Designing an ERM Infrastructure A Model from Healthcare

1. Designing an ERM InfrastructureA Model from Healthcare Michelle Hoppes, RN, MS, AHRMQR, DFASHRM-SVP Sedgwick HRM&PS Grace Crickette, Chief Risk Officer, UC Linda Epstein Esq., Acting General Counsel, Health Management Associates, Inc.

2. Discussion Items • ERM Program Design • Internal and external review • Identify key risk indicators • Key Components of Successful Programs • Healthcare Case Studies • Focus area—acquisitions and critical event investigation • Tools at the front line-embedding ERM • Overcoming Barriers • Outcomes • Demonstrating Value Protection and Creation

3. ERM Components Uncertainty Management Holistic Approach Value Protection Value Creation

4. ERM Model and Domains Value Protection And Value Creation Holistic Approach Operations Clinical / Patient Safety Strategic Technology Legal / Regulatory Hazard Environment Human Capital Financials ERM

5. Checklist for Successful ERM Process • A process not a program • Assess risk culture regularly • Support by board and senior management • Part of operational culture with process owners and drivers • Long term strategic view of risk • Customized to your organization • ERM at the front level: understanding role in managing risk • Risk is considered in all facets of decision making • Continually optimize risk strategy • Focus on most significant • Infrastructure/accountability • Robust risk identification • Accurate identification of key risk indicators • Metrics are actionable • Mitigate, manage, monitor • Defining risk appetite and risk tolerance/capacity • Risk domain owners-accountable • Evaluation of internal and emerging risks • Early warning systems—no surprises • Modeling to forecast risk • Measuring TCOR and benefits

6. First Steps in ERM Infrastructure Risk Potential Internal External • Current • Emerging • Unknown • Assess • Culture • Profile • Market change • Regulatory • Legal

7. External Market Forces FUTURE PAST -PRESENT never events value based volume based first do no harm ERM model business intelligence patient safety – national imperative reform Risk Manager as Decision Facilitator--Leader

8. Economic Futurist Value based • Aligning hospitals, physicians, and other providers • Utilizing evidence-based practices to improve quality and patient safety • Improving efficiency through productivity and financial management • Developing integrated information systems first curve second curve Volume based

9. Reform Implications • Most sweeping change to health care since Medicare was enacted • Transformative awakening Healthcare • Demand for services will increase astronomically • Fundamentally alters the healthcare landscape

10. The Demand – The Risk • Nursing shortage will exceed 800,000 by 2020 • Shortage of 85,000 to 96,000 doctors by 2020 • Boomers aging • 33-40 million more to be insured • Health Resource • And Service Admin • Council Grad Med • Education • Patient • Protection Act

11. Economic Futurist • Core Organization Competencies • Patient centered-integration and collaboration • Accountable-leadership • Electronic data for PI • Strategy in unstable environment • Engage employees full potential • Financial stewardship – Enterprise Risk Management • Patient • Protection Act

12. IOM – New Frontiers in Patient Safety Cost of Medicare 91% increase trend next decade “Only serious when on no pay list “ 2001-2009 Central line infections drop 63% Partnership for Patients Reduce preventable harm 40% Two choices: Spend less or improve care CMS Innovation Center Save $50 billion in 10 years

13. CMS Innovation Center • 40% reduction preventable harm • Hospital engagement contractors • $500 million • Adverse drug reactions • CAUTI, CLABSI, VAP, VTE, SSI • Falls • OB adverse events • Readmissions • Target

14. Healthcare Top Risks • Value based reimbursement - PI • Patient safety and quality HAC prevention • Medicare fraud and abuse • Terrorism • Pandemic • Environmental • Healthcare reform • Professional staff shortages • Economy - revenue stress • IT-EMR

15. Internal Assessment – Broad Categories of Review

16. Acquisition-Sample Due Diligence Areas

17. Key Documents

18. Drill Down-Example Risk List

19. Tour-Assessment and Clinical Safety Profiling

20. High Risk Areas

21. High Risk Clinical Areas-Drill Down

22. OB Bundles AUGMENTATION VACUUM ELECTIVE INDUCTION • Documentation of estimated fetal weight • Normal fetal status (per NICHD tiers) • Pelvic exam prior to the start of Oxytocin • Recognition and management of tachysystole • Alternative labor strategies considered • Prepared patient • High probability of success • Maximum application time and number of pop-offs predetermined • Cesarean and resuscitation teams available • Gestational age greater than or equal to 39 weeks • Normal fetal status (per NICHD tiers • Pelvic exam prior to the start of Oxytocin • Recognition and management of tachysystole

23. ERM in a Decentralized Organization • Identify the key risks that will interfere in meeting our Mission • Everyone’s a Risk Manager ERM • Office of the President sponsors numerous risk treatment initiatives • Identify risk treatments and leverage the Power of Ten

24. ERM Program: Focus on Tools Example “High Tech” Enterprise Risk Management Program “Low Tech” Business Processes “No Tech” • “No Tech” – Informational Content • Distributed via web/email • “Low Tech” – Partial Automation of Data • Excel based, e.g. risk assessment tool • “High Tech” – Information Systems • Cognos based business analytics and optimization • Custom-built information systems

