Elements of an Effective Program to Reduce Medical Liability Risk
Every healthcare organization should have a clear strategy to reduce its medical liability risk. Certainly, all hospitals, systems and physician groups aspire to work assiduously on quality and safety, patient satisfaction and other indicators. But, rarely do organizations intentionally measure and place a focus on these issues with an eye on their malpractice risk.
The cost of poor quality is well documented. It has been estimated up to 30% of healthcare costs in the United States are due to poor quality. For a healthcare organization, these costs translate to lost reimbursement, diminished referrals, declining patient satisfaction and potential litigation.
Reducing the Impact of Litigation
The cost of litigation is significant, well beyond legal and court fees. There is the human cost of the impact of a suit on physicians and other providers. We have seen doctors begin to question themselves, become less cost-effective or efficient, and show increasing signs of burnout during litigation. There is also an enormous opportunity cost related to the diversion of resources away from organizational advancement into deposition, trial preparation, case review, and other time-consuming activities.
Finally, there is the significant cost of settlement or loss, ultimately reflected in the overall cost of insurance. We believe much of this cost is avoidable through an intentional and consistent program of risk assessment and improvement. We also believe this program can be complementary and additive to existing efforts in quality and safety. Healthcare systems must improve their reliability, and the foundation of High Reliability Organizations is that they all take a proactive mindset for identification of risk.
The cost of litigation is significant, well beyond legal and court fees.
The Impact of Risk Mitigation on Insurance Costs
Healthcare organizations, including larger physician groups, are increasingly self-insured for some layer of their coverage, either individually or in partnership with other organizations. In addition, the traditional separation of physician and hospital exposure has diminished as more hospitals and systems employ physicians. Captive insurance strategies and risk retention groups are common. Despite this higher level of control and liability, most of the focus at board meetings and strategic sessions are on traditional insurance issues, and even highly integrated systems often neglect the clinical and cost opportunities of investing in risk mitigation.
Likewise, insurance companies in the professional liability space face significant pricing competition in the market, which can constrain profits. Partnering with their insureds by supporting a program of risk reduction can be an effective way to add value while lowering exposure and cost.
A common strategy in this area is a highly focused review of a hospital area, such as maternity or the emergency department, resulting in a series of recommendations on areas of risk exposure. While effective in that specific area, however, this approach is limited by its time intensity, lack of scalability and extremely hospital-centric approach.
The Hidden Factory
This strategy also does not impact the systemic, day-to-day performance of the organization. Consider the concept known as the hidden factory. There’s what leadership THINKS happens (perfect care), and then there’s what ACTUALLY happens (good people working in flawed systems, so they develop work-arounds and frequently circumvent safety protocols).
Within the concept of the hidden factory:
- 4% of problems are known to executives
- 9% of problems are known to middle managers
- 74% of problems are known to supervisors
- 100% of problems are known to the front-line workers (physicians).
Just ask those on the front line. We are certain they’ll echo these sentiments.
Implementing a Truly Effective Program
We have found that truly effective programs promote a system by which organizations can proactively identify practices that could decrease risk and errors and/or increase patient experience. These programs must include the following characteristics:
- Directly engage the provider, who knows where the problems are, in assessing their practice performance on key best-practice elements to reduce risk efficiently and easily.
- Test evidence-based care in a focused, specialty-specific manner.
- Measure key indicators of patient satisfaction and engagement.
- Help physicians stay healthy by measuring their involvement in key activities to stay well.
- Provide easy-to-read comparison reports for the providers and managers, which create focused priorities enabling manageable but effective change.
- Provide resources to support improvement.
- Structure the program so it’s easily scalable for large organizations.
Simply put, investing in an effective risk management program is the ultimate win for the complex stakeholders in a healthcare system: physicians, liability insurers, health system management, and most importantly, patients.