A Collaborative Approach
to Enterprise Risk
Management (ERM)
Application of ERM in Assessing Pandemic Risks in a Health Care
Organization
Liane McGarvie, MHA, MBA, CPHRM
Director, Patient Safety & Risk
Virginia Mason
Helen Vrabel, CPCU, ARe
Sr. Vice President
Marsh
The New Yorker, Daily Cartoon
Emily Flake
February 2, 2015
http://www.newyorker.com/wpcontent/uploads/2015/02/daily-cartoon-150202measles-1200.jpg
International New York Times
Background
Pandemics, Epidemics of the last century

2009 – 2010: Influenza A (H1N1), commonly known as swine flu, infected as many as
576,000 people worldwide resulting in more than 18,000 deaths

2003: Avian influenza A(H5N1) emerged in Southern China, spread to 15 countries in Asia
and Middle East with 628 human cases, 374 deaths

2003: SARS had nearly 8,100 probable cases in 29 countries, 774 died

1981: AIDS caused an estimated 39 million deaths worldwide since first reported in 198;
and HIV remains the world’s leading infectious killer with 1.5 million AIDS-related deaths
in 2013

1977-1978: Russian Flu, a version of N1N1 strain affected those born after 1950 who had
not developed anti-bodes from similar outbreak decades earlier

1968-1969: Influenza A (H3N2) originating in Hong Kong killing 1 million people worldwide

1957-1958: Asian Flu, first seen in China, spread to Singapore, Hong Kong then US where
death toll reached approximately 70,000 with estimates of one to four million deaths
worldwide

1918-1920 Spanish Flu caused by unusually severe strain of H1N1 was seen in every
country, even the Arctic and remote island nations. Fatalities estimated from 50-100
million people, mostly young adults who perished
Costs of Epidemics

Ebola - "The public has been clamoring for near-zero risk, forcing the public health
system to go way beyond what science and common sense requires," said
Lawrence Gostin, faculty director of the O'Neill Institute for National & Global
Health Law at Georgetown. "We really have overreacted, and it's cost us a lot of
money.“

"The fear factor from the Ebola outbreak has reduced labor force participation,
closed places of employment, disrupted transportation, and motivated some
government and private decision makers to close seaports and airports," Jim Yong
Kim, World Bank president said at a press conference last week. The “tide of fear”
triggered 80% to 90% of the economic impact

2002 to 2004, SARS, or Severe Acute Respiratory Syndrome, infected about 8,000
in 29 countries, killing 800, and caused more than $40 billion in economic losses.
But 80% to 90% of those losses came from "fear and aversion" — when people
canceled flights and hotel stays in cities affected by the virus, for example —
rather than medical costs.

Fear factor, World Bank: Cost of Ebola could top $32 billion by Ivana Kottasova,
CNN 10/9/2014
Kottassova, I. 2014, Oct. 9. Fear factor, World Bank: Cost of Ebola could top $32 billion. Retrieved May 22,
2015 from http://www.cnn.com/2014/09/24/business/ebola-cost-warning/
Governmental costs

Sen. Schumer requested $20 million to reimburse New York City for caring for
a single Ebola patient (includes monitoring his contacts and tracking travelers
from West Africa)

Dallas County spent $1 million (including $250,000 to decontaminate
apartment of Ebola victim)

The international effort to end the outbreak that hit Guinea, Liberia and
Sierra Leone last year cost an estimated $4.3 billion. Building up those
countries’ health infrastructures in the first place would have cost about
$1.58 billion, according to Save the Children Foundation.
Shafroth, F. 2015, Jan. 4. Ebola Scare Highlights the Uncertain Costs of a Pandemic Questions loom about who will pay for the fallout of a national health
crisis and what kind of impact it could have on credit ratings. Emergency Management. Retrieved May 22, 2105 from
https://www.google.com/search?q=shafroth+frank+ebola+emergency+management&sourceid=ie7&rls=com.microsoft:en-us:IEAddress&ie=&oe=&gws_rd=ssl
Costs of Ebola - Hospitals

Treating an Ebola patient at U.S. hospitals costs $25,000 to $50,000 a day

Nebraska Medical Center’s costs were $1.16 million.



