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A new frontier for health care risk management.

Imagine the year is 1952 and a young patient is undergoing a tonsillectomy in a small city hospital. One doctor and perhaps five nurses provide all the care the patient needs during the brief stay, including anesthesia and administering the three or four necessary medications. The medical record runs only a few pages. No technicians or specialists are present, and certainly no risk manager. And although medical malpractice exists, at least according to the town's gossip mill, the threat of it doesn't hang like a cloud over the medical staff; people didn't sue much in those days,

Now fast forward 40 years. A young patient undergoing a tonsillectomy is surrounded by complex equipment and a team of specialists. The hospital is equipped with machines that smash kidney and gall stones, lasers that disintegrate diseased tissue and endoscopes enabling surgeons to perform through tiny incisions or body openings; the hospital and its staff also have the resources and equipment needed for multiple organ transplants, genetic manipulation and many other procedures that were m the realm of science fiction a few decades ago. Compared to the astonishingly sophisticated and complex technological capabilities of today's medical centers, the small city hospital of the 1950s seems quaint and non-threatening.

However, the benefits conferred by modern medical technology do not come without problems. For today's more sophisticated medical environment, combined with society's penchant for litigation, has created a broad array of perils for risk managers in the health care industry. And amidst this turbulent situation, health care risk management has developed into a distinct discipline that requires the risk manager to deal with the dilemmas posed by the regulatory and technological changes that have vastly altered the medical field.

Risk Financing Concerns

Today, medical malpractice claims usually account for the largest proportion of losses in health care organizations. For this reason, health care risk managers spend a good deal of their time on risk control and risk financing activities associated with medical professional liability. In large hospitals, several employees may be devoted to risk and insurance management, with one or more people concentrating exclusively on medical malpractice loss prevention and control.

However, today's health care risk managers must also concern themselves with many other potential sources of loss. Specifically, the health care risk manager must implement risk control and risk financing systems in such diverse areas as comprehensive general liability; directors' and officers' liability; workers' compensation; pollution and hazardous waste; business interruption; employee dishonesty; and coverage of property, vehicles, boilers and machinery. Health care organizations often combine elements of commercial insurance, self-insurance and other risk financing mechanisms to design and secure as cost-effective a program as they possibly can.

A general principle of health care risk management is that resources must be allocated appropriately among the various clinical services in health care organizations. For example, physicians who concentrate their practices on the treatment of conditions for which little or nothing can be done, such as severe strokes or degenerative neuromuscular diseases, often pay far less for malpractice insurance than physicians specializing in such frontier treatments as laser or transplant surgery. These procedures are perceived as posing more risk of iatrogenic -i.e. caused by the physician injury. Likewise, hospital professional liability losses are greatest in the higher-risk departments - obstetrics, surgery, anesthesiology and emergency medicine - and accordingly receive more risk control emphasis.

But the health care risk manager's responsibilities do not stop there; several other major developments during the past few decades have contributed to the need for aggressive risk control and alternative methods of risk financing. In the 1970s and 1980s, the liability insurance crisis and the huge rise in medical malpractice losses resulted in insurance premium costs that took a much bigger bite out of hospital budgets and increased the incentive to reduce or control losses.

A hospital's public image also affects its ability to compete successfully. Medical catastrophes sell as many newspapers as medical triumphs, a fact not lost on the media or health care organizations. Certainly no hospital administration or medical staff wants negative headlines that eclipse the positive steps being taken to ameliorate damage and prevent future mishaps. Risk managers can help with damage control of medical disasters by quickly ascerraining the details and working closely with their organization's medical, administrative, legal and public affairs staffs. However, the trend toward governmental agencies releasing hospital and physician mortality data has heightened the pressure on health care organizations to demonstrate concern for quality of care issues.

Regulations, Regulations

One of the principal issues facing health care risk management is governmental regulation. Over the last few decades, there has been a growing public demand for accountability in health care delivery. The consequent tightening of governmental regulation has led to a greater allocation of an organization's resources to regulatory compliance. Some states, including New York, enacted stringent incident reporting requirements for hospitals, requiring additional staff to investigate and prepare such reports. Additionally, competition among hospitals has also fostered a greater concern over the community's perception of quality of care. Many hospitals have had to compete harder for patients as inpatient lengths of stay decrease and more procedures are performed on an outpatient basis.

Elected officials and shapers of public policy have also seen fit to protect both patients and workers through other forms of governmental regulation; one such example is the federal anti-dumping laws, which prohibit medically contraindicated transfers of patients. The risk manager is thus confronted with an incredible maze of requirements that must be met in order to maintain quality care while avoiding negative publicity, fines and other penalties.

