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Risk Data Integration Elevates Healthcare ERM

A truly integrated healthcare risk management platform will improve provider organization efforts to practice effective Enterprise Risk Management (ERM).
By: | April 18, 2017 • 6 min read

Healthcare risk management starts with patient safety. No other industry holds responsibility over people’s quality of life quite like healthcare, where mistakes hold dire consequences for patients, families, providers and organizations.

But there are many more risks to consider beyond this critical area.

Governance and compliance risk, emergency preparedness and business continuity, vendor and supply chain risk and strategic risks don’t exist in isolation. They are all interconnected, and many can impact patient safety.

“Patient safety is the traditional entry point for risk management in healthcare,” said Jay Lechtman, Senior Director, Market Development & Strategy, Riskonnect, “but you also need to look at the whole picture to understand how your risks are connected.”

“Just as healthcare provider organizations adopted lean six sigma from manufacturing, safety checklists from aviation, and high-reliability organizations from nuclear energy and defense, they are now adopting enterprise risk management from other industries — such as financial services — as a best practice.”

But ERM doesn’t necessarily place risks in context, and can still be fragmented. To ensure a more holistic approach, risk managers need to practice it as integrated risk management.

What is Integrated Risk Management?

Senior Director, Market Development & Strategy

Integrated risk management calls for risk managers to see the connections between different areas of risk and find solutions that mitigate the total exposure.

In a primer for member boards and trustees, the American Society of Healthcare Risk Management (ASHRM) explains that organizations can start with an enterprise risk management approach and then make comparisons among its risks to see how they interact with one another and what cumulative impact they have on the organization.

“That elevated view of risk is integrated risk management,” Lechtman said. AHSRM has been making efforts since 2014 to educate healthcare organizations on integrated risk management and provide tools to develop the approach.

And most if not all of these efforts come back to improving patient safety.

Pharmaceutical supply chain risk, for example, has often been involved with potentially dangerous medication errors.

“Medication errors are a commonly reported patient safety event, and drug shortages have frequently been identified as a causal or contributory factor in these errors,” Lechtman said. “It’s not a surprising fact. Clinicians unfamiliar with new drugs and their prescription and administration protocols are more likely to make mistakes.”

Yet, identifying drug shortages as a factor in isolation requires lengthy investigations, root cause analyses and enough data aggregation to see clear trends.  Somewhere there is a disconnect between supply chain risk management and downstream clinical risk management. Fragmented ERM fails to take into account how vendor risks can directly impact patients.

Now, external resources – like the FDA’s Drug Shortages Database – help healthcare providers monitor and manage this issue, but Lechtman argues that effective integrated risk management could have helped the solve the problem internally.

“In integrated risk management, the pharmacy supply chain risk could be identified and mitigated much faster, with protocols put in place to train staff on use of identified alternative medications to reduce unfamiliarity and error,” Lechtman said.

Crisis management and business continuity offer another example. New Conditions of Participation for Medicare that go into effect later this year will require healthcare providers to improve emergency preparedness, which includes having business continuity plans. Patient safety is again a critical factor in planning for transportation and use of backup supplies and facilities in the event of an emergency.

Nearly all hospitals and health systems report trying to implement ERM at some level of their organization. But, even if they want to integrate it, they have lacked the technology to enable the vision.

“Legacy vendors focus on patient safety, claims and risk management specifically designed for healthcare. They don’t support broader risk management, governance and compliance risk that healthcare organizations sorely need,” he said.

Achieving True Integration

Other industries, where patient safety isn’t a consideration, have been working towards an integrated approach for years. The financial services sector, for example, has been implementing Governance Risk and Compliance (GRC) solutions for much longer due to its exposure to regulatory and compliance risk. The healthcare industry’s late arrival to ERM gives it a unique opportunity to learn from others’ mistakes and “leapfrog” over other sectors, Lechtman said.

“Just as much of the developed world skipped building expensive wired communications infrastructure in favor of cell phones, healthcare has the opportunity to leapfrog into true integrated risk management and avoid the pitfalls of a fragmented, siloed ERM approach,” he said.

