Risk Management

Risk Management by Design

Palo Alto-based The Risk Authority Stanford is incubating risk management solutions using design thinking; that means elevating end users into key roles in addressing health care risk exposures.
By: | January 9, 2017 • 7 min read

A health care risk management team based in Silicon Valley is using the latest technology to make patients, doctors and health care systems safer and more sustainable.

Using the concept of design thinking, veteran health care chief risk officer Jeff Driver and his team at The Risk Authority Stanford believe they can engage risk and mitigate it in a way that involves client participation and is client-specific.

Design thinking, briefly stated, involves enlisting the participation of end users to find and build the solution to a pain point.

Here’s Simon Mawer, The Risk Authority Stanford’s assistant vice president of risk management, on that topic in more detail.

“Design thinking is using the tools and mindsets of designers to address problems outside the traditional fields of design. It’s a process that elevates people—and more particularly, the end-users of a product, transaction, or system—as experts for understanding the frontline realities behind the hard data. Through a creative, collaborative and experimental process, design thinking helps us generate solutions that are effective, because they are uniquely shaped by and for the people and the context for which they are designed.”

Jeff Driver, CEO, The Risk Authority Stanford

In his decades-long experience as a health care risk manager, Driver, The Risk Authority Stanford’s CEO, said he repeatedly encountered situations where off-the-shelf risk analysis products with supposedly sterling resumes and recommendations failed.

“We know from 20 years or so of purchasing solutions that not all solutions really work,” Driver said.

“There are closets full of these solutions that have never taken off,” he said.

“Design thinking solutions are those solutions that emerge from the sharp end or where the problem originates,” he said.

“We use a team of risk managers and staff quality experts to look at the possibilities of designing a solution that is specific to that problem and that culture, rather than buying an off-the-shelf solution,” he said.

It’s on the beat of that word “culture” where a lot of health care risk managers will start nodding their heads.

All work cultures are complex. The degree to which interpersonal dynamics or workplace culture can affect performance in areas like operations and risk management cannot be underestimated.

One traditional communication snare in health care is between doctors and nurses. A veteran nurse might see a doctor making a mistake, but because of the hierarchies that can exist in a hospital, won’t say anything.

Overwork, staff on staff or patient on staff violence in workplace settings, or miscommunication due to simple language differences can all lead to disruption and distraction, with the end result that those the profession swears not to harm get harmed.

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Veronique Grenon, a vice president of analytics with The Risk Authority Stanford, talks about how analytics can drive understanding of cultures, to unearth the places where one member of a hospital team, or a patient, may have one view of a medical error or event, and another party may see things through an entirely different lens.

“I think analytics is like writing a story. But data reporting isn’t enough anymore. We are working on predictive and prescriptive analytics,” Grenon said.

“We need to know what to focus our risk management strategies on,” she said.

Let’s say a medical error occurs and is reported. Using analytics to understand who initiated a report in a given system can help a risk analyst’s valuable perspective on that report, compared to other reports produced about the same health system.

“Where did this initiate, did it initiate by a patient complaint? Or did it initiate from a nurse’s concern?”

And then analyzing the event based on who wrote the report.

“The new modeling techniques are there to help us with that. We use natural language processing, machine learning, sentiment analysis to uncover more of not just the hard facts but information about the patient and how they are feeling,” Grenon said.

Veronique Grenon, vice president of risk analytics, The Risk Authority Stanford

“We combine data sets, create common language, and analyze data from many sources,” she said.

Drawing on her background as an actuary, Grenon is using analytics to touch every piece of what The Risk Authority Stanford is doing, be it a new product for insurance underwriters who are trying to get a grasp of their health care clients risk exposures, or risk managers who are trying to get their hands on a tool that can help them understand, in a more intimate way, the risks within their own organizations.

“We are using risk analytics to understand where our hotspots are,” she said.

“Then we use design thinking, we want to uncover the true drivers of the issues we are seeing. And then we create solutions,” she said.

“Together they are very powerful and complement each other very well,” she said.

“I am really glad I am a part of this project,” she said. “I was skeptical at the start and now I love it.”

“The most exciting thing about the work that Vero(nique) and her colleagues are doing is that they are giving us an accurate, nuanced, and actionable running start into the most important issues driving liability risks,” said Mawer.

“We say the data provides a direction for investigation—and to really understand clinical risks you have to walk in the shoes of the people you are designing for: before you start going straight to solutions, you have to empathically understand the people and the systems in which they live and work, from their perspective,” Mawer added.

Innovence

Driver founded what was then known as Stanford Risk Consulting in 2009. By 2013, the group decided to shed its nonprofit status and enter the for-profit realm as The Risk Authority Stanford.

