Implementing Enterprise Risk Management (ERM) in a healthcare organization is a strategic imperative in today’s complex healthcare landscape. It is crucial for ensuring patient safety, regulatory compliance, and the financial well-being of the institution.
Efficiently managing risks in healthcare is vital for patient care and the sustainability of healthcare organizations. This article provides an overview of the essential principles and strategies for implementing an Enterprise Risk Management (ERM) framework tailored to the unique challenges and opportunities within the healthcare sector. To mitigate potential hazards and enhance patient outcomes, healthcare organizations must adopt a structured approach to risk management.
What is Healthcare Enterprise Risk Management?
Enterprise risk management in healthcare is defined as a set of actions or policies that aim at value protection and preventing risks for the organization by minimizing healthcare malpractices. It helps healthcare institutions to not just handle the acute problems but to look at the enterprise as a whole and make sure that the chance of particular problems appearing is minimal.
The number of malpractices is steadily decreasing since 1991 but healthcare institutions continue to strive for even better clinical risk management. Why? Firstly, the average penalty amount increased drastically and fines for HIPAA violations can reach $1.5 Million per calendar year for an organization. Secondly, entities want to avoid reputational damage as in 50% of cases a negative reputation event in healthcare leads to a loss of brand value.
Implementing an enterprise risk management plan in healthcare has other benefits, except for saved money and a better image, including:
- easier implementation of patient-centered healthcare
- quicker adapting to new trends and changes in the industry
- better working environment due to improved operational, technological and HR workflows
- more informed decisions-making
Overall, ERM benefits everyone: patients, staff, administration, communities.
Examples of Enterprise Risk Management in the Healthcare Industry
Various types of healthcare organizations, including hospitals, clinics, nursing homes, and mental health service providers, require robust risk management protocols to ensure patient safety and operational efficiency.
Hospitals:
Hospitals implement risk management by identifying potential hazards like medical errors or infection outbreaks. They establish protocols for incident reporting and analysis to prevent future occurrences.
Clinics:
Clinics focus on risk management to ensure patient confidentiality, scheduling accuracy, and equipment maintenance. They may use EMR systems to safeguard patient data and appointment reminders to reduce no-shows.
Nursing Homes:
Nursing homes address risks related to resident safety, such as falls or medication errors. They employ regular assessments, staff training, and safety protocols to mitigate these risks.
Mental Health Service Providers:
These organizations manage risks related to patient well-being and privacy. They implement strict confidentiality policies, crisis intervention plans, and employee training on handling sensitive situations.
Risk Classification for Healthcare Enterprises
In order to understand the reasons for implementing enterprise risk management in healthcare, it makes sense to classify different types of risks. It will also help to better understand the scope of work a healthcare organization would have for implementing ERM. There are two main types of potential risks: internal and external.

Internal Risks
- Clinical Risks. Clinical risks arise from the poor delivery of healthcare services. Healthcare is quality-centered now. Many institutions operate on a pay-per-performance model which means that physicians and hospitals receive financial incentives or disincentives for meeting certain performance metrics. A healthcare organization needs to constantly monitor and improve the quality of service provided in order to avoid penalties for bad outcomes, increased costs, or medical errors.
- Operational Risks. Healthcare involves many organizational processes like scheduling, prescriptions, lab results transfer, billing, etc. If those tasks do not run smoothly, providing high-quality healthcare becomes impossible.
- Technological Risks. Technological risks are associated with the poor performance of various biomedical devices, telemedicine systems, EHR software, and solutions that support the administrative workflows of the organization.
- Financial Risks. Financial risks relate to the ability of a healthcare organization to raise and maintain access to capital, have governmental support, and continue the operation after being exposed to massive financial penalties.
- Human Capital Risk. Lack of medical staff or unengaged and unprofessional workers can cause a lot of damage to healthcare institutions, risking patients’ lives and negatively affecting reputation. The performance will suffer as well.
- Third-Party Vendor Management Risks. Healthcare institutions rely on third parties heavily. If a third-party vendor does not comply with regulations or affects healthcare quality, the healthcare institution is still the one to be responsible. It is essential to choose vendors wisely.
External Risks
- Cybersecurity Risks. Cybersecurity risks are connected with the massive financial losses and the healthcare industry has lost $4 billion due to data breaches in 2019. According to the Healthcare Cybersecurity Report, over 93% of healthcare institutions have suffered from a data breach in the past three years.
- Regulatory Risks. Regulatory compliance is of ultimate importance in the healthcare industry and not adhering to all the requirements can result in financial penalties. For HIPAA non-compliance a penalty ranges between $100 and $50,000 per single violation.
- Emergency Preparedness Risks. This risk is being widely discussed today, in the times of COVID-19. It is hard to predict when human-created and natural disasters will hit but it is better to be prepared for everything. Entities should prepare communication plans, policies, and action plans, as well as perform regular training.
Need help implementing risk management in your healthcare organization?
Reach out to LangateGoals of Healthcare Enterprise Risk Management (ERM)
Patient Safety Enhancement
Healthcare ERM aims to improve patient safety by identifying and mitigating risks associated with medical errors, infections, falls, and other adverse events.
Regulatory Compliance
Ensuring compliance with healthcare regulations is a crucial goal. ERM helps organizations adhere to laws like HIPAA, ensuring patient data privacy and other regulatory requirements.