However, “it’s hard to succeed in integrated risk management when information systems can’t handle it,” Lechtman said.

The ideal integrated risk management solutions for healthcare need to excel at helping provider organizations identify and manage their unique hazard risks — like patient safety — while seamlessly scaling to other insurable and strategic risks types that healthcare shares with other industries. And, of course, they need to be able to secure sensitive healthcare data and support healthcare privacy compliance.

Seeing is Believing

Riskonnect’s Integrated Risk Management Solutions™ check all the boxes. Scalable on a single platform, the system can handle everything from patient safety, patient relations, claims and litigation management, peer review, accreditation and HIPAA compliance, employee safety and health, governance risk, reputation risk, reimbursement risk, vendor and supply chain risk, business continuity management and strategic risk.

“We’ve taken lessons from other industries, and we’ve incorporated that into our healthcare approach so that, instead of providing another limited point solution, we can do everything for healthcare risk and do it well,” Lechtman said.

Riskonnect backs up its technology with a combination of clinical healthcare experience and risk management expertise is that is necessary for risk managers to draw the connections between patient safety and other risk areas.

“If you can make the connection from other risk areas back to patient safety, you can improve that critical risk area faster and more effectively. “Limited and siloed patient safety systems just can’t do that.”

Riskonnect’s Integrated Risk Management Solutions™ can house and allow access to data and workflows connected to all risks. The solutions provide all the functions that a risk manager or claims professional might need, from notifications to determination of compensability through to follow-ups, and everything in between.

The description alone is compelling, but nothing compares to actually experiencing everything the system can do on a day-to-day basis.

“Seeing really is believing,” said Lechtman. “People are blown away when they see what true integrated risk management can accomplish.”

For more information on Riskonnect Healthcare, visit: https://riskonnect.com/integrated-risk-management-solutions/healthcare/

For more information on Riskonnect Integrated Risk Management Solutions, visit: https://riskonnect.com/integrated-risk-management-solutions/

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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 Riskonnect. The editorial staff of Risk & Insurance had no role in its preparation.




Riskonnect is the only global provider of Integrated Risk Management technology solutions. Built on the world’s leading cloud platform, Riskonnect finally allows you to break down the silos and unite your entire organization.

Cyber Liability

Fresh Worries for Boards of Directors

New cyber security regulations increase exposure for directors and officers at financial institutions.
By: | June 1, 2017 • 6 min read

Boards of directors could face a fresh wave of directors and officers (D&O) claims following the introduction of tough new cybersecurity rules for financial institutions by The New York State Department of Financial Services (DFS).

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Prompted by recent high profile cyber attacks on JPMorgan Chase, Sony, Target, and others, the state regulations are the first of their kind and went into effect on March 1.

The new rules require banks, insurers and other financial institutions to establish an enterprise-wide cybersecurity program and adopt a written policy that must be reviewed by the board and approved by a senior officer annually.

The regulation also requires the more than 3,000 financial services firms operating in the state to appoint a chief information security officer to oversee the program, to report possible breaches within 72 hours, and to ensure that third-party vendors meet the new standards.

Companies will have until September 1 to comply with most of the new requirements, and beginning February 15, 2018, they will have to submit an annual certification of compliance.

The responsibility for cybersecurity will now fall squarely on the board and senior management actively overseeing the entity’s overall program. Some experts fear that the D&O insurance market is far from prepared to absorb this risk.

“The new rules could raise compliance risks for financial institutions and, in turn, premiums and loss potential for D&O insurance underwriters,” warned Fitch Ratings in a statement. “If management and directors of financial institutions that experience future cyber incidents are subsequently found to be noncompliant with the New York regulations, then they will be more exposed to litigation that would be covered under professional liability policies.”

D&O Challenge

Judy Selby, managing director in BDO Consulting’s technology advisory services practice, said that while many directors and officers rely on a CISO to deal with cybersecurity, under the new rules the buck stops with the board.

