Dan Moskowitz reported in Investopedia. "A good healthcare risk management plan can reduce patient health risks, as well as financial and liability risks."

Risks in technology and elsewhere

Risk management is all about being proactive. According to the Journal of Epidemiology and Preventive Medicine, healthcare risk management involves five basic steps:

  • Establish context
  • Identify risks
  • Analyze risks
  • Evaluate risks
  • Treat/manage risks

Avoiding risks can also just be a matter of common sense, such as having healthcare workers regularly use hand sanitizer, installing color-coded signs to help patients easily find their way around a facility, and ensuring healthcare providers should stay informed about the latest regulations and changes.

With the rise of electronic medical records and telemedicine, however, come new risks that can affect a healthcare facility as much as disease.

"Sensitive data can be compromised and manipulated by digital criminals, and inadequate cleansing or sterilization can open up patients to new infections and ailments," noted Maryville University (MU), a private college located outside St. Louis, Missouri.

Risk management strategies specifically designed for information technology (IT) can protect electronic patient information throughout their treatment and ensure a facility complies with the Health Insurance Portability and Accountability Act (HIPAA), which addresses, in part, the protection of private health data. Strategies can include "only giving certain employees access to specific digital files or requiring multiple layers of authentication and security to access a digital hospital network," MU suggested.

"Risk managers may also consider purchasing billing insurance that can protect an organization from the financial repercussions of billing errors due to (electronic health record) system failures," explained the University of Illinois Chicago (UIC).

Multi-level response

Identifying and managing risks requires input and action from many levels in an organization.

"Effective risk management is more than just being aware of these threats; it entails developing, implementing, and practicing policies and protocols to address them," MU noted. "This requires a cooperative effort from healthcare leaders, practitioners, and other staff members to ensure all risks are acknowledged and accounted for."

Every employee also should undergo training about risk management principles, which will help them reduce risks in their own jobs, according to UIC. Training includes providing information about healthcare privacy and security, which the university noted ensures "that no malpractice occurs, which could lead to lawsuits." While mistakes can and do happen in healthcare, MU noted, "adequate preparation will help staff address those that do."

"A registered nurse should notice if a bed rail should be modified," Moskowitz said. "But employees, like the nurse in this example, should also know who to report to with their concerns. That person is the risk manager."

UIC suggests that risk managers also put in place an organization-wide reporting system so employees can "quickly and accurately report any medical mishaps, risks or disastrous events."

Benefits of risk management

By keeping an eye out for potential risks and then making changes to prevent them, employees can avoid disasters. This, in turn, makes the world safer for patients.

"Once risk management strategies are put into place, hospitals, long-term care facilities, and other healthcare organizations can minimize the potential for loss," Moskowitz said.

Healthcare facilities and risk managers should always prioritize patient safety over everything, he added, as a "lack of safety can lead to injury and even death, which, in turn, can result in lawsuits and compensatory damages." Aside from the human cost, these problems can result in significant financial problems for an organization.

"A single malpractice suit could cost a hospital millions of dollars," MU said. "A small clerical error or treatment oversight could lead to a decline in the health of a patient and even death. And the lack of procedures in place to effectively address and mitigate these risks can lead to larger problems in the future.

“Healthcare risk management enables professionals to anticipate and address conflicts, now and in the future."

Advanced Medical Reviews is an independent medical review organization, which believes in providing quality healthcare, and is a leader in the integration of technology and client services. To find out more about AMR’s commitment to clients and patients, contact us today. 

The Importance of Risk Management in Healthcare