The Benefits of Enterprise Risk Management

By David S. Jenkins and Robert J. Latino

An automated approach to organizational reliability can boost clinical and financial outcomes.


David S. Jenkins	Robert J. Latino

Patient safety and quality of care have long been recognized as guiding principles among health care organizations. This focus has intensified in recent years as health care providers have become more adept at recognizing factors that impact quality or compromise safety.

Providers face a variety of incentives and directives to further their Hippocratic commitment to minimize risk and enhance well-being. The Joint Commission, for instance, requires health care organizations to employ root-cause analysis tools to determine the source of sentinel events and "near misses" to prevent future incidents. But the requirement applies only to sentinel events and near misses, raising the question of why more effort isn't dedicated to analyzing and mitigating these hidden risks.

For its part, the Centers for Medicare & Medicaid Services (CMS) has tied financial penalties to poor clinical outcomes. In a well-publicized move in 2008, for instance, CMS announced a list of 11 "never events," preventable conditions, medical mistakes and infections acquired during a hospital stay for which it would not provide reimbursement. More recently, it has added financial incentives for organizations that demonstrate clinical quality improvement.

Patient-Centric Risk Management

While these approaches are a step in the right direction, they fall well short of genuine patient-centric, enterprise risk-management efforts aimed at creating a high-reliability organization through effective application of root-cause analysis, opportunity analysis, and failure modes and effect analysis.

Because of the varied ways in which these approaches have been applied to health care, many people have come to the conclusion that they are cumbersome, are obscure and don't always produce the desired results. A closer look at their intentions should debunk the skeptics, however. Typically a reactionary process, root-cause analysis identifies underlying factors contributing to performance variations. Failure modes and effect analysis, on the other hand, proactively identifies ways systematic processes can fail, with the intent of rectifying vulnerabilities.

Put more simply, traditional operational philosophies say that problems are meant to be fixed—implying that effort is invested after the fact—with little thought given to potential triggers. Keep in mind that rarely is there a single path to failure. The three analysis approaches, which are highly respected in other industries, can help health care organizations consider all the factors that contribute to undesirable outcomes, both financial and clinical.

The Risk Management Proof Point

Of course, as the old saying goes, the proof of the pudding is in the eating. Do emerging automated enterprise risk-management models truly produce results?

Consider one facility that used opportunity and root-cause analysis tools to quantify losses associated with an almost routine need to redraw blood in the emergency department. There was no sentinel event that prompted evaluation, just concern about a pattern. In one year the facility recorded 10,000 occasions when blood was redrawn. At an average cost for a redraw calculated at $300—including supplies, overhead, and nurse and tech time—the facility concluded it had lost about $3 million.

The opportunity analysis revealed that 80 percent of these occurrences were attributable to a single factor: blood culture contamination. With that knowledge, the facility conducted a root-cause analysis that led to measures preventing contamination and to procedures overseeing blood processing. The measures significantly reduced the need to stick patients multiple times, reducing costs and lowering risk to patient health.

Achieving "High Reliability"

The obvious benefits of reduced cost and risk have been further bolstered as The Joint Commission has begun to recognize "high reliability" health care organizations, facilities that "are doing the right things all of the time" and consistently exhibiting exceptional quality. The concept of a high-reliability organization was highlighted by the research of Karl E. Weick and Kathleen M. Sutcliffe, organizational behavior experts at the University of Michigan who studied ways organizations can develop a sense of "mindfulness" to identify ineffective processes and ignite operational changes—which, in turn, enables these organizations to "hone their abilities to act reliably and handle adversity."

The Virginia Hospital & Healthcare Association and its shared services affiliate are among those entities offering member hospitals and health systems tools and resources that help reduce operating and capital expense while improving clinical care and mitigating risk. The association is promoting an automated approach to enterprise risk management that closes gaps and minimizes vulnerabilities in organizational processes among its members. The motivation to rely on automated solutions is obvious: It's not uncommon for health care providers to lower analysis cycle time by 90 percent, garner annual savings from operational improvements by $1 million or more, and reduce equivalent consumed analysis resources (personnel) by 90 percent.

Automated root-cause, operational, and failure modes and effects analyses help health care providers adopt a comprehensive approach to their investigation of adverse events as well as routine operational practices that may camouflage inefficiencies or potential problems. The result is the genuine identification of root causes, whether they are related to staffing, training, policies, procedures or workflow, which consequently can be corrected.

Driven by economic realities that dictate reimbursements, as well as the desire to improve health care quality, providers are seeking solutions that can help them achieve top-tier performance through a broad array of financial, clinical and operational resources. Automated enterprise risk-management, supported by advanced analytical tools such as failure modes and effects, root-cause and operational analysis, is emerging as a viable quality improvement and cost-containment solution.

David Jenkins is the vice president of VHHA Services in Glen Allen, Va., the shared services affiliate of the Virginia Hospital & Healthcare Association. Robert Latino is the CEO of Reliability Center Inc. in Hopewell, Va.

This article first appeared in the on September 27, 2010 in HHN Magazine online site.

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