25. ERMIS Business Architecture

26. ERM at the Event Level Adverse Event Claim / Lawsuit Incident (includes near misses) • Adverse event directed to category manager/quality & risk* • Directed to local risk manager, claims adjuster, OGC and OPRS • Incident reporting system captures identified event or near miss • Serious events identified and reviewed by weekly quality of care steering committee • Case reviewed by facility risk committee for quality of care issues • Directed to category manager • Sentinel event/root cause analysis • Corrective action is reported to board of regents as part of request for settlement • Trend reports developed by location quality or risk • Metrics & benchmarks • Retrospective reviews/UC action • Metrics & benchmarks • Trend reports provided to location quality & safety committee • Trend reports provided to location quality & safety committee • Trend reports are forwarded to the location executive committee of the medical staff • Trend reports are forwarded to the location executive committee of the medical staff • Trend reports provided to governing body • Trend reports provided to governing body

27. Resources for Integration Source: http://www.ucop.edu/riskmgt/erm/bulletins.html

28. UC Action Background Basic system functionality was originally intended to be a campus specific activity tracking tool Original tool was repurposed to automate the retrospective review process Team has made multiple presentations on the proposed functionality of the tool, and incorporated changes and suggestions from campus and medical center risk managers whenever possible

29. Tools for Evaluating Risk

30. Overcoming Barriers • ERM is not just about the deliverables!! • Not just a Risk Assessment, or a Strategic Plan, or Mitigation Plan • ERM does not replace what you are already doing but rather leverages these activities and builds on them • ERM is about the thought process-does not replace your professional experience or judgment! • Value of ERM • Improved management of risks • Improved quality and sustainability of controls • Consistent approach and terminology used across the organization • Improved visibility and understanding of risk across the entire organization (causality as well as impact) • Makes Everyone a Risk Manager!!!

31. DashboardsA Key Component of ERM Infrastructure High Level and Drill Down

32. Monitoring: Example Key Risk Indicators

33. ERMIS Dashboards Background • Users - Risk Managers enterprise wide, enterprise leadership, general counsel’s office, external finance staff, UCSF Police Department personnel, and medical center HR and quality departments • Web based BI solution • Designed to provide: • Better quantitative analysis capabilities • Improved analytical and reporting capabilities • Support for leading risk governance and compliance processes • System wide visibility, with local flexibility • Scalability without additional burden on UC staff

34. ERMIS Cognos Dashboard Development Priority Pipeline Process Overview Steps Process Overview Steps Process Step Indicators Process Step Descriptions 1. Receive Dashboard Request 5. Dashboard Design & Development 2. KPI Development & Data Availability 6. Prototype Testing 3. Develop Solution Outline (Mock-Up) 7. Design Review and Final Approval 4. Data Acquisition • = Completed  = Started • ™= Not Started

35. Overcoming Barriers

36. Outcomes Return on Investment (ROI)

37. Key Components Driving Value • Reduce Cost of Risk • Create Efficiency • Reduce IT and Operational Redundancy • Improve Cost of Borrowing ERM process- tools include these four components: Create Efficiency – Benefits that result in saved time, fewer resources, or faster cycle time Reduce Cost of Risk – Benefits that result in a lower risk exposure, fewer claims, less expensive claims, lower insurance rates or reduced administrative costs Improve Cost of Borrowing – Benefits that result in improved debt ratings and reduced borrowing rates Reduce IT and Operational Redundancy – Benefits that allow users to leverage a single tool to support multiple activities, or support a single process system-wide to achieve consistency

38. Example: ERM Benefits in Healthcare • First non-financial institution to receive credit agency acknowledgement of ERM program • System-wide ERM information system • Drive down total cost of risk to 13.43 per $1000 of operating budget • Cost avoidance ($493 million)

39. Preventing Harm-OB Example • 16 hospitals • Perinatal safety initiative • Bundles • Induction • Vacuum • Standardize • Measure harm • Adverse outcome index • 8% decrease in adverse outcomes • 790 births • Preliminary claim costs: 33% to 14% OB PROCESS OUTCOMES

40. OB Risk Management Intervention-Shoulder Dystocia Intervention- 2004 Outcome-decreased SD loss

41. Future Risk Management • Outcomes in Value Creation • Quantify Risk • Decision Analysis Demonstrate Experts Facilitators Outcomes – Data - ROR Operational Excellence SSE rate decreased 70% TCOR less than $10 per $1000 of operating budget ERM metric compliance 98%

42. Notes Information is educational and is based on several references including but not limited to: • AON 2009 and 2010 Global Risk Management Survey • Greater Expectations, Greater Opportunities-Excellence in RM VIII –RIMS/Marsh 2011 • ERM Framework-Committee of Sponsoring Organizations of the Treadway Commission • AON/ASHRM Benchmarking and Liability Report-2010 • This presentation is for informational/educational purposes only. The speakers do not warrant as to the accuracy of the data or opinions expressed.

43. Designing an ERM InfrastructureA Model from Healthcare Michelle Hoppes, RN, MS, AHRMQR, DFASHRM-SVP Sedgwick HRM&PS Grace Crickette, Chief Risk Officer, UC Linda Epstein Esq., Acting General Counsel, Health Management Associates, Inc.