“Over time we accomplished that but we had this whole other side of our brain so we built this new product which we call ‘Innovence,’ said Driver. The name is a cross between “innovation” and “evidence”.

The software piece of the business is known as Innovence Pulse. One product, Innovence Pulse: Enterprise, is helping carriers look at the data from their insureds to understand what is driving losses at those insured entities.

A second software product, Innovence Pulse Risk Manager, was released this past fall. That product allows risk managers to essentially “shrink wrap” an analytics solution around their particular set of risks, allowing them to get their arms around disparate sets of data systems.

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The Risk Authority Stanford’s Grenon said that while some modules of Innovence Pulse are complete and some are still under construction, the team is, in a sense, always in process.

“We’re giving risk managers a tool to be proactive about what they are doing,” Grenon said.

“My personal objectives come into this as well,” she said.

“I don’t want to add a data entry burden to people. I want to be able to use what intelligence is available

History

Jeff Driver’s first job in health care risk management was at tiny Geauga Hospital in Chardon, in Ohio’s Amish country.

“Literally, the Amish would roll up in their buggies, take off their boots, leave them at the door and walk in with bags of cash,” Driver recalls.

From those humble beginnings at a 110-bed hospital in Ohio, Driver is using his Silicon Valley connections to shape the future of the health care risk management profession.

The Risk Authority, as it is known for short, not only consults in risk management for Stanford Health Care and Stanford Children’s Health, but works with health care clients and insurance carriers across the globe.

Due to confidentiality agreements, Driver can’t reveal the carriers or the hospitals that he is working with. Suffice to say that there are a number of them.

Driver’s career in health care began some years earlier than that risk management stint in Chardon, when he worked at the Cleveland Clinic as a respiratory therapist. Almost immediately, he was confronted with the issue of medical error.

It didn’t take long for him to decide that he wanted to study and help mitigate medical error(s) and their aftermath for a living.

“I was personally involved in medical errors,” Driver said. “I watched other people be involved in medical errors,” he said.

“It changed my vision of what I wanted to do. Rather than be a clinician I wanted to be a person that was involved in preventing those kinds of errors,” he said.

Following risk management positions at San Diego Children’s Hospital and at the Beth Israel Deaconess Medical Center in Boston, Driver took a position as the Chief Risk Officer at the Stanford University Medical Center in 2004.

The move to Stanford was fortuitous because it placed Driver in one of the leading medical facilities in the country. It also put him in Silicon Valley, in the company of hundreds of aspirational people who through a technology revolution, are reshaping commerce globally.

“Obviously we are heavily influenced by our geography,” said Driver.

“On the Stanford campus we are right in the middle of Silicon Valley,” he said.

“Hewlett Packard is right across from us. Google is right here. You mingle with these people and you can’t help but want to learn about what they are doing.”

Simon Mawer, assistant vice president of risk management, The Risk Authority Stanford

Like Driver, The Risk Authority’s Simon Mawer encountered the issue of medical error earlier in his career, became intrigued by its dynamics and was drawn to a career in health care risk management.

Mawer began his professional life as a litigator in Australia, working in the tort-liability field on cases involving personal injury, medical malpractice and aviation accidents, among other topics.

“Part of what I loved about that work was the sacred privilege of meeting people in their hour of greatest need, understanding their situation deeply, and advocating in close collaboration with them for the resolution they deserved,” Mawer said.

Mawer moved to California, and worked for a number of years in claims and litigation in-house for the Stanford University health system. That experience deepened his knowledge of the importance of empathy in understanding how patients view health care, and how wronged they can feel if they are injured as part of their medical treatment and their concerns not listened to.

“After spending hours and hours listening to the experiences of patients, nurses and physicians in the aftermath of medical errors and health care gone wrong, I developed a passion for getting on the other side of it, to see if I could be part of preventing the errors themselves, and solving the issues that forced patients to sue in order to get the support they needed,” he said.

“It made no sense to me that after a medical injury, patients should be further harmed by the claims handling process,” Mawer said.

It’s a classic and painful —some might say shameful— dilemma in health care risk management that injured parties traditionally felt shut out by the way claims are handled in the aftermath of medical error.

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Legal counsel might be given to the treating physician to not speak to the injured party. Getting any information about how the mistake happened, be it wrong-site surgery, the wrong medical dose given, or some other mistake, proved to be extremely difficult for most patients.

Many times, to get the information they needed, to get an apology, or to get the financial support they needed to heal, patients and/or their families did the only thing they thought they had available to them; they sued.

