Why is Risk Management Important in Healthcare?

Everything you need to know about Healthcare Risk Management.

Health insurance is one of the most popular types of insurance available. It is a coverage type that pays for medical, surgical, dental and prescription expenses incurred by the policyholder. Health insurance either pays the provider directly or reimburses you for the expenses incurred in case of an injury or illness. It is a part of the healthcare system that involves a high level of risk.

Risk is anything that can result from a loss or an unexpected circumstance. It exists in almost all kinds of industries, even in healthcare. Although risk cannot be avoided, it can be managed so that it is minimized as much as possible. This is done so with risk management. But how does risk management work in healthcare?

What is Risk Management in Healthcare?

Risk management basically analyzes all the practices that are in place for the risks they possess. The risk factors are identified after which procedures are implemented to address those risks and make sure that they are minimized.

Since healthcare is a very intense industry and one little change can become a matter of life and death, it is essential to make sure the level of risk in this industry is minimized. Which is why it is important for an industry like healthcare to have risk management.

Some potential examples of risks in healthcare include faulty equipment, medical malpractice and procedures and other hazards. That is why it is important to make sure these risks are identified and addressed so that people remain safe and secure and the costs do not increase.

Why would the costs increase, you ask?

In case of faulty equipment, it is possible that something can go extremely wrong. Equipment can stop working or display inaccurate results during surgery. This could lead to hospitals or even doctors being slapped with a lawsuit which will drain their pockets. Moreover, the cost of repairing these equipment may also be high. In case of medical malpractice and negligence, doctors can be sued for medical negligence resulting in high expenses and so on. However, once hospitals put risk management strategies in place, there are significantly less chances for potential losses and damages.

Why is Risk Management Important in Healthcare?

Although it is impossible to calculate which risks are higher than others, a trained and experienced risk manager in the healthcare industry will be able to spot the signs and immediately get to mitigating those risks.

If an organization does not have a risk manager, or if a risk manager is not doing their job properly, the consequences can be costly for the entire organization. For organizations that do not have proper risk management or risk assessment, the organization is likely to face more liability and lead to patients suffering. This can ruin the reputation of an organization.

Moreover, the workplace quality of healthcare staff can also decrease resulting in low morale and poor output. Ultimately, these risks could lead to severe financial loss among other losses such as bad reputation, etc.

That is why the importance of risk management is stressed upon. Especially in healthcare where the patient’s welfare, treatment of the healthcare staff, standard of care and quality of care given is of utmost priority. The reputation of an organization operating in the healthcare industry is one of the most important factors as well. If an organization has a bad reputation, no patient is likely to avail its services.

These are some of the factors that influence risk management in healthcare.

Before the malpractice crisis hit the healthcare industry, risk management did not exist. Problems would be ignored until they become costly. However, things have changed since then. Ever since the malpractice premiums skyrocketed, many doctors have been unwilling to practice medicine. The increase in premiums was due to a rise in healthcare costs and a drop in the availability of healthcare.

However, thanks to proactive risk management, healthcare organizations are now focusing on employing more risk managers and saving costs as well as lives much better.

The best way to be successful in establishing good risk management is to have a centralized reporting system. Data would not be shared across departments before, leading to a lack of communication and increased risks. However, a centralized reporting system led to better care as patient risks were reduced, costs were cut and the process became efficient.

Moreover, since organizations decided to take a more collaborative approach to risk management, they have been successful in allowing them to meet compliance standards by conducting business.

It is imperative for a company to have smooth processes in order to achieve sustainable success. Even though making the risk management system proactive is a positive step in mitigating and preventing risks, the system can only be effective if all the employees have been properly trained and know how to implement strategies. They should also be prepared to react to the unavoidable. For example, it’s the duty of a registered nurse to make sure none of the bed rails are faulty. And it is also their duty to know who to report to in case the bed rails are faulty. The person to whom everything needs to be reported to will be the risk manager.

A risk manager should be someone who has experience in handling risk-related issues in every kind of situation related to the industry they are working in. They should be able to identify and evaluate risks and manage to reduce the potential for injury either for patients, staff members or visitors, making it a safe place for everyone. They are also required to analyze the risk management strategies that have already been set in place. If certain strategies are believed to have dangerous side effects and are only used for specific medical conditions, those strategies need to be altered. However, with that said, it is the duty of all employees to make sure they recognize anything that can present increased risk and have the knowledge of all the principles of risk management in healthcare.

Although detecting risks is crucial, it is also important to make adjustments to reduce those risks. Some common ways of managing all types of risks in healthcare are:

  • Not filling expired prescriptions in order to prevent medicinal abuse.
  • Increasing consultation by following up on missing test results.
  • Tracking missed appointments.
  • Reducing improper taking of medicine by increasing communication with patients.
  • Preventing falls and immobility.

Conclusion

So, why is risk management important in healthcare?

It is important because of the increased risk the healthcare industry comes with that automatically increases the risk as well. One wrong move or omission can lead to catastrophes. Which is why it is important to analyze all potential and present risks so that they can be eliminated before they pose a threat that you cannot recover from.

Tony Bennett

Tony Bennett

Tony Benett makes his living in the insurance industry by teaching and consulting. He is also recognized by the legal profession as an expert on insurance coverages. His insurance experience includes having worked at the company level, owned an independent general agency and having worked for an insurance association. He has received various certificates over the past few years and helps his clients and readers by giving them a realistic outlook on what they can expect to achieve within their set targets. At Insurance Noon, he is known for his in-depth analysis and attention to details with accuracy. He has been published as one of the most referred agents by his peers in the insurance community. Tony loves the outdoors and most sport events. His passion other than providing excellent advice is playing golf.

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