Take a look at the University of Michigan\'s approach to risk management: www.he

Question

Take a look at the University of Michigan's approach to risk management: www.healthcarefinancenews.com/news/hospitals-face-risk-management-head (Links to an external site.) Links to an external site. What "tools" do you think make these programs effective. Stanford and Harvard are both taking leads (as of today as well). This article was published almost five years ago. Why are some areas slower to conform? Why do many health institutions and systems throughout the U.S. continue to place risk management as a "lower" priority than other institutional programs? Also, you see the results accomplished in this article; how may the results illustrated increase organizational financial security?

Explanation / Answer

What "tools" do you think make these programs effective?

Assessing the risk management programs makes these programs effective. Two approaches to assessing these programs are Capital Asset Pricing Model (CAPM) and Probabilistic Risk Assessment Model (PRA). PRA is based on the single point estimates of the probability of occurrence. In other words, PRA addresses uncertainty by generating metrics, prioritizing these metrics and then developing responses and the final step is tracking the risk from the components. For University of Michigan's approach to risk management, the best tool to make the programs effective is the PRA tool.

Why are some areas slower to conform?

Yes, as the article states some areas are slower to conform. As mentioned in the article, ‘Despite the advances, Summy said the industry is “just scratching the surface” of risk management.’ This is because the risk management did not gain importance then and hence the performance assessment was slower to confirm. The prioritization of other institutional goals was of prime importance for the hospital.

Why do many health institutions and systems throughout the U.S. continue to place risk management as a "lower" priority than other institutional programs?

Many health institutions’s prime motive was to reap more profits irrespective of the quality of the care provided. Since the priority was in monetary terms, risk management was of lower priority than other institutional programs.

Also, you see the results accomplished in this article; how may the results illustrated increase organizational financial security?

The results indicate that the loss ratio has been decreased which means many patients seek the hospital due to its growing reputation of reduced risk. This will lead to more of financial transactions in the health care sector which provides the return for the investments. In other words, the financial gain is more based on the reduced risk level. This definitely provides an increase in the organizational financial security. Where there are more returns there is more of financial security.

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