In the super-powered environment of Silicon Valley, Driver and his colleagues are marshalling analytics and the concept of design thinking to find a way to avoid that kind of outcome. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Scenario

A Recall Nightmare: Food Product Contamination Kills Three Unborn Children

A failure to purchase product contamination insurance results in a crushing blow, not just in dollars but in lives.
By: | October 15, 2018 • 9 min read
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

PART ONE: THE HEAT IS ON

Reilly Sheehan, the Bethlehem, Pa., plant manager for Shamrock Foods, looks up in annoyance when he hears a tap on his office window.

Reilly has nothing against him, but seeing the face of his assistant plant operator Peter Soto right then is just a case of bad timing.

Sheehan, whose company manufactures ice cream treats for convenience stores and ice cream trucks, just got through digesting an email from his CFO, pushing for more cost cutting, when Soto knocked.

Sheehan gestures impatiently, and Soto steps in with a degree of caution.

“What?” Sheehan says.

“I’m not sure how much of an issue this will be, but I just got some safety reports back and we got a positive swipe for Listeria in one of the Market Streetside refrigeration units.”

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Sheehan gestures again, and Soto shuts the office door.

“How much of a positive?” Sheehan says more quietly.

Soto shrugs.

“I mean it’s not a big hit and that’s the only place we saw it, so, hard to know what to make of it.”

Sheehan looks out to the production floor, more as a way to focus his thoughts than for any other reason.

Sheehan is jammed. It’s April, the time of year when Shamrock begins to ramp up production for the summer season. Shamrock, which operates three plants in the Middle Atlantic, is holding its own at around $240 million in annual sales.

But the pressure is building on Sheehan. In previous cost-cutting measures, Shamrock cut risk management and safety staff.

Now there is this email from the CFO and a possible safety issue. Not much time to think; too much going on.

Sheehan takes just another moment to deliberate: It’s not a heavy hit, and Shamrock hasn’t had a product recall in more than 15 years.

“Okay, thanks for letting me know,” Sheehan says to Soto.

“Do another swipe next week and tell me what you pick up. I bet you twenty bucks there’s nothing in the product. That swipe was nowhere near the production line.”

Soto departs, closing the office door gingerly.

Then Sheehan lingers over his keyboard. He waits. So much pressure; what to do?

“Very well then,” he says to himself, and gets to work crafting an email.

His subject line to the chief risk officer and the company vice president: “Possible safety issue: Positive test for Listeria in one of the refrigeration units.”

That night, Sheehan can’t sleep. Part of Shamrock’s cost-cutting meant that Sheehan has responsibility for environmental, health and safety in addition to his operations responsibilities.

Every possible thing that could bring harmful bacteria into the plant runs through his mind.

Trucks carrying raw eggs, milk and sugar into the plant. The hoses used to shoot the main ingredients into Shamrock’s metal storage vats. On and on it goes…

In his mind’s eye, Sheehan can picture the inside of a refrigeration unit. Ice cream is chilled, never really frozen. He can almost feel the dank chill. Salmonella and Listeria love that kind of environment.

Sheehan tosses and turns. Then another thought occurs to him. He recalls a conversation, just one question at a meeting really, when one of the departed risk management staff brought up the issue of contaminated product insurance.

Sheehan’s memory is hazy, stress shortened, but he can’t remember it being mentioned again. He pushes his memory again, but nothing.

“I don’t need this,” he says to himself through clenched teeth. He punches up his pillow in an effort to find a path to sleep.

PART TWO: STRICKEN FAMILIES

“Toot toot, tuuuuurrrrreeeeeeeeettt!”

The whistles of the three lifeguards at the Bradford Community Pool in Allentown, Pa., go off in unison, two staccato notes, then a dip in pitch, then ratcheting back up together.

For Cheryl Brick, 34, the mother of two and six-months pregnant with a third, that signal for the kids to clear the pool for the adult swim is just part of a typical summer day. Right on cue, her son Henry, 8, and his sister Siobhan, 5, come running back to where she’s set up the family pool camp.

Henry, wet and shivering and reaching for a towel, eyes that big bag.

“Mom, can I?”

And Cheryl knows exactly where he’s going.

“Yes. But this time, can you please bring your mother a mint-chip ice cream bar along with whatever you get for you and Siobhan?”

Henry grabs the money, drops his towel and tears off; Siobhan drops hers just as quickly, not wanting to be left behind.

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“Wait for me!” Siobhan yells as Henry sprints for the ice cream truck parked just outside of the pool entrance.

It’s the dead of night, 3 am, two weeks later when Cheryl, slumbering deeply beside her husband Danny, is pulled from her rest by the sound of Siobhan crying in their bedroom doorway.

“Mom, dad!” says Henry, who is standing, pale and stricken, in the hallway behind Siobhan.

“What?” says Danny, sitting up in bed, but Cheryl’s pregnancy sharpened sense of smell knows the answer.