The federal Safe Medical Devices Act that went into effect last year is one of the newer laws that generates more work for risk managers. The law requires that health care facilities report to the U.S, Food and Drug Administration (and, in some cases, the manufacturer) the details of adverse patient care incidents involving any kind of medical device. Although the law aims to better identify potentially harmful medical equipment - a move that will ultimately benefit both consumers and providers - the lengthy paperwork required to comply with the law, which appears to cover any and every device including disposables, will necessarily supplant other risk management activities.

To the extent that any laws and regulations associated with patient injuries require documentation, risk managers should develop a data base of all relevant incidents. Keeping abreast of the risks posed by new diagnostic and treatment technology including devices is a big job; add to that the need to track the sources of actual and potential claims that arise in order to institute risk control measures, and the use of computerized data bases becomes a necessity in all but the smallest health care organizations.

In addition to an institutional claims data base, health care risk managers can find aggregated claims information from insurers and other organizations very helpful. Publications of the Physician Insurers Association of America (PIAA) and the Risk Management Foundation of the Harvard Medical Institutions Inc. have provided data that can assist risk managers in focusing efforts on specific areas. For example, the PIAA's shared data project issued studies of breast cancer-related claims that raised awareness of the number of younger women who sue for failure to diagnose breast cancer. The Harvard Medical Practice Study, commissioned by the New York State Health Department and issued in 1990, contains a wealth of information about adverse events, both negligent and non-negligent, in hospitalized patients. Among the books on health care risk management, The American Society for Healthcare Risk Management's Risk Management Handbook for Health Care Facilities provides a comprehensive overview of the field.

Health care risk managers must also be cognizant of other types of legal changes. For example, many states have made progress in defining and giving legal form to various types of advance directives that allow people to exert more control over their treatment while unconscious or otherwise unable to make health care decisions. Legal documents such as health care proxies, durable powers of attorney for health care and living wills may be imperfect instruments, but they are nonetheless helpful in enabling patients who lack decisional capacity to exercise control over their treatment.

The federal Patient Self-Determination Act, which also went into effect last year, requires hospitals, nursing homes, hospices and certain other providers to inform patients of their right to accept or refuse treatment under state law. Risk managers must ensure that their organizations have appropriate compliance procedures in place, including the means to inform patients if certain treatment choices are not available at their facilities; as an example of this latter case, some facilities will not honor requests to withhold or withdraw artificial hydration and nutrition.


In addition to keeping a careful eye on legislative changes, today's health care risk managers must also look toward the future; in many cases, the future is now. For instance, take bioethics, which has always had a place in health care. Today trained ethicists are fast becoming indispensable in settings where the availability of medical technology imposes difficult choices on patients, families and medical personnel. The advent of life prolonging technology, legal codification of a patient's right to accept or reject specific treatments, and the limited availability of some therapies has made ethical considerations more important than ever before. Due to these radical changes, risk managers and hospital attorneys frequently find themselves involved in situations in which patients, their families and health care professionals are at odds over what course to follow.

As a result, a well-trained bioethicist can be of great help to all concerned parties by elucidating medical, legal and ethical issues and communicating them sensitively and dearly to patients and their relatives. Although most risk managers come to understand the legal context of such conflicts, they are usually not able to respond to the full range of issues. Additionally, the medical and nursing staff caring for the patient may disagree with the patient's or family's opinions and welcome an ethics consultant to help find common ground.

For example, although legal directives such as health care proxies and living wills are becoming increasingly common, not every patient has decided to - or, due to state laws, has had the opportunity to - utilize them. Consequently, risk managers often find themselves embroiled in disagreements involving the differences of opinion concerning the type of treatment that is in the best interests of patients who are terminally ill or in persistent vegetative states. While it is still rather common for judges to be awakened in the middle of the night to decide whether a patient's family's wishes or those of the physician should be followed, bioethics committees are playing an increasingly routine role in situations that appear to pose dilemmas for health care institutions, patients and their families and friends. Indeed, the Joint Commission on Accreditation of Healthcare Organizations 1992 Accreditation Manual for Hospitals includes standards on patient rights that require hospitals to have a mechanism in place to deal with bioethics issues.

Health care consumers and providers also face ethical dilemmas posed by a dearth of necessary equipment or treatments. For example, when resources are scarce, donor organs for transplant, renal dialysis machines, procedures performed by very few highly trained specialists, intensive care unit beds and other medical services and commodities may not be available to all the patients who could benefit from them. Allocation of scarce or very expensive resources becomes a risk management issue when the explicit and presumably legal policies of an organization conflict with actual practice. Guidelines that specify which patients are more likely to benefit from a given resource should be supported by institutional procedures that ensure an equitable application.

