Presentation Transcript

1. David McMillan Pershing Yoakley & Associates, P.C. (800) 270-9629 dmcmillan@pyapc.com Larry Vernaglia, Esq. Foley & Lardner LLP (617) 342-4079 lvernaglia@foley.com
2. Cast of Characters David the COO performed by David McMillan Larry the GC performed by Larry Vernaglia Mike the CEO performed by Himself
3. Last Week After a Strategic Planning Retreat…

4. One Week Later…

5. Connecting the Dots: Comprehensive Enterprise Risk Management

6. Making the Case for Enterprise Risk Management Healthcare reform is causing many health systems to quickly react/respond to proposed changes (i.e., bundled payments, ACO regulations, value-based purchasing, etc.) Enterprise Risk Management Too often, health systems are failing to proactively plan for the response of the reaction to healthcare reform often leaving the system at risk Hastened decisions are often made in silos and without considering the impact/risk to all entities
7. Challenger Mission STS-51-L “… a series of seemingly harmless decisions were made that incrementally moved the space agency toward a catastrophic outcome." SOURCE: Gladwell, Malcolm. Gladwell.com blog post. New Yorker . “Blowup”, Jan. 22, 1996
8. What is ERM? Formal Definition “A process, effected by an entity’s Board of Director’s, management and other personnel, applied in strategy [sic] setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risksto be within its risk appetite, to provide reasonable assuranceregarding the achievement of entity objectives.” SOURCE: Committee Sponsoring Organization of the Treadway Commission. Enterprise Risk Management – Integrated Framework, Executive Summary. September 2004.
9. What is ERM? Practical Definition “Creating an effective structure through combining the correct players with an appropriate strategy, equipping these players with a common understanding and appreciation for the direction of the health system and engaging these players in a process to evaluate enterprise risk.”
10. Managing Risks in Healthcare is Complex Health systems operate multiple businesses with divergent priorities within one entity An enterprise risk management framework, consisting of an effective structure and a disciplined process, intersects each distinctive business initiative to provide a holistic view of the health system. Patient Access CapitalPlanning Regulatory Compliance Physician Alignment Information Technology Enterprise Risk Management Structure and Process Real Estate Financial Performance
11. Risk Management in Face of Rapidly Changing Environment Yesterday: Financial derivatives in capital and debt structures Today: Physician-Hospital Integration Tomorrow: Managing to the PPACA and private payor models
12. A Practical Approach > = ( +)* Ability to Evaluate Risks Disciplined Approach RightProcesses RightPeople
13. The Right Process Risk management must be driven from the top down At its core, an ERM framework is proactive, not reactive A framework acknowledges that confronting risks before they are emergent yields significant benefit A comprehensive risk management framework does not automatically ensure that a system will be void of future and present risks Structure Process
14. The Right Process Risk Mapping: A data generating process using local perceptions to identify and address risks in order to reveal transactions, departments, or processes that face different types and levels of risk SOURCE: Worldbank.org; online at http://siteresources.worldbank.org/EXTTOPPSISOU/Resources/1424002-1185304794278/4026035-1185375653056/4028835-1185375811087/1_Risk_mapping.pdf
15. The Right Process – The Tool
16. Little Sigma Prospective New Initiative/ Transaction New Initiative/ Transaction New Initiative/ Transaction Comprehensive Risk Profile Senior VP Comprehensive Risk Profile Perspective Departments/Services Departments/Services Departments/Services Departments/Services
17. Isolated Risk vs. Systemic Risk Risk Profile 2 Isolated Risk Systemic Risk Risk Profile 1 Risk Profile 8 Risk Profile 53 How many “Moderate”s = “Untenable”?
18. The Right People The Right People make up the ERM evaluation team Right People, typically members of senior management, are responsible for evaluating risks respective to his or her position within the organization and hold responsibility for strategic initiatives > = (+)* RightPeople Ability to Evaluate Risks RightProcesses Disciplined Approach
19. The Right People CEO CIO CFO Human Resources COO Legal Counsel CMO Risk Manager CNO Real Estate/Facility Management Key Leader
20. Accumulating the Results CEO SVP Operations Risk Survey SVP Quality Risk Survey SVP Finance Risk Survey SVP Information Risk Survey
21. The Importance of Process and People
22. The Ingenuity of Complete Fools
23. Disciplined Approach Frequency Transparency Board Involvement Accountability > = (+)* RightPeople Ability to Evaluate Risks RightProcesses Disciplined Approach
24. Ability to Evaluate Risks Risk management must be driven from the top down and embedded in an organization’s culture At the core of the ERM framework, an entity must be proactive, not reactive Health systems should plan for risks, and create an efficient structure and a disciplined process to evaluate potentially risky strategic decisions. > = (+)* RightPeople Ability to Evaluate Risks RightProcesses Disciplined Approach
25. Challenges to Implementing a Contemporary ERM System Communication Culture Scale Predictive Element Objectivity Lean and Transparent “Objectivity requires taking subjectivity into account.” - Lorraine Code Ability to evaluate future associated risks The sheer number of risk elements to be assessed Having the courage to embrace the value proposition

26. Connecting the Dots: Comprehensive Enterprise Risk Management