Siobhan, wailing and shivering, has soiled her pajamas, the victim of a severe case of diarrhea.

“I just barfed is what,” says Henry, who has to turn and run right back to the bathroom.

Cheryl steps out of bed to help Siobhan, but the room spins as she does so.

“Oh God,” she says, feeling the impact of her own attack of nausea.

A quick, grim cleanup and the entire family is off to a walk-up urgent care center.

A bolt of fear runs through Cheryl as the nurse gives her the horrible news.

“Listeriosis,” says the nurse. Sickening for children and adults but potentially fatal for the weak, especially the unborn.

And very sadly, Cheryl loses her third child. Two other mothers in the Middle Atlantic suffer the same fate and dozens more are sickened.

Product recall notices from state regulators and the FDA go out immediately.

Ice cream bars and sandwiches disappear from store coolers and vending machines on corporate campuses. The tinkly sound of “Pop Goes the Weasel” emanating from mobile ice cream vendor trucks falls silent.

Notices of intent to sue hit every link in the supply chain, from dairy cooperatives in New York State to the corporate offices of grocery store chains in Atlanta, Philadelphia and Baltimore.

The three major contract manufacturers that make ice cream bars distributed in the eight states where residents were sickened are shut down, pending a further investigation.

FDA inspectors eventually tie the outbreak to Shamrock.

Evidence exists that a good faith effort was underway internally to determine if any of Shamrock’s products were contaminated. Shamrock had still not produced a positive hit on any of its products when the summer tragedy struck. They just weren’t looking in the right place.

PART THREE: AN INSURANCE TANGLE

Banking on rock-solid relationships with its carrier and brokers, Shamrock, through its attorneys, is able to salvage indemnification on its general liability policy that affords it $20 million to defray the business losses of its retail customers.

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But that one comment from a risk manager that went unheeded many months ago comes back to haunt the company.

All three of Shamrock’s plants were shuttered from August 2017 until March 2018, until the source of the contamination could be run down and the federal and state inspectors were assured the company put into place the necessary protocols to avoid a repeat of the disaster that killed 3 unborn children and sickened dozens more.

Shamrock carried no contaminated product coverage, which is known as product recall coverage outside of the food business. The production shutdown of all three of its plants cost Shamrock $120 million. As a result of the shutdown, Shamrock also lost customers.

The $20 million payout from Shamrock’s general liability policy is welcome and was well-earned by a good history with its carrier and brokers. Without the backstop of contaminated products insurance, though, Shamrock blew a hole in its bottom line that forces the company to change, perhaps forever, the way it does business.

Management has a gun to its head. Two of Shamrock’s plants, including Bethlehem, are permanently shuttered, as the company shrinks in an effort to stave off bankruptcy.

Reilly Sheehan is among those terminated. In the end, he was the wrong person in the wrong place at the wrong time.

Burdened by the guilt, rational or not, over the fatalities and the horrendous damage to Shamrock’s business. Reilly Sheehan is a broken man. Leaning on the compassion of a cousin, he takes a job as a maintenance worker at the Bethlehem sewage treatment plant.

“Maybe I can keep this place clean,” he mutters to himself one night, as he swabs a sewage overflow with a mop in the early morning hours of a dark, cold February.

Bar-Lessons-Learned---Partner's-Content-V1b

Risk & Insurance® partnered with Swiss Re Corporate Solutions to produce this scenario. Below are their recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

Shamrock Food’s story is not an isolated incident. Contaminations happen, and when they do they can cause a domino effect of loss and disruption for vendors and suppliers. Without Product Recall Insurance, Shamrock sustained large monetary losses, lost customers and ultimately two of their facilities. While the company’s liability coverage helped with the business losses of their retail customers, the lack of Product Recall and Contamination Insurance left them exposed to a litany of risks.

Risk Managers in the Food & Beverage industry should consider Product Recall Insurance because it can protect your company from:

  • Accidental contamination
  • Malicious product tampering
  • Government recall
  • Product extortion
  • Adverse publicity
  • Intentionally impaired ingredients
  • Product refusal
  • First and third party recall costs

Ultimately, choosing the right partner is key. Finding an insurer who offers comprehensive coverage and claims support will be of the utmost importance should disaster strike. Not only is cover needed to provide balance sheet protection for lost revenues, extra expense, cleaning, disposal, storage and replacing the contaminated products, but coverage should go even further in providing the following additional services:

  • Pre-incident risk mitigation advocacy
  • Incident investigation
  • Brand rehabilitation
  • Third party advisory services

A strong contamination insurance program can fill gaps between other P&C lines, but more importantly it can provide needed risk management resources when companies need them most: during a crisis.



Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]