“There is a general misconception as to what risk is and what it isn’t. People think it’s a bad thing, but it’s really just the difference in the actual outcome from the expected outcome, either positive or negative.” Brandon Driscoll, Chief Business Officer at Inspirien, takes a very practical standpoint on risk.
The question then becomes how much of an appetite for risk (nay, uncertainty) does a hospital have? They would need to weigh the cost-benefit options throughout their ecosystem to make the savviest decision, whether to hold on to the risk or transfer the risk… for a price. Let’s look at an example that affects hospitals directly: a hospital might expect to pay out $500,000 in medical malpractice claims, but buying an insurance policy and transferring the risk to an insurer might cost a million. That’s a fairly substantial disconnect, an opportunity to view the risk as revenue. Brandon likes to use an analogy of crossing the street: you can cross against the green and outside the crosswalk. You might get across faster, but the risk is higher. Here again, the question is about risk appetite.
So how does one move from viewing risk as revenue to actually being a source of revenue? It’s a bit of a chicken-and-egg question, meaning it’s as much of a mindset shift as it is a tangible change. With an insurance market that ebbs and flows, Brandon keeps a close eye on it. “As the liability insurance market seems to have already begun hardening, and rates go up, more and more of that mindset shift is going to happen naturally.” As for the tangible parts, it’s equal parts for facilities and administrators knowing the numbers, getting up close and personal with the data, and wielding it strategically.
Often struggling, rural hospitals may have neither the ability nor the appetite for increasing their risk exposure, so they might choose to transfer it in full to an insurance company. It’s not that their care delivery cost is cheaper because they’re in a rural region, explains Brandon. It’s that they simply can’t afford to take the risk. For one, the cost of healthcare administration has ballooned, and secondly, CMS reimbursements are tied to a state wage index. They are often faced with deploying their monetary resources to their operations.
Ultimately, there are things that hospitals cannot change: reimbursement rates or contracts with healthcare providers, for example. The practice is what it is, and with administration and brick and mortar costs, the line items are very high. When making decisions about risk management, hospitals have two options: either go into the cut-and-slash mode or be strategic about it. Each hospital is a unique case, but there is always a strategic, budget-friendly approach.