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11 Critical Risks Facing the Healthcare Industry

Healthcare providers continue to face numerous emerging challenges.
By: | June 1, 2015 • 5 min read
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From pandemics to violence in hospitals, alarm fatigue to healthcare-acquired infections, healthcare organizations will be put to the test in the coming months and years.

Added pressure from new regulatory requirements under the Affordable Care Act makes the future even more challenging.

ACE_BrandedContentWhen you factor in the daily demands healthcare organizations face in their quest to provide quality patient care, it’s clear that there are many hurdles that can disrupt facility operations and put employee and patient safety at risk.

”Today’s healthcare landscape is arguably the most difficult ever,” said Diane Doherty, Vice President, ACE Medical Risk Group. “If not managed properly, these critical issues can cause other unwanted outcomes such as an increase in medical malpractice and workers’ comp claims, government fines and penalties, and may negatively impact the organization’s brand and reputation.”

The following are some of the top critical issues facing hospital leadership.

1) Cyber Risk

ACE_BrandedContentThe healthcare industry’s move to electronic healthcare records has created new patient privacy exposures as records are more easily accessed by consultants, vendors and other third parties for efficient operation, and targeted by cyber criminals. Additionally, healthcare organizations face exposure to cyber risks that could have significant impacts on their operations, including shutting down critical, health-related systems.

Data breaches and network disruptions can jeopardize an organization’s financial stability, security and reputation. Standard general liability policies often do not adequately cover perils associated with cyber and technology related exposures. Cyber liability insurance can address coverage gaps while also enabling companies to transfer risks associated with cyber, such as patient privacy and notification, crisis management, and forensic analysis expenses as well as certain regulatory fines, indemnity payments and legal costs.

“Cyber hacks and data breaches are a major issue facing the healthcare industry today,” said Renee Carino, Vice President and Chief Underwriting Officer, ACE Medical Risk Group. “It’s important now more than ever, that healthcare organizations work closely with their insurance carrier to assess this exposure and develop effective risk management strategies and ensure the proper coverage is in place.”

ACE_BrandedContent”Today’s healthcare landscape is arguably the most difficult ever. If not managed properly, these critical issues can cause other unwanted outcomes such as an increase in medical malpractice … and may negatively impact the organization’s brand and reputation.”
— Diane Doherty, Vice President, ACE Medical Risk Group

2) Healthcare Infections

ACE_BrandedContentHealthcare-acquired infections (HAIs) cost the U.S. healthcare system billions of dollars each year and lead to the loss of tens of thousands of lives.  At any given time, about 1 in 25 hospital patients has at least one such infection, according to the Centers for Disease Control and Prevention. Healthcare-acquired infections also come with a financial price, costing up to $9.8 billion a year, according to research published in 2013 in JAMA Internal Medicine.

Among many solutions, healthcare organizations should ensure all sanitation systems are up to date, operational and ensure that staff understands how to properly use the systems to keep patients safe. They also should continue to remind staff and visitors about basic infection control techniques.

“Basic infection control techniques should be at the forefront of the risk management process,” said Doherty. “For example, it’s critical that medical personnel must wash their hands with antiseptic soap and water every time they treat patients to help reduce the spread of infections.”

3) Telemedicine

ACE_BrandedContentAdvances in technology, the current physician shortage and the dramatic increase in the number of patients seeking care under the Affordable Care Act have led a growing number of healthcare facilities to expand their use of telemedicine to deliver services to patients in hospitals as well as in remote locations. Over half of all U.S. hospitals now use some form of telemedicine to treat patients.

Telemedicine may also result in allegations of negligence if healthcare providers do not have the proper training, experience and credentials. Currently, there is no federal standard of clinical guidelines for telemedicine.

In developing strategies to mitigate this risk, a few key processes and areas that should be examined include credentialing and peer review, medical staff by-laws and of course, CMS guidelines.

