This article is the second in a series concerning how Princeton Insurance will be working with you, our policyholders, to become patient safety-driven risk management organizations. This edition will focus on how this approach will differ from and complement that of traditional risk management. It will also get into some of the benefits of this approach beyond that of protection from medical liability risk.

Why is Traditional Risk Management Not Enough?

It is certainly no revelation to say that the $2.1 trillion healthcare industry has never been under more stress, nor has it ever had such a large impact on the rest of society. The cost of health care is draining the U.S. Treasury and preventing national investment in other equally important pursuits (such as educating our youth to compete in a global economy and achieving energy independence). Just as importantly, the costs of health benefits have severely handicapped American companies’ global competitiveness.  Among the “Big Three” (soon to be just  “Another Three”) automakers, the cost of health benefits adds about $1500 extra to the cost of each car produced vs. about an extra $200 for cars manufactured in Japan, according to estimates by the National Association of Manufacturers. Health benefits are almost always a front burner issue in major labor negotiations, serving as a key strike issue which may further cripple American competitiveness.

Despite spending almost 150% more per capita on health care than the median industrialized (OECD) nation, the U.S. invests only about $0.43 per capita on health information technology to improve the safety and quality of care. This is less than one-tenth that of the next-most frugal nation and almost 500 times less per capita than the United Kingdom (Anderson, GF, Frogner, BK, John, RA, Reinhardt, UE, Health Care Spending and the Use of Information Technology in OECD Countries; Health Affairs; 25(3):819-31(2006)). In fact, the U.S. only invests about 1% of its overall research dollars in an effort to identify, evaluate and increase the utilization rate of interventions and treatment proven to be effective in improving the quality, safety and value of health care according to Carolyn Clancy, M.D., Director of the U.S. Agency for Healthcare Research and Quality (Clancy, C., If We’re Spending so Much on Health Care, Why so Little Improvement in Quality? Med. Gen. Med. 8(2) 2006).  A growing number of leading health services researchers have come to agree with David Eddy, M.D., Ph.D., regarded by many as the originator and world’s leading expert of evidence based medicine, that only 20 to 25% of medicine that is practiced is actually proven to be effective (Cf. Medical Guesswork:  Business Week; pp.72-79; May 29, 2006; New York).

As pointed out in the previous article in this series, traditional risk management has involved primarily the mitigation of claims and litigation support. Even with a proactive stance through education and other interventions to prevent adverse events, the focus has typically been on improving areas such as documentation, informed consent, and credentialing. These practices are all very important and it should be stressed that in no way will these be de-emphasized. However, even the optimization of these practices cannot improve significantly the 20 to 25% overall effectiveness of the actual clinical care being delivered.

Even in the fairly recent past, these traditional risk management practices were often enough to prevent (or at least minimize) the adverse effects of litigation. Most people had no idea that 75 to 80% of the medical care they were receiving was ineffective. However, now the proverbial “cat is out of the bag”. Internet technology, the push toward consumer directed health care, and the Institute for Healthcare Improvement’s highly publicized and successful 100,000 Lives Campaign have significantly raised patients’ expectations for effective care. In the near future, patients (especially the rapidly aging 78 million Baby Boomers) will expect their clinical care and that of their dependents (for which they will be footing a much larger portion of the bill) to be much more than 20 to 25% effective. So a much greater percentage of instances of ineffective care will result in successful litigation. Since traditional risk management practices alone cannot appreciably improve the overall effectiveness of clinical care, it will not suffice to head-off this new wave of lawsuits.