Regulations, Risk Management, Risk Sharing, and Risk Financing
MHA-FP5014
Assessment 2 Context 1
Regulations, Risk Management, Risk Sharing, and Risk Financing
Leading in today’s ever-changing health care industry requires constant adjustment to emerging laws, regulations, and industry standards. Organizations must quickly and effectively reposition to meet new, existing, and emerging laws. Two examples of laws that have driven a multitude of new and sometimes confusing regulations are the Patient Protection and Affordable Care Act of 2010 and the Healthcare Insurance Portability and Accountability Act of 1996. The shift to electronic health records is another example of the need to create new structures, processes, and policies to meet legal and regulatory requirements. Government surveying bodies and industry accrediting bodies assess basic compliance as well as best practices. Effective leadership is not only necessary for the pursuit of excellence, but also for organizational survival. Policy changes drive regulatory requirements and, consequently, requirements for provider organizations that depend upon Medicare and Medicaid as reimbursement sources. In The New England Journal of Medicine article, Inglehart (2011) creates a context for the health care environment relating to regulations, risk management, and risk sharing: One of the hottest issues debated within the administration was whether ACOs should bear financial risk in their quest to achieve savings. CMS supported awarding a bonus to an ACO when its stated goals were achieved but imposing no penalty if it failed in that regard for the first 2 years. This approach (used in Medicare’s Physician Group Practice [PGP] demonstration) is designed for start-up ACOs, while they gain experience. After White House intervention, a second, two-sided approach to risk was added to the rule, aimed at larger medical groups with stronger management structures. Such groups could choose to bear some of the financial risk, which currently Medicare totally assumes, in exchange for modestly higher bonuses if they succeed. CMS is uncertain how many large groups will opt for this at-risk approach. A companion program offering even greater risk sharing is expected to be tested by CMS’s innovation center, and it may have more appeal to integrated systems that already accept capitation payments or other larger risk-sharing arrangements. Risk Management Risk management has taken an increasingly important role in organizational viability. Conditions of participation for government-supported programs, standards for provider status required by insurance companies, and quality metrics requisite for industry accreditation must all be considered within the context of the organization’s directional strategy. It is wise to revisit the vision, mission, and directional strategy of an organization when considering how to assess and manage risk, as well as how to become a top-performing organization. There is an ever-present tension between management of medical errors and the improvement of quality of care. The goal is to determine how to assess risk, manage it, and create a culture of patient safety.
Risk Financing
Risk management entails prevention of adverse consequences and minimization of negative effects from accidental loss. Risk financing refers to reducing the financial impact of risk, as well as determining the best approach, from a financial standpoint to handling adverse situations. Risk financing means looking at the operations of the organization as well as determining what financial preparation is needed to ensure a minimal financial loss. Concepts such as risk pooling, purchasing insurance, and taking risk reduction measures are key to financial preparation in risk management. Risk financing may include all aspects of both legal protection and compliance with government regulations. It is important to note that many health care organizations have legal obligations to carry liability insurance under either their accreditation or license type as a means of financial loss protection. Some key concepts relating to risk financing include:
1. Identifying and managing a risk financing issue.
2.Examining issues related to risk financing.
3.Analyzing existing organizational structures.
5. Determining the best risk financing options for a specific organization.
Understanding various insurance types related to financial risk reduction and asset protection for a health care organization.
While health care leaders may expend great effort to avoid liability, it is wise and realistic to plan for human error. Inadequate risk financing exposes organizations to losses that can potentially threaten future viability.
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