$148,000 in revenue lost when nearby beds had to be closed off to accommodate a
special Ebola isolation ward
Presbyterian - initial

Revenue decline by more than 25 percent in the first 20 days of October,
Emergency room visits fell by 53 percent (mostly because it closed the ED)

Surgeries declined by about 25 percent.
Presbyterian – long-term

Dec. 1-15, emergency room visits at the hospital were down by about 4 percent

Daily number of patients was down about 2 percent compared to the first nine
months of 2014.
Szabo, L. 2015, Dec. 19. Costs of responding to Ebola adding up. Retrived on May 22, 2015 from
http://www.usatoday.com/story/news/nation/2014/11/25/ebola-costs-add-up/19346913/
Stegle, J. 2015, Jan. 14. Patients return to Dallas hospital where Ebola hit, revenue back to pre-crisis level. Retrieved May 22, 2015
from http://finance.yahoo.com/news/patients-return-dallas-hospital-where-231442739.html
Background
Timeline of Events
Zaire ebolavirus
outbreak begins in W.
Africa
Two nurses treating
Ebola patient at
Dallas hospital
contracts Ebola, later
survives illness
Massive information
from CDC and
preparations
underway by hospitals
in U.S.
•March 2014
•October 2014
•November/December 2014
First Ebola patient
diagnosed in U.S.
(Dallas, TX), died 8
days later
•Sept/Oct 2014
Medical aid workers
working in New
Guinea return to U.S.
for treatment of
Ebola.
First U.S. Ebolarelated travel
restrictions imposed.
•October 2014
http://www.cdc.gov/vhf/ebola/outbreaks/2014-west-africa/united-states-imported-case.html
http://www.cdc.gov/vhf/ebola/outbreaks/2014-west-africa/whats-new.html
Timeline of Events – Local Preparation
Interdisciplinary
team established
to guide
preparation for
organization
Communication
plan in effect
PPE training begins
Organization-wide
communication – “Town
Hall”
Establishment of new
process flows for
screening, appointing and
arriving patients in all
settings
Cooperation with DOH &
NW Healthcare Response
Network
•October 2014
•October 2014
Supplies and
equipment
identified for
purchase
Training in
highest risk
areas
Plans for
add’l training
Plans for
screening
questions
•October 2014
One of eight
designated “highreadiness” hospital
Refinement of
process flows
Guidance on privacy
and media
•November/December
2014
Dedicated
hospital unit
identified
Care teams
identified
Continuation
of training
(donning/doff
ing)
•November
2014
Simulations,
train the
trainer, video
education
completed
•December 2014
Risk Management
How do
we
quantify
it?
What is
the risk?
What is
our
tolerance?
Recommendation on
management of risk
Enterprise Risk Management Process
Identify
risks
Evaluate
risks
Map
risks
http://www.ashrm.org/ashrm/education/development/monographs/white-papers/ERM-White-Paper-8-29-14FINAL.pdf
Financial
Risks related to the
organization's ability to
earn, raise or access
capital as well as costs
associated with its
transfer of risk
Hazard
Operational/Clinical
Interruption to service,
natural impediments to
service
Risks related to the
organization's core
business, including systems
and practices
Enterprise Risk
Management
Technological
Risks associated with
biomedical and
information
technologies,
equipment, & devices
Human Capital
Assessment of Risk
Legal/Regulatory
Strategic
Risks related to
health care statutory
and regulatory
compliance, licensure
& accreditation
Risks related to the
ability of the
organization to grow
and expand, including
reputational risk
Worker safety, coverage
for absences, temporary
hand-offs and turnover
A Collaborative Approach
Zurich
Virginia Mason
• Help to identify
risks broadly
• Categorize those
risks under the
ERM framework
• Recommend some
mitigation
strategies
• Adapt and
customize the
risks to the
organization and
current state
• Determine
mitigation already
in action
• Note gaps
Marsh
• Evaluate current
coverage options
• Negotiate for
additional
coverage with
existing carriers
• Note gaps
• Recommend
additional
mitigation
strategies
• Seek additional
coverage within
market, if
necessary
Categorizing Risks
Customization/Adapt to Organization
Workers
Compensation
Injury to employees
Healthcare
Professional
Liability
Business
Interruption
Contamination of site
causing shut down or
supply chain interruption
Property Damage
Failure to
diagnose/importer
treatment
Enterprise Risk
Management
Contamination or
destruction of
materials/supplies
General Liability
Injury/mental anguish;
infection to
other workers, family
members or 3rd parties
Is it covered?
Pollution
Employment
Practices Liability
Disinfection & Clean
Up Cost
Unsafe workplace;
discrimination
D&O
Healthcare Regulatory
Fines & Penalties
Evaluate Current Coverage/Identify
Gaps
Lessons Learned
• Risk was at a tolerable level to retain
• New insurance products for Ebola response did not have
sufficient levels to cover all exposures at the time of analysis
• Limited by multiple exclusions
• Additional Cost > Benefit
• Attained a better understanding of existing coverage
Strength of ERM Approach
Broad
Simple
Applicability
Relevant
ERM
Conclusion

Leverage the power of collaboration upstream and downstream when
assessing risk in your organization

Include stakeholders from across the organization – including front line staff
who know actual processes vs. written procedures

Use past experience/lessons learned to develop proactive assessments

Reach out to insurance brokers, companies to identify possible coverage