ACE_BrandedContent“It’s important now more than ever, that healthcare organizations work closely with their insurance carrier to assess this exposure and develop effective risk management strategies and ensure the proper coverage is in place.”
— Renee Carino, Vice President and Chief Underwriting Officer, ACE Medical Risk Group

4) Violent Incidents in Hospitals

ACE_BrandedContentHospitals may be places of healing, but they also have become the scene of an increasing number of violent incidents. Such incidents not only put patients at risk but also medical professionals, who are often the targets of attacks, harassment, intimidation and other disruptive behavior.

The incidence rate for violence and other injuries in the healthcare and social assistance sector in 2012 was over three times greater than the rate for all private industries. The Joint Commission, meanwhile, reports increasing rates of assault, rape and homicide in healthcare facilities. Perpetrators can include patients, family members, visitors and vendors as well as current and former healthcare employees.

Hospitals and healthcare organizations should enact a zero-tolerance policy, one that states that no form of violence — physical, verbal or psychological — will be tolerated, and that all offenders will be subject to disciplinary action, including termination.

“Healthcare organizations should develop a comprehensive violence prevention program that is specific to their organization and analyzes potential safety hazards and implements strategies to prevent them,” Carino said.

5) Alarm Fatigue

ACE_BrandedContentHospital nurses hear them constantly — the beeps and chirps of alarms on medical devices, such as ventilators, cardiac monitors and pulse oximetry devices. While alarms are designed to draw attention to a potential problem, they can easily be tuned out by overwhelmed medical professionals, who may then fail to respond as they should.

Alarm fatigue is a growing problem for hospitals and the consequences can be fatal. The Joint Commission’s Sentinel Event database includes reports of 98 alarm-related events between January 2009 and June 2012. Of the 98 events, 80 resulted in death, 13 in permanent loss of function and five in unexpected additional care or extended stay. Alarm fatigue was rated a top concern by 19 out of every 20 hospitals in the United States, according to a national survey presented at the annual meeting of the Society for Technology in Anesthesia in 2014.

To reduce the risk of patient harm from alarm fatigue, the Joint Commission, along with the Association for the Advancement of Medical Instrumentation and the ECRI Institute, offered a list of precautions, including ensuring that there is an effective process in place for safe alarm management and response in high-risk areas.

Additional Risks

6) Preparedness for Pandemics

7) Healthcare Reform/Physician Integration

8) Disruptive Staff Behavior

9) Environmental Pollutants

10) Emergency Preparedness

11) Obesity Epidemic

Please download the whitepaper, “Critical Risks Facing the Healthcare Industry” to learn more about the additional risks listed above. The paper also provides a deeper perspective on the risks covered in this article as well as additional risk management recommendations.

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BrandStudioLogoThis article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with ACE Group. The editorial staff of Risk & Insurance had no role in its preparation.
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With operations in 54 countries, ACE Group is one of the largest multiline property and casualty insurance companies in the world.
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Contractors Face Complex Insurance Scenario

Contractors should consider many factors when building a multinational insurance program.
By: | October 1, 2014 • 5 min read
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With today’s expanding global marketplace, U.S.-based construction companies naturally seek growth opportunities in foreign countries. For instance, China has been on a decades-long building spree. Middle Eastern nations continue to invest in massive developments. Cross-border construction activity among developed countries, particularly in Europe and Japan, remains robust.

That’s the good news for U.S. contractors considering or already involved in global projects. On the flip side, it’s critical to realize that international opportunities present different challenges than domestic projects.

Construction services represent a significant portion of global trade. World exports of construction rose 2% (to $115 billion) in 2012, the World Trade Organization estimates. The European Union and Asia represent the major share of that trade. Yet, while international trade in construction is on the rise, every country retains its own laws regarding insurance, so building a multinational insurance program represents a significant challenge.

ACE’s recently published whitepaper, “Global Construction: International Opportunities, Local Risks” focuses on educating risk managers about the complexities of going global.

Key issues for contractors to consider include:

Unique challenges

SponsoredContent_ACELegally speaking, compliance for U.S. contractors operating outside the U.S. is much more complex than for their domestic operations. For example, by operating in different countries, multinational contractors must adhere to a myriad of local national laws and regulations regarding the “duty of care” they owe to the general public and other third parties. While most of the developed world has established employer duty-of-care legislation, the majority of the countries where many of these new global projects are available have not. A contractor’s insurance program should be flexible enough to handle claims in several different jurisdictions and provide adequate coverage for awards granted in emerging, as well as developed, legal jurisdictions.