Financial Stability
Maintaining financial stability is essential for healthcare institutions. ERM assists in managing financial risks, such as billing errors, insurance claim denials, and revenue cycle management.
Operational Efficiency
Enhancing operational efficiency is another key objective. ERM helps streamline processes, optimize resource allocation, and reduce waste, ultimately improving the overall functioning of healthcare organizations.
Reputation Management
Protecting and enhancing the organization’s reputation is vital. ERM strategies help prevent adverse events that could damage the institution’s public image.
Continuity of Care
ERM ensures the continuity of patient care by identifying and mitigating risks that could disrupt healthcare services, such as power outages, supply chain disruptions, or natural disasters.
Staff and Provider Safety
The safety of healthcare staff and providers is a priority. ERM protocols help create a safe working environment, reducing risks related to workplace injuries and stress.
Data Security
Safeguarding patient data is critical. ERM focuses on data security by identifying and addressing vulnerabilities to prevent data breaches and protect sensitive health information.
Key Components of Performing Risk Management in Healthcare
As you can see, there is a lot to take into consideration when it comes to risks in healthcare. Where do you start with all of these? Here are the main steps that would help you implement a healthcare enterprise risk management.
Risk Assessment
The first stage in implementing ERM in healthcare is one of the most effort-demanding as the success of other stages depends on risk assessment.
Risk assessment requires the involvement of many employees and thorough research. All the information should be collected through surveys, interviews, and check-ups of documentation, inventory, etc.
- Risk Identification. Firstly, you need to identify the risks themselves. Take a look at every sphere and assess what can cause interruptions in their work. You should also use past records about the accidents since you might find risks that you would otherwise never think of.
- Risk Quantification. Secondly, you should determine who or what can be harmed by every risk you found out in the first part and measure the potential damage in each case.
- Risk Prioritization. Thirdly, you have to estimate how threatening the risks are, whether the events are likely to occur, and how bad the consequences can be. In case you can not mitigate all the risks at once, you need to prioritize and this step will help you.
Risk Mitigation
If you know your risks, it is easier to deal with them. Prepare a detailed plan with clear steps on how the institution has to react if any unfortunate events occur. The development of an enterprise risk inventory for healthcare helps entities to bounce back from problems quicker.
However, it is better to not only have a reaction plan but to prevent risks altogether.
Risk Monitoring
The world is changing rapidly, new risks appear and some become irrelevant. It is not enough to go through assessment and mitigation once because the environment of healthcare institutions changes, priorities change, and legislation changes all the time.
If you do not want to find yourself in a situation where your ERM is irrelevant and you have to start from scratch, it is better to freshen up the plan once in a while.

Healthcare Enterprise Risk Management Implementation Plan
Define Purpose, Goals, and Metrics of Your ERM Plan
Risk management plans need to clearly articulate their purpose and the benefits that the organization would gain from its successful implementation. It’s also important to define the specific goals that would help a healthcare facility reduce liability claims, medical malpractice, and the overall cost of potential risks as well as metrics for measuring these goals.
Deploy Proven Analysis Models for Incident Investigation
Analysis models help to discover latent failures and causes of accidents as well as hidden relationships among risks. For example, technological issues or understaffing can lead to medical malpractice. Sharp and Blunt End Evaluation of Clinical Errors Model and Swiss Cheese Model of Medical Errors are examples of incident analysis models that are used in healthcare risk management.
Currently, only 38% of healthcare organizations utilize the power of data analytics for risk management, however, the use of innovative data analytics can significantly enhance the ability of a healthcare organization to work with risks.
Invest in a Robust Risk Management Information System
A risk management information system (RMIS) is a tool that aggregates risk data helping decision-makers evaluate business risks. Such a system enables a healthcare organization to perform the following actions:
- Detect and report incidents
- Mange claims
- Track risks
- Report trends
- Benchmark data points
- Generate reports
Having an RMIS that is tailored specifically to the needs of your organization would help you proactively or reactively protect your business and minimize damage.
Do you want to develop a robust healthcare enterprise risk management plan?
We can helpOur Successful Case
One of Langate’s clients is a provider of back-office solutions for healthcare businesses nationwide. The client works with over 300 healthcare institutions in the US, meaning that they need to process a large amount of data, guarantee a stable system performance, ensure complete privacy of the processed information and adhere to all the legal regulations. They contacted Langate to develop an ERM plan to secure themselves from the potential risks.
Langate professionals have conducted a profound assessment of their business, defined, quantified, and prioritized the main risks, as well as integrated an RMIS that is customized to the particularities of their operation.
Thanks to implementing the ERM plan, they’ve been able to provide high-quality services, which consequently enabled them to constantly grow their customer base and increase the average duration of cooperation with their customer to 6 years.
Bottom Line
Enterprise risk management is an essential part of smooth functioning in any healthcare organization. It ensures quality, good reputation, prevention of cost loss and non-compliance, and the safety of patients and staff.
The risk management framework for healthcare has three stages: risk assessment, mitigation, and monitoring. Yet, they all require effort and almost constant involvement.
A healthcare institution has many risks and the risk management process may be overwhelming. If you need help with implementing enterprise risk management, do not hesitate to contact Langate! Our experts have been working in custom healthcare software development for more than 20 years and are familiar with all the challenges that institutions face. Develop your individual enterprise risk management implementation plan for healthcare with us.