Risk management strategies in the healthcare sector aim to reduce the probability of risks and losses. Risk management channels efforts into four main directions: identification of potential risks, estimates of the likelihood of an adverse impact, estimates of the size of the adverse impact and control over the risk. When it comes to medicine in particular, risk management techniques seek to improve the quality of medical care and cut the ratio of medical malpractice claim. They also analyze tort claims. All these efforts are meant to reduce the probability of harm to patients.
A 1999 report of the United States Institute of Medicine, To Err is Human: Building a Safer Health Care System, found that between 44,000 and 98,000 people die in hospital on an annual basis because of errors by physicians. Medical errors are estimated to cost between $17 billion and $29 billion to hospitals per year. The report set a minimum target of reducing medical errors by 50 percent within five years. The study drew the conclusion that most often medical errors are caused by problems in systems and processes rather than mistakes of individual physicians.
Healthcare risk management became a central issue in the American healthcare sector in the 1970s during the so-called medical malpractice insurance crisis. Insurance premiums in California skyrocketed by over 300 percent because of frequent liability claims. This trend drove many physicians, in particular those involved in high-risk areas such as neurosurgery and obstetrics, out of the profession. In 1975, Governor Jerry Brown summoned the state's legislature in a bid to address the malpractice crisis. The situation called for stricter safety and accountability rules and traceability of medical errors.
Medical liability premiums in the United States grew steeply again in the 1980s, which forced some states to limit malpractice insurers' costs. Despite the measures undertaken thereafter, the healthcare system faces a constant need to improve its risk management strategies. Research has identified problems with medical safety and care, ineffective IT systems and underinvestment in IT as well as shortages of qualified employees, to name but a few. Hence, the healthcare system can improve its functioning by a better focus of the risk management efforts. Experts recommend that risk management should be embedded into the fabric of healthcare operations and planning.
As a key concept in contemporary healthcare management all over the world, risk management deals with a wide range of issues: patient safety, device safety and occupational safety. Its scope covers also accident investigation and quality improvement. Risk in healthcare translates into an unexpected death, wrong diagnosis or treatment and surgical mistakes. The majority of these cases can give grounds for litigation. Risk management approaches advocate for both proactive measures and reactive measures. While proactive efforts seek to prevent the occurrence of unfavorable situations, reactive methods address unfavorable events which have already occurred. Although statistics are crucial for undertaking proactive actions, facts and figures about risk in healthcare are not always solid. Studies show that most of the complications resultant from medical treatment and negligence do not lead to malpractice tort claims. Hence, statistics cannot cover these instances. Furthermore, in a number of cases judicial proceedings fail to detect the doctor's errors or malpractice.
Due to uncertainties in statistics, the health authorities channel considerable efforts into the identification and reporting of incidents in healthcare. They also try to identify and address potential tort claims, review complaints and the documentation of potentially problematic events. To minimize risks, health authorities pay particular attention to guaranteeing the initial and ongoing competency of staff, while evaluation and feedback are also crucial to effective risk management processes.
Providing stable foundation for business decision-making and fiscal accountability like other types of risk management, healthcare risk management deals also with a number of specific concepts which are not typical of business in general. These include adverse event, failure mode effect analysis, incident reports and root cause analysis. An adverse event is an injury triggered by medical intervention. Failure mode effect analysis enables the detection of potential failures. Incident reports document events which are extraordinary for medical practice. Root cause analysis for its part identifies the most basic underlying factors which lead to variation in results.