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Assistant Vice President, Risk Management
St. Joseph Health System
Orange, Calif.

Working Toward the Good, the Right and the Just

Although St. Joseph Health System in Orange, Calif., prided itself on continually modernizing its care-giving capabilities throughout its 100-year history, its approach to professional liability risk management remained steeped in the old ways.

Then Lisa Ramthun became assistant vice president of risk management and everything changed.

Ramthun reshaped the risk management program of the large and diverse organization. She trimmed costs, redefined the culture from damage control in the aftermath of adverse events to one that fosters proactive risk management, collaboration in loss prevention and best-practice sharing among the 15 hospitals in the system.

St. Joseph embraces the concept of what healthcare risk managers and others refer to as "the just culture," a structured process to guide managers through the evaluation of an event, a near miss, or the analysis of risky behavior. It is a process for conducting an investigation of the event, for identifying contributions, and for assessing accountability, either remedial or punitive, for those involved in the event.

Traditionally, healthcare organizations have held individuals accountable for all errors or mishaps that befall patients under their care. But a just culture demands that individual practitioners should not be held accountable for system failings, for which they have no control.

The concept of the just culture holds individuals accountable for the quality of the behavioral choices they make. The focus is on system design and behavior choices, rather than on punishing people when there is a bad outcome.

"Her efforts to implement a just culture model throughout the health system have been exceptional," said Gregory Wren, director of risk finance at St. Joseph. "It's a very large undertaking to get all of our ministries (hospitals) and management to go along with it.

"A lot of effort used go into managing claims," he said. "After that, we managed risk. Now, we're more focused on the prevention."

Today, the emphasis on a just culture is expressed most clearly through efforts to achieve early and equitable resolution of claims when examination of the facts demonstrates that the responsibility for the harm rests with the hospital.

As a result, total indemnity costs are down almost 40 percent since Ramthun's introduction of the proactive approach in 2008. St. Joseph now settles about half of its claims prelitigation, with minimal defense costs, compared to a prelitigation settlement rate of only 2 percent prior to the implementation of the program.

Claims reserves, standing at $35 million in June 2008, have decreased to $27.5 million in 2010. "We wouldn't have been able to lessen our reserves by more than $7 million without hard work," Wren said. "Lisa is doing the hard work."

The program assesses compliance and outcomes in seven areas: risk management; loss prevention; program review for high-risk areas; development of risk management resources; peer-based medical staff risk control and risk integration including patient safety; and performance improvement environmental safety.

Ramthun introduced other reforms as well.

Investigations of unasserted claims were transferred from outside counsel to internal risk management professionals, resulting in savings in legal fees in the past year of some $245,000.

Litigation guidelines were developed to focus on facilitating early decisions on litigated files and implementing negotiated defense fee schedules, which have reduced defense costs nearly 35 percent.

Internal claims management procedures were re-engineered to introduce the services of a third-party administrator with a specialized professional liability practice, and the capability of providing customized reports for newly introduced quarterly claims review and loss prevention meetings.

An internal incident tracking system was introduced as well. It used a variety of screens to identify incidents, them filter them up to local risk management when they are thought to be potentially compensable. The goal of the reporting system is to identify and manage compensable events before they become claims.

--Julie Liedman

Caring for the Caregivers

Overworked medical staffers have to take the blame for errors, leading to nasty professional liability disputes within the medical community. It's a sick and diseased model that needs the help and attention of people like Lisa Ramthun, a proponent of the "just culture" model.

The model finds a middle ground between a blame-free culture, which attributes all errors to system failure and a punitive culture, where individuals are blamed. Working for an organization that grounds its activities in faith-based traditions of service and justice, Ramthun has demonstrated that doing the right thing is a sound and practical strategy for risk management and may just end up saving lives.

The number of deaths caused by healthcare professionals is a cruel irony. Consider the estimated number of errors made by doctors, nurses and other medical caregivers: between 44,000 to 98,000 deaths a year, according to one source.

Hospital infections take another 100,000 lives. Mistakes involving medications injure 1.3 million patients annually, according to the U.S. Food and Drug Administration.

Divisional Vice President, Risk Management
Family Dollar
Matthews, N.C.