“The common refrain I hear from directors and officers is ‘we have a great IT guy or CIO,’ and while it’s important to have them in place, as the board, they are ultimately responsible for cybersecurity oversight,” she said.

William Kelly, senior vice president, underwriting, Argo Pro

William Kelly, senior vice president, underwriting at Argo Pro, said that unknown cyber threats, untested policy language and developing case laws would all make it more difficult for the D&O market to respond accurately to any such new claims.

“Insurers will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure,” he said.

Going forward, said Larry Hamilton, partner at Mayer Brown, D&O underwriters also need to scrutinize a company’s compliance with the regulations.

“To the extent that this risk was not adequately taken into account in the first place in the underwriting of in-force D&O policies, there could be unanticipated additional exposure for the D&O insurers,” he said.

Michelle Lopilato, Hub International’s director of cyber and technology solutions, added that some carriers may offer more coverage, while others may pull back.

“How the markets react will evolve as we see how involved the department becomes in investigating and fining financial institutions for noncompliance and its result on the balance sheet and dividends,” she said.

Christopher Keegan, senior managing director at Beecher Carlson, said that by setting a benchmark, the new rules would make it easier for claimants to make a case that the company had been negligent.

“If stock prices drop, then this makes it easier for class action lawyers to make their cases in D&O situations,” he said. “As a result, D&O carriers may see an uptick in cases against their insureds and an easier path for plaintiffs to show that the company did not meet its duty of care.”

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One area that regulators and plaintiffs might seize upon is the certification compliance requirement, according to Rob Yellen, executive vice president, D&O and fiduciary liability product leader, FINEX at Willis Towers Watson.

“A mere inaccuracy in a certification could result in criminal enforcement, in which case it would then become a boardroom issue,” he said.

A big grey area, however, said Shiraz Saeed, national practice leader for cyber risk at Starr Companies, is determining if a violation is a cyber or management liability issue in the first place.

“The complication arises when a company only has D&O coverage, but it doesn’t have a cyber policy and then they have to try and push all the claims down the D&O route, irrespective of their nature,” he said.

“Insurers, on their part, will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure.” — William Kelly, senior vice president, underwriting, Argo Pro

Jim McCue, managing director at Aon’s financial services group, said many small and mid-size businesses may struggle to comply with the new rules in time.

“It’s going to be a steep learning curve and a lot of work in terms of preparedness and the implementation of a highly detailed cyber security program, risk assessment and response plan, all by September 2017,” he said.

The new regulation also has the potential to impact third parties including accounting, law, IT and even maintenance and repair firms who have access to a company’s information systems and personal data, said Keegan.

“That can include everyone from IT vendors to the people who maintain the building’s air conditioning,” he said.

New Models

Others have followed New York’s lead, with similar regulations being considered across federal, state and non-governmental regulators.

The National Association of Insurance Commissioners’ Cyber-security Taskforce has proposed an insurance data security model law that establishes exclusive standards for data security and investigation, and notification of a breach of data security for insurance providers.

Once enacted, each state would be free to adopt the new law, however, “our main concern is if regulators in different states start to adopt different standards from each other,” said Alex Hageli, director, personal lines policy at the Property Casualty Insurers Association of America.

“It would only serve to make compliance harder, increase the cost of burden on companies, and at the end of the day it doesn’t really help anybody.”

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Richard Morris, partner at law firm Herrick, Feinstein LLP, said companies need to review their current cybersecurity program with their chief technology officer or IT provider.

“Companies should assess whether their current technology budget is adequate and consider what investments will be required in 2017 to keep up with regulatory and market expectations,” he said. “They should also review and assess the adequacy of insurance policies with respect to coverages, deductibles and other limitations.”

Adam Hamm, former NAIC chair and MD of Protiviti’s risk and compliance practice, added: “With New York’s new cyber regulation, this is a sea change from where we were a couple of years ago and it’s soon going to become the new norm for regulating cyber security.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]