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When groundbreaking shifts occur in business, groundbreaking opportunity appears as well. Leadership goes to those who respond. And, for those who ignore the opportunity or are incapable of action, leadership changes hands.

The health-care industry, like many others, is undergoing a revolution centered on the need to improve quality of service. This movement has been called the Quality Revolution and is enabling managers to analyze a new set of risk variables, opening the way for a new generation of risk management.

With the new approach, risk managers can gauge the causes and effects of risk in the broader organization and quantify its management financially and operationally--enabling a new level of insight, more advanced tactics and better designed and priced transactions as a result.

The potential advantages for organizations are enormous. They'll be able to measure exactly where they stand on key financial and/or quality metrics; identify key risk drivers; quantify the financial and operational returns to the organization; differentiate when presenting themselves to the insurance markets and external stakeholders, and better manage the apportioning of premiums among business divisions based on accurate risk/performance benchmark reports.

In short, they'll be able to leverage risk into competitive advantage in the business, financial and even local communities--a groundbreaking result in any risk manager's terms.

Complex new technologies function best on integrated platforms. Ideally, these platforms are designed to be modular and "scalable," allowing changeover to occur in stages and integrating conventional systems with new systems as necessary. It is also understood that the demand for automation only increases in organizations once the process has begun.

The leading risk management advisors are designing integrated operating systems that will include: 1) integrated data collection and warehousing from which data "content" will be fed electronically to organizations, 2) development of data-based analytic and tracking tools that enable managers to develop tailored quality of care initiatives and 3) client-based and Internet-based risk management information system software that allows clients to receive, organize and apply data across all of its risk "silos" while tracking and managing the silos themselves.

How do you win over your operation?

DEVELOP YOUR RISK DATA STRATEGY

First, form your team. You'll need to draw members from outside the boundaries of the traditional risk management "stakeholder." Ideally, decision makers from the following disciplines should be included: human resources, information technology, clinical operations, quality management and finance. Beyond internal team members, now is the time to also identify your outside partners, such as your RMIS provider and your risk advisor.

Next, assess and identify your core "buckets" of risk--traditional and "new generation."

"Traditional" includes the common data fields captured for insurance risks such as exposures, incident reports and loss history information for liability and workers' compensation exposures, for example.

"New generation" includes your "Dynamic Risk Influencers"--in essence, the potential causes of risk in your organization. These are the critical risk variables that can be managed to have an impact on your risk profile. Examples in health care are incidence of infection, time to admission from emergency department, nurse staffing ratios and patient walk-out ratios.

Simply put, the rule of thumb during this assessment and identification phase is to identify as many influencers as possible. Be creative. Remember that in the new approach to risk, every risk represents a golden opportunity to improve.

Ultimately, the new paradigm sees risk as a leverage point to manage for competitive gain, rather than an unavoidable, negative aspect of doing business that is administered just to avoid loss.

Your last task is to create a "risk map" with risk influencers listed on a four-quadrant grid from low to high, using frequency and severity as your X- and Y-axes. Risk influencers that are high in both severity and frequency are your initial targets for improvement initiatives.

DEVELOP YOUR PLAN

Integration and automation make up the backbone of the new approach. In other words, having the best risk data strategy in the world with a sophisticated list of priorities identified and ready is pointless unless these variables can "talk to each other."

The silos must have a means of connection and the data must be made accessible--not only to stakeholders in other departments--but to the system itself so that it can perform the magic of which it is capable.

The new approach is a management mindset but also a technology play. With the help of your IT staff, you'll need to assess whether to build or buy the technology, and whether you want to host the database servers in-house, or outsource via the Internet to a provider. Finally, you'll need to decide which technology provider is right for you.

You'll be judging your technology platform against six criteria:

Scalable -- Whether your initial implementation is very small and basic or very large, it will inevitably need to grow as you grow, without costly and disruptive changes to the system.

Modular -- It has to be built using components so that new functionality is easily plugged in and outdated components can be easily upgraded.

Reliable -- Once you're managing with the system, you'll want minimum downtime.

Flexible -- It will need to operate with multiple technology platforms, not only making it easier to install, but also enabling it to report out and receive data from more external and internal sources.

Secure -- The system has to be secure enough to maintain HIPAA compliance and general corporate security.

Ease of Use -- Whether you're starting with a complete risk management information system (RMIS) or choosing to start with a limited series of individual tools, the user interface has to be intuitive to operate, so that managers are inclined and capable of utilizing that system to its full capacity.

IMPLEMENTATION

This is the phase where you switch on the system, turning data from random risk influencers and other variables into actual business intelligence that can transform your whole risk management and decision-making process. The ease, economy, effectiveness and satisfaction of this step is proportional to your strategy and planning in Steps 1 and 2.

If the idea of getting your organization to cross the chasm to the new generation of risk management is especially daunting, just remember that modern technologies have accounted for start-up challenges. There is no requirement to transition to total automation that tracks and manages 50 different quality initiatives and creates automatic algorithms for your risk drivers, all on day one.

What you need is to take the first step and get started. If you don't, you'll wind up watching from the sidelines while the competition moves from analog to digital and enjoys all the financial and operational benefits that go with it. If your system is designed to be scalable, modular and flexible, you'll be able to add to your new generation risk management operation.

The financial and operational rewards for your organization virtually guarantee to make your endeavor worthwhile. And, to complete the cycle from a health care provider's perspective, the ultimate reward is better, safer health care for the patients and families who depend on you.

GISELE NORRIS, DRPH, is senior consultant for Aon's National Healthcare Alternative Risk Practice. She provides strategic risk consulting services, specializing in alternative risk transfer.

KATHY BURNS is chief executive officer of Aon Risk Services Americas eSolutions Group.

November 1, 2006

Copyright 2006© LRP Publications