Staying in Touch with the Employee Family

Not placing a focus first on return on investment usually is anathema in corporate America, but for David Smith at Family Dollar, it was an easy call as he implemented and then improved an employee emotional health program.

To Smith, divisional vice president, risk management at Family Dollar, the program for all employees--team members--did not depend on a cost/benefit analysis. It was the humane response after an employee suffered emotional trauma at work.

Turns out, however, that kind of support also curbs workers' compensation costs and improves employee retention.

Family Dollar operates 6,700 stores nationwide in middle- and low-income neighborhoods. While the discount retailer provides security, company stores--like retailers generally--face the risk of robberies, threats of violence and other traumatic events.

In 2004, Smith, who had just been appointed divisional vice president, risk management, implemented a program providing immediate counseling to any employee who suffers a traumatic workplace event. Significantly, the program covers not only full-time but also part-time employees, who typically are not eligible for benefits from retailers.

Once a store manager reports a traumatic incident, Grandville, Mich.-based Crisis Care Network (CCN), a provider of incident and employee assistance programs, immediately contacts all affected employees and provides up to 10 days of telephonic counseling.

"Time is of the essence" in offering employees support that will help minimize disruptions in their lives, Smith said. "Telephonic contact is always made within two hours of notification. CCN talks to the affected team member, coaches them through their feelings, shares with them the stages of emotions they will go through, answers questions, reassures and assesses their emotional state."

The counselor then encourages the employee to call back for any reason.

The counselor also assures the employee of a follow-up call in 10 days. If the employee is not troubled then and has returned to work, the counseling ends. If the incident was severely traumatic, however, immediate onsite counseling might be provided instead.

That was the program until 2009, when Smith determined it could be improved. That began with a communications effort to increase employee awareness about the program.

Smith also brought newly retained workers' comp claims administrator Sedgwick CMS, based in Memphis, Tenn., into the loop. After fielding a report of a possible workers' comp claim from a store manager following a traumatic incident, Sedgwick ensures that CCN is notified. That avoids the risk of CCN not contacting a traumatized employee because a store manager was unaware of the program and failed to notify the provider.

Smith also brought in Minneapolis-based Behavioral Medical Interventions(BMI), which specializes in helping individuals who need intensive therapy.

BMI has a couple of roles. After a severely traumatic incident, an employee's case might not be assigned to a CCN counselor but instead channeled to BMI.

BMI also could be called in when an employee who had received telephonic counseling continues to miss work or struggle emotionally after 10 days. The CCN counselor, risk management and Sedgwick would determine whether the employee should receive more intensive care.

BMI would manage that care. The employee initially would receive five counseling sessions, after which a case assessment would determine whether more therapy is necessary. For employees already in therapy, BMI would work with the therapist to ensure an aggressive resolution so the employee can return to work.

On the program's return on investment, Smith said: "Most importantly, it is the right thing to do in support of our team members" and to retain them with the company.

The employee retention rate after a traumatic event has increased about 29 percent to the current 90 percent retention rate with no lost time. Only 6 percent of cases progress into the workers' comp system, but those claims are 15 percent less costly, Smith said.

Matthew Cohen, account manager/operations manager at Sedgwick, also said that Family Dollar projects its return-on-investment "in the high six figures." Those savings are reflected in lower workers' comp disability claims costs and indirect costs, which the American Society of Safety Engineers estimates could run as much as 20 times direct costs, Cohen said.

"Whereas the financial savings from reduced attrition and workers' comp claims are significant, David truly seems to derive his greatest satisfaction from witnessing associates who are more quickly able to resume healthy, productive lives," said Bob VandePol, president of CCN.

--Dave Lenckus

Helping Others Through Trauma

With Family Dollar operating 6,700 stores nationwide in middle- and low-income neighborhoods, company stores--like retailers generally--face the risk of robberies, threats of violence and other traumatic events.

In 2004, David Smith, divisional vice president, risk management, implemented a program providing immediate counseling to any employee suffering from a traumatic workplace event. "Time is of the essence," Smith said.

A quick reaction on the part of the employer improves employee morale and lessens the disruption in his or her life, he said. Family Dollar's program goes "above and beyond" because many of the employees working on the front lines of Family Dollar's stores don't have access to those kinds of services.