Continuity of coverage across borders

For projects in foreign countries, a proactive risk management strategy should not only address the wide range of exposures typical in a given construction project, but also the impact that the differing local laws and regulations may have on the insurance coverage. For example, a contractor may have to obtain local insurance policies for various lines of business to cover the risks associated with its operations and to be compliant with local insurance requirements.

Building multinational solutions

SponsoredContent_ACEA multinational program using “non-admitted” coverage can be a cost-effective alternative to local coverage. Such non- admitted coverage is usually arranged in the parent company’s home country to insure exposures in other countries. Some countries, however, don’t allow non-admitted coverage, while others may allow it subject to conditions such as prior approval. In the past the threshold question was whether non-admitted insurance could be used, but today companies should also consider potential changes in enforcement practices as well as evolving regulations.

Local services can be crucial

Besides compliance issues, companies should address issues such as how local claims will be handled and paid, and which other local services they may need in the event of a claim or incident. For example, companies building projects in the European Union may want to purchase environmental coverage that responds to the demands of the European Environmental Liability Directive in order to provide proper insurance protection for potential liability associated with damage to the environment or natural resources. On a broader level, catastrophe planning should be part of a global risk management strategy.

Public/private partnerships may bring new risks

Another consideration for contractors revolves around project structure. Typically in the U.S., construction projects have been driven either by the owners or the contractors and the insurance coverage reflected that through an owner- or contractor-controlled insurance program (OCIP/CCIP). Today, while more U.S. projects are being structured as public-private partnerships, because the structure is more common in Europe, U.S. contractors considering projects abroad may encounter it for the first time. Public-private partnerships raise questions about how risks and liabilities are apportioned among the parties, so contractors may find themselves sharing responsibility for risks that are not typically part of a standard project, or have increased exposures for professional liability.

M&As can impact insurance programs

SponsoredContent_ACEWith the growth of the global construction economy, and the rising need for the development or improvement of infrastructure in emerging economies, an increasingly multinational approach has led to consolidation and merger-and-acquisition activity in the construction marketplace. As this trend continues, companies also need to consolidate their insurance programs to achieve better efficiency by individual lines of business and to meet insurance requirements in different countries.

The takeaway: local risks, global solution

For contractors working in more than one country, maintaining consistent insurance coverage across borders while controlling costs clearly presents a number of challenges. By using a controlled master policy and admitted insurance from local carriers, contractors potentially gain greater insight into their claims trends and an increased ability to identify locations experiencing significant losses. With this information, contractors also will be in a better position to take corrective action and reduce losses.

Finally, while varying insurance regulations and markets must be addressed, contractors should evaluate the insurance carrier, its experience and presence in foreign markets and its relationships with local insurers around the world. When it comes to international construction projects, the right insurance coverage will play a crucial role in long-term success.

To learn more about how to manage global contracting risks, read the ACE whitepaper: “Global Construction: International Opportunities, Local Risks.”

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with ACE Group. The editorial staff of Risk & Insurance had no role in its preparation.




With operations in 54 countries, ACE Group is one of the largest multiline property and casualty insurance companies in the world.
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5 & 5: Rewards and Risks of Cloud Computing

As cloud computing threats loom, it's important to understand the benefits and risks.
By: | June 2, 2014 • 4 min read
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Cloud computing lowers costs, increases capacity and provides security that companies would be hard-pressed to deliver on their own. Utilizing the cloud allows companies to “rent” hardware and software as a service and store data on a series of servers with unlimited availability and space. But the risks loom large, such as unforgiving contracts, hidden fees and sophisticated criminal attacks.