Whenever a health care organization's financial interests conflict with patient welfare, risk managers are well advised to counsel those performing direct patient care to err on the side of the patient. It is far more beneficial to the organization in the long run to explain to the patient, the board of directors, regulatory agencies and the public via the media that the mission of healing the sick was put first. When there is time to choose medically acceptable options that pose less of a financial problem, organizations should do so; in effect, when time is short, they should do the right thing.

However, when risk management and ethical issues intersect, doing the "right thing" is useless advice if no one knows what the "right thing" is. Treatments involving genetics and reproductive technology provide one example of how medical innovations have clouded the ethical question. In an age of in vitro fertilization, prenatal diagnosis and treatment of fetal illnesses, and the increasingly successful identification of genes for various diseases, physicians and other scientists seek guidance on how to order ethical priorities. During FOJP Service Corp.'s 1991 conference on medical malpractice issues, Lori Andrews, senior research fellow at the American Bar Foundation and senior scholar at the Center for Clinical Medical Ethics at the University of Chicago, described how such technological initiatives expand the frontiers of liability.

As researchers identify genetic markers for disorders such as heart disease, diabetes and some cancers, parents who seek genetic testing of fetal cells may bring lawsuits that allege failure to diagnose a particular genetic predisposition or to provide proper genetic counseling. Ms. Andrews reports that the ongoing human genome project, which represents researchers' attempts to map all human genes, may eventually result in the identification of genes for specific psychiatric illnesses and even behavioral propensities such as risk taking behavior. Ms. Andrews warns that such genetic diagnoses could create situations that pose liability hazards, including treatment based on false-positive genetic test results, the failure to recall patients known to be at risk for a genetic disease when a new test becomes available to perform carrier screening and diagnosis, and very difficult confidentiality issues.

Confidentiality of genetic diagnoses would present a special problem, because disclosure could cause health insurers, employers and others to avoid the costs associated with some genetic disorders. A situation could develop in which a patient could sue a physician for breach of confidentiality for disclosing a genetic diagnosis, and a relative could sue for failure to disclose a genetic disorder that resulted in damages to others, including a child whose birth otherwise would have been prevented. Lastly, since patients' expectations can far exceed the ability of science to deliver reliable advice, Ms. Andrews counsels providers to avoid implied promises in describing or advertising genetic services.

Diseases Old and New

Besides the complexities caused by new laws, regulations and medical developments, it should not be forgotten that the health care industry is continually bedeviled by the reason medicine was developed in the first place - disease. New diseases, re-emerging old ones and insufficient control of others present health care risk managers with significant challenges. For the past 10 years, human society and health care institutions have been profoundly affected by the emergence of the human immunosuppressive virus (HIV). Due to the grave threat HIV poses to health care workers and patients, risk managers must satisfy themselves that appropriate precautions are established and enforced to minimize the possibility of transmission of this deadly virus in the health care setting.

The HIV threat has meant tighter control procedures and surveillance, greater use of protective barrier equipment, the need to respond rationally to health care workers' fear of infection and additional precautions to ensure the safety of the blood supply. Despite evidence of the extremely low incidence of transmission in the health care setting, the lack of a cure and the stigma attached to acquired immune deficiency syndrome (AIDS) have led some health care professionals to avoid infected patients. In addition to violating ethical principles, such avoidance can promote a negative image of the health care professions in the public's eye.

The threat of HIV infection requires risk managers to address mandated patient confidentiality requirements and the informed consent implications of blood transfusions. Both patients and health care workers can bring claims that allege inadequate protection from infection in health care settings. Also, the limitations of workers' compensation benefits help motivate health care workers who believe they were infected in the workplace to file civil suits. One relatively new insurance product that attempts to address the fear of financial devastation is coverage that provides a cash benefit to health care providers who contract HIV.

Besides the scourge of HIV, health care risk managers must also support efforts to vaccinate larger numbers of health care workers against the hepatitis B virus. The availability of an effective vaccine has provided health care institutions with an important opportunity to protect employees from this relatively easily transmitted and potentially fatal disease. In addition, the recent emergence of drug-resistant tuberculosis especially threatens immunosuppressed individuals and expands even further the need for intense efforts in the infection control area.

In regard to health care risk management, one thing is clear: things will not get boring. Yesterday's science fiction is tomorrow's reality. There will be plenty of new innovations and laws to keep risk managers, ethicists, lawyers and philosophers busy and intrigued for years to come.
COPYRIGHT 1992 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Challan, Barbara
Publication:Risk Management
Article Type:Cover Story
Date:Sep 1, 1992
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