Smith's program covers full-time and part-time employees, who typically are not eligible for benefits from retailers. The company benefits, of course, from Smith's initiative as it improves employee retention. But, Smith said, "Most importantly, it is the right thing to do in support of our team members."

Executive Director
WatchTower International
Christchurch, New Zealand

Watching Out for the Silos

The International Civil Aviation Organization has growing concerns about airline and airport safety problems attributable to operators' multiple silos of information.

ICAO's concern is not that airline and airport operators cannot anticipate risk events. The organization also acknowledges that those losses and incidents often occurred when operators were fully compliant with regulations.

The issue is that airlines and airports manage the various elements of their governance, risk and compliance profiles separately, aided by a variety of management systems.

That approach is understandable, because each of the areas that operators are managing--including civil aviation regulation and safety--requires a high level of expertise, said Aarron Spinley, executive director of WatchTower International in Christchurch, New Zealand.

Even when management is outstanding, though, the operator loses the potential of understanding and managing to the interdependencies of all of those areas. Those interdependencies are at the heart of potential systemic risk for operators, as well as at the industry level, Spinley said.

To unite airlines' and airports' management of all areas of governance, risk and compliance, WatchTower has developed the WTI-Navigator system. Navigator brings into a single platform the management of civil aviation regulation and safety systems, as well as enterprise risk management and legislative compliance. Those areas encapsulate every aspect of an operator's organization: its boardroom, its core operations and its corporate services, such as information technology, finance, legal services, human resources and occupational safety and health.

The primary benefit is moving away from multiple systems, which fail to capture the interdependencies of risks, he said.

As a result, when the operator's environment changes, only one area of the organization might detect that development. Because multiple management systems are not connected across an enterprise, many relevant managers are not provided critical information.

But, a single, specialist platform allows "interdependencies to be built up between multiple controls and multiple risks, controls to controls, risks to risks, and the overall profile against organizational objectives and strategy," Spinley said.

"One specific example we use to discuss the failings of silos is a Singapore Airlines crash in Taipei in October 2000," when a Boeing 747-400 crashed into construction equipment sitting on a closed runway that the pilot mistakenly had attempted to use for takeoff during windy and rainy conditions, Spinley said. The crash killed 83 people.

"This resulted from next-to-zero visibility and an information gap between the operational teams, which failed to address a changed operating environment," he said.

"A simple example might be the failure of a safety light at an airport hangar, detected only by a maintenance team," he said. "In isolation, as a maintenance task, it is of little consequence."

This seemingly small failure is connected to issues of health and safety and regulation compliance, however, and has a much broader impact, he said.

Using a single systems management platform, operators not only would eliminate information silos, they also would reduce the costs associated with maintaining multiple systems, including software licensing, maintenance, internal information technology resources, external consulting resources and staff training, Spinley said.

Other systems that Navigator can replace are electronic safety incident reporting, occupational health and safety, system action improvement reports, hazard reporting systems, manual/semiautomated legal compliance reporting, incident management, capital project risk systems, insurance claims management, staff surveys and others.

Some operators have favorite systems that they choose to integrate instead of replace. WTI-Navigator can also cater to those requirements.

Spinley said Brett Watson, an equal owner and founder of WatchTower, has been equally involved in developing Navigator. He has a systems background and has been responsible for analysis of existing operating environments and system customization and testing.

--Dave Lenckus

Flying into the Ranks of Leadership

It's been a rapid flight into the leadership ranks for New Zealander Aarron Spinley, a former Marsh executive and now executive director of WatchTower International, a consulting firm to the aviation industry.

Spinley, described as an expert with the requisite degree of "high intensity," in the words of client Roberto Martinelli, is known for instilling trust. From 2007 to 2010, Spinley worked for Marsh before leaving for WatchTower in March. Young, aggressive and steeped in the techniques of aviation safety, Spinley isn't lacking for initiative. He's a member of multiple risk management organizations and a dozen or so aviation-related organizations.

His firm's recent white paper, titled "The Case for Integrated Risk and Compliance Management Platform in the Aviation Sector," explores the silos in the aviation industry, and the many governance, regulation and compliance challenges facing it. An avid blogger, Spinley is the author of the "Risk & Reward Equation" blog, where he opines on issues from aviation to governance to enterprise risk management to just plain old common sense.