Five Reasons Healthcare’s ERM Playbook is Due for a Rewrite

Learn how healthcare leaders can make investments to more effectively anticipate, mitigate, and manage business risk.

By David Burik, Dennis Butts, Jr.

For health system leaders, enterprise risk management (ERM) strategies are evolving. Threats such as the move toward digital care delivery, well-capitalized disruption, lack of agility among legacy organizations, and increased demands for price transparency all require a more urgent and complete approach to identifying and responding to business risk.

ERM is a leadership challenge. It is virtually impossible to predict all material variables accurately and with precision at the pace required by a rapidly shifting market. In 2022, it is important that leaders make investments that help them more effectively anticipate, mitigate, and manage business risk.


Five Areas of Focus for Health System Leaders

  • Labor shortages: Typically, we look to healthcare workers to create scale and broaden growth. Now, with fewer resources in place, leaders must create the means to reduce healthcare consumption via improved efficiency, throughput, and capacity management.
  • Capital planning: It’s time to examine not just whether you have the right capital plan for an evolving environment, but also if the financial covenants in your organization’s bond documents, combined with operating performance, might put it at risk of default.
  • Energy consumption and social determinants of health: It takes long-term investment and a shift in culture to reduce energy consumption. Leaders need the processes and tools in place to consistently capture and report on the organization’s efforts.
  • Cyber risk: Health systems spend less dollars per device on cybersecurity than any other industry, making them the easiest targets to attack. To become more strategic about cyber defense, security must be built into everything – not just bolted on.
  • Increased price transparency: The stakes regarding consumer trust and loyalty and an organization’s market position are too high for leaders not to put their organization’s best foot forward. It’s critical to make a good faith effort to achieve compliance by clearly understanding scheduling, billing, insurance verification/eligibility, case pricing, and contract negotiations.


A New Enterprise Risk Management Playbook

It will take strong ERM muscle to mitigate these threats in 2022 and beyond. And executive support is crucial. The challenge that now lies before healthcare organizations is to effectively transform ERM from a check-the-box compliance exercise to a fundamental component of doing business in a rapidly evolving environment.

Read the full byline in the February edition of HFMA’s Cost Effectiveness of Health Report.

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