Cleveland Clinic leaders had discussed the need to do something about enterprise risk management (ERM) for years, said Charles Kolodkin, JD, executive director of enterprise risk and insurance for the health system. But the physician-driven organization did not amass the momentum necessary to launch a formal ERM process until the Great Recession hit.Seeing this as a wake-up call, Cleveland Clinic’s CFO and chair of the board’s audit committee pushed their fellow executives to adopt a more formal process for identifying and managing strategic, operational, and other types of enterprise risks and opportunities. “Without high-level support, there would not have been as much ‘oomph’ behind this,” said Kolodkin at ANI: HFMA’s Annual National Institute in June.Launched in 2010, Cleveland Clinic's ERM process is helping the health system successfully navigate the changing healthcare environment. The organization completed a full risk management cycle in 2012 and is now working to ensure a continuous and sustainable ERM approach (see the exhibit below).
“ERM has been very successful,” said Kolodkin. “Now that we are anticipating risks, we are no longer constantly defending our brand against unexpected risks. We are doing a better job?for example, before we sign contracts with vendors?at thinking through the ramifications of business opportunities.”
A common concern about ERM is that it can become a worthless exercise (i.e., complete a risk assessment and file the documents away). Another concern is that ERM programs tend to melt away after the initial momentum is lost. To ensure that its ERM process provides value and is sustainable, Cleveland Clinic developed a six-step approach. Establish the ERM structure and provide training. A steering committee was established with representatives from operations, accounting, risk management, legal, internal audit, and continuous improvement, as well as two physician leaders.The steering committee then created work teams of four to eight employees to “do the heavy lifting,” or conduct detailed assessments on specific risks, said Kolodkin. “We tried to create cross-discipline teams with someone from finance, operations, and maybe legal, as well as others who could provide insights into the specific risk being assessed. This way we made sure there was someone on the team with analytical skills, as well as other needed skills.” Each of the work teams has two executive sponsors (one physician leader and one non-physician leader) who serve as a sounding board for the team. Comprehensive training on ERM concepts and techniques was provided to members of the steering committee and all the work teams. “Many of these people, including the physicians involved, were not familiar with ERM. So we spent a lot of time on what we are trying to accomplish, how we define ERM, etc.” Identify risk categories and top risks. The steering committee spent time upfront determining how it wanted to categorize different types of risks to the organization, finally settling on six categories:
“One of things we’ve struggled with is the high value that we place on our brand and our reputation,” said Kolodkin. “We weren’t sure if ‘reputational risk’ should be a separate category of risk. In the end, we decided that reputational risk should transcend everything we do in ERM, versus just being one category of risk. Our reputation touches operations, strategy, etc. We want people to be constantly cognizant of protecting our brand.” Another major step in the ERM process was identifying Cleveland Clinic’s top risks under each of the six risk categories. The health system's consultant started this process by interviewing high-level leaders across the health system about potential threats to the organization’s reputation and livelihood. From these interviews, the consultant came up with a list of more than 100 potential risk areas. The steering committee then narrowed this list down to seven high-priority risks for which to deploy work teams:
Conduct detailed risk analyses. A work team was assigned to each of the seven risks. The teams conducted “deep dive” analyses of each risk. First, sub-risks were identified for each risk. For example, for the risk “mergers and acquisitions consistent with strategy and culture,” the work team identified three sub-risks:
The work teams then conducted detailed risk assessments of each sub-risk, breaking each sub-risk into logical components, gathering needed data and information, and making assessments or judgments. Determine how to mitigate and respond to risks. Kolodkin and two other leaders served as mentors to the teams, helping them sort through the risks and challenging them to consider questions such as the following:
The teams then developed a report to share with senior leaders about each sub-risk, using a template that is integrated with data from Excel files (see the exhibit below). These reports spell out the impact of the risk, planned mitigation activities, and metrics for monitoring each sub-risk. The reports also include a heat map that visually classifies each sub-risk by potential impact and likelihood. In some cases, the mitigation plans simply involved documenting what was already being done. “One of our top risks is clinical quality and safety. But we already had all types of risk indicators and processes in place to track and ensure quality. So for that work team, they mostly just had to document what we were already doing.” Continually monitor and report. The ERM steering committee makes regular reports (typically twice a year) to Cleveland Clinic’s leadership team and the audit committee about all the ERM activities. “Our reports to the board are high-level summaries of our top-risk areas and what we are doing about them,” said Kolodkin. Embed risk management in business. The health system plans to repeat this detailed risk assessment process every few years. “We don’t need to do the 50 interviews with high-level leaders again,” said Kolodkin. “We don’t want to reinvent the wheel. To guide our ERM initiative, we will use some of the work that our internal audit department does as well as the information we gather during various strategic assessments.” In addition, the health system is working to make risk assessment part of every leader’s job. One step is asking all service line and physician group leaders to identify major risks as a part of their quarterly business reviews, said Kolodkin. “We are now trying to challenge them to be prepared to talk about the major risks that are facing their groups and how they are measuring those risks.”
Finding the resources to carry out ERM is a key challenge, said Kolodkin. “We did not create a new department, said Kolodkin. Instead of adding FTEs, Kolodkin borrowed some FTEs (e.g., financial analysts) as needed.While this helped Cleveland Clinic manage costs, it has been a continuous struggle. “It’s a huge thing to manage your personnel. You are asking existing people to do more. So it’s a balancing act. To be successful, you cannot stretch your people too much or they will feel stretched and then they’ll just go through the motions and you won’t get a valuable product.” Another challenge is dealing with constant change. “When our work team was in the middle of assessing our business model, our business model changed. So we have to be continually responsive to changes and conduct new risk assessments when a risk is altered.”
Maggie Van Dyke is HFMA’s managing editor, Leadership, newsletters, and Forums. Quoted in this article: Charles Kolodkin, JD, executive director, enterprise risk and insurance, Cleveland Clinic, Cleveland.
Ontario Systems: Maximizing Self Pay Collections
The Claro Group: Helping Hospitals and Healthcare Systems Improve the Bottom Line
Deloitte: Helping Organizations Navigate MACRA
ClearBalance: Boosting Patient Payment through Consumer-Friendly Loan Programs
Deloitte Consulting LLP: Employing Innovative Solutions to Optimize Revenue Cycle Performance
Grant Thornton LLP: Maintaining and Improving Collections During an EMR Implementation
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10 Ways to Reduce Patient Statement Volume (and Reduce Costs)
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ICD-10: Managing Performance
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Revenue Cycle Payment Clarity
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Streamlining the Patient Billing Process
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Wallace Thomson Hospital Automates to Maximize Limited Resources
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7 Steps for Building and Funding Sustainability Projects
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Key Capital Considerations for Mergers and Acquisitions
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Yuma Regional Medical Center case study
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Reforming with a New 50-Bed Acute Care Facility
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
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5-Minute Briefing on Reducing the Cost of RCM WhitePaper Hospitals FS
Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.
Providers Focus Too Much On Revenue Cycle Management
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Lucille Packard Children’s Hospital Stanford Case Study
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
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ZOLL and Emergency Mobile Health Care Case Study
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Denials Deconstructed: Getting Your Claims Paid
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