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Use data to prove value of RM to top brass
Risk managers have always struggled to prove the value of their work to health care administrators, because much of what they do consists of preventing expenditures and minimizing costs. A concerted effort to prove the worth of your department can result in a higher profile for risk management within the organization, greater stature for the risk manager, and improved resources.
Showing what you contribute is crucial for both your individual success and the future of risk management as a whole, says risk manager Roberta Carroll, ARM, CPCU, MBA, senior vice president with Aon Solutions, the risk management consulting company based in Chicago.
"After almost 40 years in risk management, I see that we need to make some dramatic changes in not only what we do but how we do it, or we're going to be a dying breed," Carroll says. "With the emphasis on patient safety officers, some CEOs could say, 'I have a patient safety officer who is managing the clinical aspects of risk management, and I have in-house general counsel for the claims, and my CFO can do the risk financing, so what do I need you for?'"
Risk managers must be able to carve out their own place in the organization, a significant role, and prove their value, Carroll says. There is a role that is going unfilled in most health care organizations, she says. There is no one who connects all the dots, looking at not just the surface problems such as malpractice claims, for instance, but deeper into the many causes of the mistake that led to that claim. Risk managers are ideally suited for that role and should start moving themselves into that kind of key leadership position, Carroll says.
The big picture is the future of risk management, she says. For instance, many providers have a fleet of vehicles to manage. Who is looking at fleet safety? When Carroll worked in a health system, it had 120 cars and more than 300 drivers. That was a significant risk for her, and she addressed it with safe driving programs, a claims reporting process, and other preventive measures. Then she measured the results before and after. That is the kind of wide-ranging risk management that she recommends as a way to improve your value to the organization.
"Risk managers are at the cusp of either something wonderful or potentially their demise," she says. "I see some real possibilities if they take the opportunity that's in front of them now."
Have to blow your own horn
Just saying you are doing a good job, or hoping that upper management notices, is never enough. Risk managers should present data that prove the department's success, says Cindy Berry, chief health care strategist with SAS, a software and analytics company based in Cary, NC. That isn't always easy to do, however, because risk managers often compile data in the way that best suits their needs and not in a way that will present well to upper management, she says.
"Most of the systems risk managers use are not really great for reporting to senior management," she says. "A lot of times, we see a lot of manual work being done to report to upper management, and they can't really see the magnitude of the work risk managers do. They also can't see trends or efforts for improving that process."
Better data management and the use of analytics can yield more persuasive information, but Berry cautions that you can't just focus on your own in-house data. You also should be presenting data from outside your organization as a comparison. Carroll says risk managers traditionally have not been very good at quantifying the effects of programs they implement, particularly when it comes to anticipating and then documenting the actual change in their own organization, as opposed to goals and hopes.
Berry agrees that data is king.
"You might be doing a phenomenal job, but if [you] have no data to show what the rest of the health care world is doing, nobody can really tell how well you're doing. With that data, then you can show that you had 12 hospital-acquired infections last year, and after our risk management initiative this year, we only had two," she says. "The rest of the industry averages 20, and we can look at this financial data to see that every additional infection costs us an additional $60,000. So, we saved our organization $600,000 over last year and $1,080,000 compared to other hospitals."
This type of information often is presented through quality committees, at the board level, Berry says. Participating in quality committees creates good exposure at a high level within the organization, she says.
"If your committee meets monthly, that is ideal, because you can present this data each month and see the trends going up or down," she says.
Keep information flowing
This type of information should be presented regularly, on an ongoing basis, she says. Don't think that you can't schedule a meeting with executives once or twice a year and do a big presentation to justify your department, she says. Berry notes that risk managers should not be dissuaded from presenting risk management data because they do not have all the data they want or because it is not in the most useful form. Anything is better than nothing, she says.
"If you don't have access to integrated data that paints a full picture, start with critical event reports on some of those measures that Medicare is going to start cutting payment for, like hospital-acquired infections," she says. "Work with your quality department to get data on issues like that, and start building your presentation. Then, you can track three or four core quality measures that you're already tracking for the government anyway."
Then you should work with someone in the organization who can help tie that information into financial data, Berry says. Remember that in the C-suite, they will want to know the dollar impact, not just that you did a good thing by improving quality or safety.
"Find someone who can tell you that for every hospital-acquired infection you avoid, this is how much money you're saving, because the government doesn't pay for them anymore," she says.
Workers' comp ripe for analysis
Some areas of risk management lend themselves better to statistical analysis than others, says Timothy Folk, a partner with the Health & Human Services Industry Team at The Graham Company, a risk management consulting firm in Philadelphia. Workers' compensation claims are one of the best options, because their high frequency and high severity lead to more statistically relevant data, he says.
"With other types of claims, like professional, property, or general liability, you may only get one claim every couple of years, or even if you get a few more, you're still not able to gather the volume of data necessary to make it statistically relevant," he says.
With workers' compensation claims, Folk says the data can be compiled over several years and then broken down by many factors, including the details of how the injury happened, the time before settlement, and medical vs. indemnity ratios. That breakdown can point to trends in your workers' comp claims and then relate those to the training provided to employees and the results of your risk management efforts.
"You can show to upper management the changes in lost days, settlement costs, all the associated costs that come with a workers' comp claim," Folk says. "Workers' comp is probably the most data-heavy opportunities you have [to] present your work to management, even if it isn't as exciting as some other risk management activities."
Reserves are critical subject
Be sure to focus on reserves when discussing worker's compensation with upper management, says Christopher Keith, also a partner with the Health & Human Services Industry Team at The Graham Company in Philadelphia. Executives will be most interested in reserves in relation to workers' compensation management, because that equals cash flow, he says.
"You want to really aggressively manage those reserves and show how you are managing the claims to closure," he says. "Another way to drive up your reserves is with the medical to indemnity ratio. A good rule of thumb is that you should have an 80/20 ratio, meaning 80% should be medical-only and 20% should include indemnity loss."
Keith recalls working with a client that had a 60/40 ratio, meaning 40% of the workers' compensation claims involved lost time. The indemnity claims were costing an average of $21,000 per claim, but the medical-only claims were costing an average of $5,000. Reducing those indemnity-related losses with light-duty programs and other strategies can significantly improve the ratio, which can be demonstrated to management.
Folk points out that it also is important to adjust your costs and exposures over time when discussing long-term trends in claims management or other risk activities. Particularly in a down economy, the data can be misleading if you do not account for changes in your exposures. If your organization has downsized and has fewer employees, for instance, the exposure to certain risks may have decreased.
"You don't want to give upper management a false read on the performance of risk management," Folk says. "If your premiums have gone down, and you don't adjust for contracted or expanded operations, it makes the statistical balance irrelevant."
Cindy Berry, Chief Healthcare Strategist, SAS, Cary, NC. Telephone: (919) 677-4444.
Roberta Carroll, ARM, CPCU, MBA, Senior Vice President, Aon Solutions, Chicago. Telephone: (312) 381-1000.
Timothy Folk, Partner, Health & Human Services Industry Team, The Graham Company, Philadelphia, PA. Telephone: (215) 701-5231. E-mail: firstname.lastname@example.org.
Christopher Keith, Partner, Health & Human Services Industry Team, The Graham Company, Philadelphia, PA. Telephone: (215) 701-5297. E-mail: email@example.com.