Enterprise Risk Management Takes Hold in Healthcare

For the last several years, risk management professionals outside healthcare have started to embrace a new concept called enterprise risk management—a process of assessing all of an organization's risks and developing strategies to coordinate the management of these risks. Healthcare risk managers are starting to hear about this concept, which would extend their field beyond traditional clinical and insurable risks to others affecting their facilities, such as financial and operational risks.

Today's business headlines highlighting the bankruptcies of companies such as Enron, WorldCom, and Kmart Corporation are accelerating an enterprisewide approach to risk for other organizations that want to survive. "With the turmoil in the business community, companies are recognizing the urgency of adopting enterprise risk management," says Christopher E. Mandel, president of the Risk and Insurance Management Society and assistant vice president of enterprise risk management at a diversified financial services company in Texas.

While some industries, such as financial services, have been early adopters of this concept, healthcare is starting to catch up. "I think we in healthcare will see an increase in this animal over the next couple of years in reaction to the external environment," says Mitch Melfi, senior vice president and chief risk officer (CRO) at Catholic Health Initiatives (CHI), a Denver, Colorado-based health system operating in 19 states. In particular, Melfi says the ongoing insurance crisis will spur providers to examine new ways to address risk. "Providers are trying to find ways to better manage their insurance costs," he states.

An approach using enterprise risk management in healthcare is inevitable, agrees Mike Evans, senior vice president and CRO at Sutter Health, a Sacramento, California-based health system. "The healthcare industry will not get any less complicated, and the insurance market is in...