Healthcare risk managers will come under increasing scrutiny from their boards of directors and senior executives this year as the Affordable Care Act sets in motion a period of rapid change, according to the Risk and Insurance Management Society’s (RIMS) new president John Phelps.
“There is great intensity and velocity of change over the next 12 months as the Exchange piece of the legislation kicks in,” said Phelps, a risk manager with Blue Cross Blue Shield in Florida. “This is the most comprehensive overhaul of health insurance that has happened in my lifetime and it is happening very quickly and very comprehensively. There’s hardly anything in the healthcare business marketplace and economy that will not be touched by this legislation.”
A major feature of 2013 will also be increased board level oversight and interest in the work of risk managers.
“As the result of some stellar bankruptcies and the dissolution of very significant and marquee companies as well as regulatory impact from the Dodd Frank act and some other state legislation, there is far more interest in risk management than there ever has been,” Phelps said.
“The best practice for boards over the last few years has changed significantly with regards to their responsibility to understand how the company is identifying, evaluating and addressing the risk in the organisation. This causes them to have more of a dialogue with their risk manager than they have had in previous years.”
Phelps sees this as an extremely healthy development because risk managers will be increasingly involved in making significant decisions within the organisation.
“In the past a company might have been more inclined to shoot from the hip; now they’re looking for a more disciplined approach to understanding the risk and making better decisions,” he said. “More risk mature organizations understand the business value of integrating an effective ERM discipline into strategy formation and execution. It can increase the implementation confidence in strategic plans and reveal opportunities for future growth.”
Increased regulation and compliance requirements look set to create a need for greater diversification and integration by providers and payors this year. Phelps believes that in order to be effective and successful in an exchange environment, companies have to look for ways to reduce cost and increase quality at the same time.
“It’s hard to do both together,” he said. “The Accountable Care Organisations are a good example of that – payors and providers essentially team up to reduce cost but keep a very strict view on the quality of services that are being delivered.”
Diversification is a hot topic for 2013 because it often exposes companies to a new set of regulations and could create opportunities for a misstep from a compliance standpoint, which could have a detrimental effect on the reputation of an organization. “That in turn can affect the company someone selects when they’re on the internet selecting their coverage in the Exchange, so compliance and reputation in general are very serious issues going forward,” he said.
RIMS president, Healthcare risk managers, Affordable Care Act,