ACE’s recently published whitepaper, “Cloud Computing: Is Your Company Weighing Both Benefits and Risks?”, focuses on educating risk managers about the risks and rewards of this ever-evolving technology. Key issues raised in the paper include:

5 benefits of cloud computing

1. Lower infrastructure costs
The days of investing in standalone servers are over. For far less investment, a company can store data in the cloud with much greater capacity. Cloud technology reduces or eliminates management costs associated with IT personnel, data storage and real estate. Cloud providers can also absorb the expenses of software upgrades, hardware upgrades and the replacement of obsolete network and security devices.

2. Capacity when you need it … not when you don’t
Cloud computing enables businesses to ramp up their capacity during peak times, then ramp back down during the year, rather than wastefully buying capacity they don’t need. Take the retail sector, for example. During the holiday season, online traffic increases substantially as consumers shop for gifts. Now, companies in the retail sector can pay for the capacity they need only when they need it.

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3. Security and speed increase
Cloud providers invest big dollars in securing data with the latest technology — striving for cutting-edge speed and security. In fact, they provide redundancy data that’s replicated and encrypted so it can be delivered quickly and securely. Companies that utilize the cloud would find it difficult to get such results on their own.

4. Anything, anytime, anywhere
With cloud technology, companies can access data from anywhere, at any time. Take Dropbox for example. Its popularity has grown because people want to share large files that exceed the capacity of their email inboxes. Now it’s expanded the way we share data. As time goes on, other cloud companies will surely be looking to improve upon that technology.

5. Regulatory compliance comes more easily
The data security and technology that regulators require typically come standard from cloud providers. They routinely test their networks and systems. They provide data backups and power redundancy. Some even overtly assist customers with regulatory compliance such as the Health Insurance Portability and Accountability Act (HIPAA) or Payment Card Industry Data Security Standard (PCI DSS).

SponsoredContent_ACE5 risks of cloud computing

1. Cloud contracts are unforgiving
Typically, risk managers and legal departments create contracts that mitigate losses caused by service providers. But cloud providers decline such stringent contracts, saying they hinder their ability to keep prices down. Instead, cloud contracts don’t include traditional indemnification or limitations of liability, particularly pertaining to privacy and data security. If a cloud provider suffers a data breach of customer information or sustains a network outage, risk managers are less likely to have the same contractual protection they are accustomed to seeing from traditional service providers.

2. Control is lost
In the cloud, companies are often forced to give up control of data and network availability. This can make staying compliant with regulations a challenge. For example cloud providers use data warehouses located in multiple jurisdictions, often transferring data across servers globally. While a company would be compliant in one location, it could be non-compliant when that data is transferred to a different location — and worst of all, the company may have no idea that it even happened.

3. High-level security threats loom
Higher levels of security attract sophisticated hackers. While a data thief may not be interested in your company’s information by itself, a large collection of data is a prime target. Advanced Persistent Threat (APT) attacks by highly skilled criminals continue to increase — putting your data at increased risk.

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4. Hidden costs can hurt
Nobody can dispute the up-front cost savings provided by the cloud. But moving from one cloud to another can be expensive. Plus, one cloud is often not enough because of congestion and outages. More cloud providers equals more cost. Also, regulatory compliance again becomes a challenge since you can never outsource the risk to a third party. That leaves the burden of conducting vendor due diligence in a company’s hands.

5. Data security is actually your responsibility
Yes, security in the cloud is often more sophisticated than what a company can provide on its own. However, many organizations fail to realize that it’s their responsibility to secure their data before sending it to the cloud. In fact, cloud providers often won’t ensure the security of the data in their clouds and, legally, most jurisdictions hold the data owner accountable for security.

The takeaway

Risk managers can’t just take cloud computing at face value. Yes, it’s a great alternative for cost, speed and security, but hidden fees and unexpected threats can make utilization much riskier than anticipated.

Managing the risks requires a deeper understanding of the technology, careful due diligence and constant vigilance — and ACE can help guide an organization through the process.

To learn more about how to manage cloud risks, read the ACE whitepaper: Cloud Computing: Is Your Company Weighing Both Benefits and Risks?

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with ACE Group. The editorial staff of Risk & Insurance had no role in its preparation.




With operations in 54 countries, ACE Group is one of the largest multiline property and casualty insurance companies in the world.
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