Live Webinar | Medicare Payment and Reimbursement
Save
Live Webinar | Innovation and Disruption
Save
Live Webinar | Patient Financial Communications
Save
Live Webinar | Operations and Other Technology
Save
Column | Enterprise Risk Management

Assessing Risk in Healthcare Finance Calls for Stewardship

Column | Enterprise Risk Management

Assessing Risk in Healthcare Finance Calls for Stewardship

Amid the healthcare industry’s ongoing transformation, healthcare leaders are called upon to be stewards in guiding their organizations through change and managing financial and operational risk.

How much risk is too much? What’s not enough? These questions have been at the heart of many healthcare leader discussions over the past decade.

Our industry has pivoted in strategy to focus on value-based care and population health management, prompting vast investments in infrastructure, talent, scale, and innovation to create a new financial and operational risk profile for healthcare organizations. Meanwhile, the regulatory environment ebbs and flows with changes in leadership and policy at the federal and state levels, with different cadences and twists according to each market’s unique characteristics.

At the root of this transformation, healthcare leaders, board members, and physicians are called to be stewards. They must consider what’s been entrusted to them while gauging the risks and benefits of action or inaction in the context of their local communities and organizational strategy. Many have embraced the perspective expressed by Mark Zuckerberg: “In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”

Against this backdrop, finance professionals are at the center of teams “leading the change,” developing complex risk-mitigation tactics to anticipate possible trends, outcomes, and implications for significant risks to their organizations. As they rigorously execute strategy, they weave in these tactics to create an integrated enterprise risk framework aligned with the organization’s overall strategy and direction.

Among the most common mitigation tactics are cadence, resource allocation, and collaboration. Staged deployment of strategy, or the cadence of change, aligns the pace of internal change and resource consumption with demand and acceptance from the external environment. For example, if we create a solution that payers are unwilling to pay for or consumers are unwilling to adopt, we take on significant risk. A staged deployment, however, creates decision points along the change curve to ensure the appropriate amount of risk supports the time interval.

Another tactic is allocating a specific amount of energy, time, and resources to invest in innovation outside of core service lines. The result is a shared, clearly delineated understanding of what and how much risk the organization can take, for how long, and to what degree, thereby enabling the organization to have a higher risk tolerance within a well-defined, narrow scope and strategy.

The third tactic is collaboration versus creation. Partnerships, acquisitions, and collaboration create value by flexibly and speedily providing access to the expertise, risk-bearing capabilities, scale, and influence needed for success. The delay to market, external competitors, and overall scarcity of resources have lowered past hurdles between organizations related to a need for exclusive control and autonomy.

There’s no one magic answer to the risk question. Instead, it’s a matter of stewardship—and diligently defining it, one organization at a time.

About the Author

Carol A. Friesen, FHFMA, MPH,

is HFMA's 2017-18 National Chair. 

Sign up for a free guest account and get access to five free articles every month.

Advertisements

Related Articles | Enterprise Risk Management

Column | Healthcare Business Trends

Paul Keckley: Inflation’s impact on healthcare: 5 takeaways

For healthcare finance professionals, healthcare inflation requires intensified efforts to address five concerns: increased bad debt, increased operating costs, heightened public scrutiny of pricing policies and executive compensation, increased competition by privately funded competitors offering low-cost solutions and growth of “Occupy Healthcare” movements.

Blog | Enterprise Risk Management

Federal government, American Hospital Association issue warnings and guidance about cybersecurity threats stemming from the conflict in Ukraine

The potentially heightened risk stems from the possibility both of being targeted directly and being impacted by malware that spreads from other sectors.

Article | Cost Effectiveness of Health

5 ways the ERM playbook for health systems is due for a rewrite

Business risk for health systems has continued to evolve amid huge changes affecting the industry, including those driven by COVID-19. Health system leaders should respond by revisiting their approach to enterprise risk management (ERM) to focus on five areas of risk where their ability to deliver healthcare cost effectively could be compromised: Labor shortages, capital planning amid ongoing change, energy consumption, cyber security and price transparency.

How To | Cost Effectiveness of Health

4 essential tactics for sustaining an independent community hospital

Independent community hospital face threats to their survival, and they need to take deliberate action to address those threats in order to continue to deliver essential care cost effectively to their communities. Leading community hospitals that are committed to remaining independent share the tactics they have adopted to ensure their independence is sustainable